Wall Street has been asking the company some version of this question for years, and now investors may get some kind of answer. Apple has announced a conference call to discuss its cash position — and only its cash position — tomorrow morning, at 9 am ET.

Here’s the entirety of the release:

“Tim Cook, Apple’s CEO, and Peter Oppenheimer, Apple’s CFO, will host a conference call to announce the outcome of the Company’s discussions concerning its cash balance. Apple® will not be providing an update on the current quarter nor will any topics be discussed other than cash.”

Apple has been hinting for a while that some kind of announcement has been coming. Cook made two public appearances this year — during the company’s earnings call and at a Goldman Sachs-hosted investor conference — and both times he said Apple was debating what to do with its stockpile.

Here’s John Paczkowski’s summary of Cook’s comments at the Goldman event, where Cook spent a lot of time talking about cash:

“We’re in very active discussions at the board level on what we should do,” he said, adding that careful consideration is the guiding principle here. “We are not going to run out and have a toga party.”

“We are judicious in our spending,” Cook said. “We are deliberate. We spend our money like it is our last penny. … I think shareholders want us to do that. They don’t want us to act like we are rich.”

“I’d be the first to admit we have more cash than we need to run the daily business. So we’re actively discussing it. I only ask for a bit of patience, so we can do it in a way that’s best for the shareholders.”

The suit, filed in the Southern District of New York, said Mr. Falcone made “deceptive and misleading statements” by not disclosing that he intended to form the new wireless company, which was told this week by the Federal Communications Commission it couldn’t operate its network because of Global Positioning System interference concerns.

Read the rest of this post on the original site »

To many investors, visionary entrepreneurs come off as naïve or worse — isn’t it safer/easier/more profitable to create a(nother) social network for cat fanciers than to try to cure cancer, defeat terrorism, or organize the world’s information?

– Bruce Gibney, in a post on the Founders Fund Web site entitled “What Happened to the Future?”

So well, in fact, that the tablet market is often characterized as being a two-horse race between the tricked-out Amazon e-reader and Apple’s iPad.

But when it comes down to the numbers, the two companies couldn’t be more different, like comparing Apples to oranges.

Tomorrow, Amazon is expected to report a giant fourth quarter, but it’s guaranteed not to look anything like Apple’s monstrous results reported last week for the same period.

Here’s one data point: For the holiday period, Apple’s gross margin was an impressive 44.7 percent, up from 38.5 percent a year earlier. Meanwhile, analysts are estimating that Amazon’s operating margin will fall to 1.3 percent from 3.6 percent last year.

The specifications of the two tablets can be compared side by side, but a completely different vocabulary is needed to speak intelligently about the two businesses. Simply put, Apple is a hardware maker and Amazon is a retailer.

One has very high margins and the other doesn’t, resulting in two drastically different financial outcomes today. But over time, the idea is for that to change.

Rather than making money from hardware sales, Amazon’s approach to the Fire is to generate incremental sales from other goods and services on the device. Some analysts feel that, over time, that play can create a reliable and recurring revenue stream – and ultimately higher margins.

Tomorrow, Amazon is expected to report sales of $18.3 billion in the fourth quarter, up more than 40 percent from the same period in 2010, according to FactSet Research. Q4 earnings are expected to fall notably to 17 cents a share from 91 cents a year ago.

While revenue growth is impressive, the company’s profitability is being weighed down by losses from the $199 Kindle (which is not quite a break-even proposition), the construction of more warehouses across the globe (17 were added in 2011 for a total of 69) and other investments in infrastructure, like its cloud-computing services and media services, like video, music and e-books.

In contrast, Apple has a rich markup on its iDevices and doesn’t have much of the same overhead as Amazon.

Still, the number of consumers Amazon touches in just one quarter is staggering, and it continues to take share from brick and mortar retailers.

As J.P. Morgan analyst Douglas Anmuth points out in a report, e-commerce grew about 15 percent in Q4 in the U.S. due to strong holiday sales, but he expects Amazon’s growth rate to more than double that to 47 percent year over year.

Anmuth is also bullish that while the fourth quarter could represent a “low point for margins,” Amazon could start seeing an uptick in margin as soon as the first quarter, now that a number of services and some key infrastructure are set in place.

However, don’t expect much insight tomorrow into the company’s long-range plans. The Seattle-based company is typically short on details during its earnings release and call.

If it follows standard protocol, it could provide an update on warehouses being built next year, number of employees and other infrastructure investments, but will likely dodge answers about how many Kindles it shipped during the quarter, or how much Kindle Fire owners are purchasing on the devices.

For now, we’ll have to settle for analyst estimates.

On Sunday evening, Stifel Nicolaus analyst Jordan Rohan raised his estimate for fourth-quarter Fire sales to six million units from five million.

While only on the market for a limited time, that’s still a lot less than Apple, which sold 15.43 million iPads, up 111 percent year over year.

Amazon’s stock dropped 1.65 percent, or $3.22, today to close at $192.15 a share.

The San Francisco-based company is somewhat similar to the teen-oriented book series by Ann M. Martin, in which a group of middle-school students help parents find babysitters.

But in this version, instead of an elaborate phone tree, it uses modern communication tools like Facebook. The UrbanSitter site helps parents find sitters based on their availability, and even on their experience working for Facebook friends and friends of friends.

UrbanSitter has secured $1.75 million in seed funding from First Round Capital. Rustic Canyon Partners, Menlo Ventures and several angels also participated.

In September, AllThingsD’s Liz Gannes reported that the company had launched in one market, and had assisted with 300 babysitting bookings.

Since then, it has expanded to San Diego, Napa and Sonoma Valleys, Seattle, Boulder and Lake Tahoe. Next month, it will roll out in New York, Chicago, Denver and St. Louis.

The funding will be used for product development, such as mobile bookings, and new features, including online payments to sitters. The capital will also go toward expansion into new cities.

At one point today, the stock dipped as low as $7.97 a share before closing at $8 even.

At that price, it is $2 below it’s initial stock price of $10, and has lost at least 20 percent of its market value in less than a month.

But why?

The San Francisco social games company has launched at least two new games since going public, and over the past few days, no harsh analyst report has come out with a negative rating.

It appears the once high-flying Silicon Valley company — known for addictive games on Facebook like FarmVille and CityVille, and mobile games like Words With Friends — is having a hard time gaining the market’s confidence.

To be sure, there’s no clear answer for the price drop; and other tech companies that recently went public, such as Groupon or LinkedIn, have experienced their own fluctuations. But there is one theory making the rounds.

Analysts and other sources suspect Zynga’s stock has been propped up over the past month by the underwriters, who agreed to buy shares if the stock started to perform poorly. The stock purchases would have created steady demand for the stock and kept the price relatively stable.

Furthermore, the theory goes, the underwriters have since met their obligations for buying the stock, and therefore are are no longer buying as many shares.

Incidentally, on Friday, Morgan Stanley — one of Zynga’s underwriters — disclosed that it had purchased nearly 16 million shares in December.

But while the disclosure, filed with the with the Securities & Exchange Commission, adds fuel to the theory, it is unclear if those shares were purchased as part of the IPO, or if they were spread out throughout the month.

Zynga declined to comment, citing its quiet period.

Still, whatever the reason for the drop, Zynga’s shares are seeing less demand.

As recently as last week, the stock was trading at $9.45 a share, but since then, it has struggled to stay above $9. On Friday, it lost 12 cents; today, it lost 81 cents, or 9 percent.

But even if the underwriting theory is on the mark, it doesn’t explain the broader question of why Zynga’s stock price is falling. Shouldn’t there be other investors who are willing to buy up a piece of Zynga?

Unfortunately, it seems the market isn’t sure what to do with the stock, or how to value it.

A social games company fits somewhere between traditional game makers, like Electronic Arts and Activision; and an Internet stock, like Google or LinkedIn.

Zynga gives away its games for free, but still manages to be profitable from selling virtual goods, such as a tractor or more power-ups, that a small number of players elect to purchase inside the games.

It’s also heavily reliant upon Facebook, which could be another problem. Facebook, too, operates privately, and reveals only as much information about its business as it has to — at least until it files to go public, which could be later this year.

In all likelihood, many of these investor fears could be settled when Zynga reports its first period as a public company. No word on when that will be yet, but the fourth-quarter report should come as soon as this month, and no later than February.

Last week, the Facebook game company sold 100 million shares at $10 apiece to raise $1 billion.

On its first day of trading, the stock fell 5 percent, and its losses are even deeper today. In early morning trading, the stock was down nearly 8 percent, or 73 cents, to trade at $8.77 a share. UPDATE: The stock ended up falling 48 cents, or 5 percent, to close at $9.02 a share.

No anti-wither serum exists in the real world to revive a stock price the way virtual crops can be revitalized in FarmVille, one of the game-maker’s hit titles.

Zynga is not the only recent Internet darling to take a nosedive.

It took a while longer, but about a month after Groupon went public, its stock tumbled and was trading for less than half its first-day high of $30 a share. Groupon has since rebounded, but it is also trading lower today, at $22.47 a share.

Zynga has not see those wild fluctuations yet.

Still, the losses do add up — at least on paper. Both the company’s public valuation and some of its largest shareholders’ shares are quickly dwindling in value.

The company is now trading at a valuation of $6.1 billion, down from its IPO valuation of $10 billion. Other big game companies, like Electronic Arts, are now more valuable, albeit only slightly higher.

Investors like Morgan Stanley are seeing their stakes drift further and further underwater.

Earlier this year, Morgan Stanley, which was also one of the Zynga’s underwriters in its IPO, purchased 5.3 million shares at $14 apiece, for a total of $75 million. Four other investors, which were unnamed, also contributed to the round totaling $490 million, according to the document.

Morgan Stanley’s stake is now worth only $46.5 million.

The dip is also hurting Zynga founder and CEO Mark Pincus’s stake, which is now worth less than $1 billion, or roughly $982.5 million.

One thing the company can look forward to is its first-quarter earnings, which will come out early next year and should be bolstered by a strong fourth-quarter performance. In the quarter, Zynga launched new games, including CastleVille, on Facebook, as well as some standalone titles for iPhone; the fourth quarter is typically strong because players have a little more free time to play — and pay — during the holidays.

That brings the price tag for Adobe’s two-year ad business shopping spree to $2.4 billion. The bulk of that comes from Adobe’s 2009 acquisition of Omniture for $1.8 billion; it has also recently picked up Auditude and Demdex.

Adobe’s appetite for ad technology has been good news for a handful of investors who have been betting on the sector. In the case of Efficient Frontier, the deal is a big win for Mitsui & Co., Redpoint Ventures and Cambrian Ventures, who put less than $15 million into the start-up.

But while lots of VC cash has gone into ad tech in the past few years, there haven’t been a ton of big exits.

Beyond Adobe, the only other active buyer has been Google. And industry executives say that some ad tech firms looking for more funding are having trouble getting the dollars they want.

Last week, the retired prison guard showed up at a midtown New York loft for an event that connects entrepreneurs with investors to see whether he might get, say, $50,000, from the angels — wealthy individuals who provide capital to start-ups with the potential for fast growth.‬

Mr. Bolden, dressed in a suit and tie, took to the microphone for a two-minute pitch, clutching his crumpled notes of the key selling points for his idea — a police handgun identification signal, complete with a flashing alert. The proposed device is meant to protect plain-clothes officers from friendly fire.‬

Read the rest of this post on the original site »

To all those entrepreneurs, I offer my advice: Don’t do it. Shotgun weddings don’t work in romance, and they don’t work in venture capital, either.

Solutions that offer the best valuations, without the close-knit partnerships required to build successful long-term businesses, are never going to be sustainable solutions.

In my experience, a lack of shared understanding between the parties upfront can lead to bigger problems down the line.

I recently read a statement from Founders Fund boldly declaring that VCs impose “value-destroying distractions” with the “intrusion of adult supervision.” As I reflected on this thought, I began to wonder — if any entrepreneur shares these feelings, why then would he ever enter into an arrangement with a venture firm?

The fact is, a VC’s value can vary widely. Just like you’d be better off not going under the knife of a neurosurgeon who graduated med school with a C- average, you’d be wise not to choose a sub-par venture investor who doesn’t share your values. Take the time to find the right one.

If both enterprise and investor don’t understand each other upfront, there is going to be a lot of dissatisfaction about where — and how — the relationship ends. When you look at the start-up and venture capital sectors separately, it seems they both understand this principle. For each, building relationships is a prerequisite to building up businesses.

In the start-up world, founders take a long-term approach when searching for co-founders. Larry Page and Sergey Brin met at Stanford on Larry’s first day of class before founding Google; Steve Jobs and Steve Wozniak were friends in high school and spent every day together before founding Apple.

Similarly, while you probably won’t find a VC partner after a single meeting, there are a few things to keep in mind that can increase your chances of success over the long run.

First and foremost, do your homework. It’s shocking to me how few entrepreneurs actually make due diligence calls to other portfolio CEOs. At Foundation Capital, we provide contacts for every company we have ever funded. Use those kinds of resources. Ask for references beyond what is on the Web site. Don’t expect glowing reviews from every single reference, but weigh the feedback carefully and decide if you like what you hear overall.

Second, dig deeply into how the firm works with founders on a day-to-day basis. Consider how much — and in what capacity — partners participate in their portfolios. Think about the proposed value-add, and if it will complement the existing capabilities of your executive team. Decide if the VC firm’s approach fits your style.

Third, don’t get seduced by the name of the firm. This isn’t choosing a college or buying a car. Set the prestige factor aside. Frankly, a firm’s name counts for little when it comes to predicting the success of your venture. It’s really about the individual partner who will be working with you. Decide if you want to work with that particular person.

Finally, ask the tough questions:

• How will this investor help out during difficult times?
• Will he or she understand the process and need for more funds if or when that time comes?
• Is the investor’s approach to the venture truly collaborative — one in which both parties are dependent on each other to succeed?
• Are your prospective investors passive-aggressive, or do they come out and tell you what they’re thinking?

Strong entrepreneur/VC partnerships are based on mutual respect and a true drive to succeed. You don’t want an investor who simply hands you a check and pushes you out the door with nothing more than an expectation of flawless execution — and, of course, a significant return on that investment.

At the end of the day, accepting an investment is like committing to a relationship — there will be ups and downs and disappointments, and even a few failures along the way. But the best partnerships — like the strongest relationships — are lasting ones. Granted, we’re talking about a decade and not a lifetime, but it is still critical to understand the people you are bringing into your business and whether you can work with them over the long haul — through thick and thin.

Understanding a prospective partner takes time. So do yourself a favor: Play it smart. Take your time. Do your homework.

Charles Moldow is a general partner at Foundation Capital, where he primarily focuses on consumer Internet companies. A former entrepreneur, Charles was a member of the founding executive team at TellMe Networks and on the founding team of @Home, and has a background in general management, sales, marketing, product management and business development.

Earlier this morning, Zynga announced it would price its stock between $8.50 and $10 a share when it goes public later this month.

That’s at the high end of the range that values the four-year-old company at as much as $7 billion. But that’s much lower than than what some investors paid as recently as February, according to documents filed with the Securities & Exchange Commission.

In fact, some of its investors are already underwater.

One of those investors is Morgan Stanley, which is also one of the company’s underwriters in its IPO. In February, 11 mutual funds associated with Morgan Stanley purchased 5.3 million shares at $14 apiece for a total of $75 million. Four other investors, which were unnamed, also contributed to the round totaling $490 million, according to the document.

At $14 a share, the company’s value in February totaled nearly $10 billion, or roughly 43 percent greater than today’s high-end of the range.

Zynga justified the higher stock price back in February, stating that the U.S. economy had improved and that the public markets were being receptive to Internet stocks, including generous valuations for privately held companies such as Facebook and Groupon.

Furthermore, in March, the company used that valuation as a guide to purchase shares back from five of its early investors and its CEO Mark Pincus at $13.96 a share.

While the market conditions have likely changed since then, it’s important to note that things are still in flux. If the company drums up enough demand for the 115 million shares being sold over the next two weeks, the price could move even higher.

As Kara Swisher previously reported, Pincus will not sell any shares in the offering, and no other executives at Zynga have plans to sell stock, either.

But a number of the company’s early investors will be cashing in. Institutional Venture Partners, Avalon Ventures and Foundry Venture Capital will sell 2.5 million shares apiece for up to $25 million each. Union Square Ventures will sell 2.2 million for roughly $22 million.  Google and Silver Lake Partners will also both sell 1.7 million shares for a proceed of $17 million each.

Google was originally not listed as an investor when Zynga filed documents with the SEC to go public, but it showed up in subsequent filings. Google, which was rumored to have invested as much as $100 million in Zynga, has an interest in social gaming because of its Google+ network. Following the offering, it will continue to own 21 million shares, or about 3.8 percent of the company.

One notable shareholder that won’t be selling shares is venture capital firm Kleiner Perkins Caufield & Byers, an early investor in the company. Its partner Bing Gordon, who personally owns a 10.7 percent stake in the company, also does not plan to sell any shares.

The company filed documents with the Securities & Exchange Commission this morning, indicating that it intends to raise between $850 million and $1.15 billion in its public offering.

At the high end of the range, that would translate to roughly $150 million more than it had previously estimated it could raise.

The company is seeking to sell 100 million shares at $8.50 to $10 a share and will reserve 15 million additional shares for extra demand. It expects to trade on the Nasdaq under the ticker ZNGA.

Under the best circumstances, the company will be valued at nearly $7 billion based on 699.3 million shares outstanding. That falls below some of the rumored expectations that have been floating around over the past few weeks.

Still, at that value, it will come close to the public valuation of Electronic Arts, which hovers around $7.8 billion, but falls short of other game publishers, like Activision, which has a value of  $14 billion.

Zynga has made its riches off selling virtual goods in social games on Facebook. Some of its most recognizable titles include FarmVille, CityVille, Poker and Words With Friends.

Virtual goods often allow players to continue to play the game and level-up faster, such as an energy boost. They also can be decorative in nature, like an outfit for an avatar or seeds to plant on a farm. Of the roughly 230 million monthly active users, very few players ever bother making a purchase.

Since the beginning, the company has a very close relationship with Facebook, which has been contentious at times, especially since the platform started collecting a 30 percent tax on all virtual goods sold. More recently, the company has tried to expand to other platforms, including the launch of several games on mobile and Google+. It also has its own online game network in production.

The company’s IPO will be one of the largest tech offerings in recent memory.

In early November, Groupon raised $700 million including overallotments. It had originally sought to raise $750 million. Other recent tech IPOs include Angie’s List, Pandora and LinkedIn.

But some critics think Zynga is rushing its offering before a broad financial collapse. If it waited until reporting fourth-quarter results, it could paint a stronger growth story as it completes the busy holiday period.

The San Francisco company, which was founded in 2007, was named after Founder and CEO Mark Pincus’s dog named Zinga.

In 2010, Zynga recorded a profit of $27.9 million on revenues of $597.5 million. In the first nine months of 2011, it broke even on revenues of $828.9 million.

While its revenues continue to grow, the number of daily active users that play its games has fallen two quarters in a row and some critics question whether the company can keep up its aggressive growth.

In recent weeks, Pincus has come under harsh criticism for his heavy-handed leadership approach. But to his credit, he has overseen rapid growth, including the acquisition of dozens of smaller game studios. Today, his company has 2,500 employees.

At the mid-range of its expectations, Zynga will bring home proceeds of $889.4 million after selling shareholders take their winnings.

The primary purpose of the sale is to increase its visibility in the marketplace and create a market for its stock. Proceeds will go towards working capital, but also $83.6 million will be spent to satisfy tax withholding obligations related to stock of current and former employees. Additionally, it plans to use a portion of the proceeds for charitable causes through its Zynga.org initiative.

As part of the sale, the company will have three classes of shares. Class A stock will have one vote per share; Class B stock will have seven votes; and Class C will have 70 votes.

Pincus owns some Class B shares, and all of the company’s Class C shares. Following the offering, he will control 36.2 percent of the company’s voting power.

As Kara Swisher previously reported Pincus will not sell any shares in the offering.

No other executives have plans to sell stock, either. But a number of the company’s early investors will sell stock, including Institutional Venture Partners, Union Square Ventures, Foundry Venture Capital and Avalon Ventures. Other interesting names that made the list include Google, which will sell 1.7 million shares.

The company’s largest institutional holder, venture capital firm Kleiner Perkins Caufield & Byers, which owns 11 percent of the shares, will not sell any of its stock in the offering either.

In a shift away from the frenzy surrounding consumer-focused companies such as social-games maker Zynga Inc., venture capitalists are pouring more money into business-to-business start-ups.

Read the rest of this post on the original site »

About eight million LinkedIn shares came to market Thursday, with 1.3 million coming from the company and 6.7 million from insiders and early holders. The secondary offering, which followed the company’s successful debut in May, roughly doubled the company’s float, or the number of its shares available for trading.

Read the rest of this post on the original site »

But what about the unknown investors? The ones who purchased the stock on the first day, or picked it up a few days later?

To find out those answers, a San Francisco company called SigFig culled its database, which includes more than $20 billion in investment assets from its users, to gain insight into how private investors actually fared from the daily deal leader’s IPO.

Today, Groupon’s stock is up 26 cents, or 1.1 percent, to trade at $24.33; it has stayed fairly constant after closing more than a week ago at $26.11.

Here’s what SigFig found:

• 22.3 percent of people who bought Groupon’s stock on the day it went public dumped the stock that same day.
• The average purchase price on day one was $28.17, or well above the company’s $20 initial price. At one point, the stock went as high as $31.14.
• Even though Groupon ended the day up, almost two-thirds (62.5 percent) of people who sold off their stock on opening day lost money. The average negative return was 3.3 percent.
• People showed hometown pride: The highest percentage of investors came from Chicago, where Groupon is headquartered.
• For those who bought and sold on day one, Groupon’s IPO performed better than Pandora, but not as well as LinkedIn. Those who flipped Pandora’s stock lost an average of 8.52 percent; those who flipped LinkedIn’s stock made an average of 7.10 percent.