Now we’re starting to hear some ad sellers and buyers tell us that things are indeed slowing down this fall. But the stories aren’t consistent, so it’s hard to figure out what to make of them quite yet.

Yesterday, for instance, Time Warner Cable said that its ad sales had been soft last quarter, and that would continue through Q4. But Time Warner Cable’s main business is selling subscriptions to consumers, not eyeballs to marketers. So, hard to tell if that’s a harbinger.

This morning, though, ad giant WPP cut its full-year growth forecasts because of slowdowns in the U.S. and Europe and an “increasingly challenging economic environment.”

But the ad guys aren’t consistent about this stuff. A few hours later, ad holding company Interpublic said that it was hanging on to its 2011 forecast, even though “macro uncertainty remains.”

This is normally the point where digital optimists tell us that even if traditional ad markets get hit, digital will do fine, because marketing dollars are still transitioning from offline to online, and online buys are much more efficient, etc.

And all of that may be true. But I took a quick survey of some digital ad sellers in the past couple days, and heard uneasiness from them, too. The mild version: “Companies are pulling back and being more selective with spend versus spreading it across the board.” The more alarming one: “If you ask around, all you’re getting from anybody is ‘brutal.’ Dollars have dried up.”

Again, this is profoundly anecdotal, so I’m happy to hear from folks with different experiences — my hunch is that Facebook is still moving very quickly, by taking share from a variety of competitors.

More important, no one is yet suggesting that we’re entering the dark days of 2008-2009, when ad spending went negative — so far, people are just talking about not hitting sales goals they made earlier in the year. Hopefully that’s as bad as it gets.

And now for our media bummer of the week: Even without a 2008-style meltdown, ad spending is already contracting.

Kantar Media says that U.S. ad spending grew 2.8 percent in Q2. That’s still growth, but it’s the smallest quarterly gain since the media business began crawling out of its post-Lehman hole.

In fact, it turns out that ad spending has been slowing since the second half of last year. Ad buys grew by 8.7 percent in Q3 2010, but have been shrinking since then.

Some sales guys I’ve talked with are still shrugging off the decline as the result of more difficult comps: It was a lot easier to post big year-over-year increases when the preceding year was the apocalypse.

And again, if you’re in digital ad sales and you don’t work for Yahoo or AOL, you’re probably not seeing any sign of a slowdown at all. And if you sell newspaper ads, you’re used to bad news because you haven’t really had good news in years.

But if things really do crater worldwide — and today doesn’t look like much fun at all — then all bets are off, no matter what you’re selling.

LNKD shares, which had dropped 10 percent during the day, shot up 10 percent again after the company beat analyst estimates for both the top and bottom lines and produced a revenue chart that looked like this:

Since then investors have cooled a bit, and LNKD is up around five percent.

As always, it’s dangerous to assign too much meaning to any individual stock’s rise and fall in the short term. And even more so for a company with a low float, like LinkedIn, where the actions of a few investors can have a big impact.

That said! There are at least a couple reasons why Wall Street might be a little bit more cautious about LinkedIn after a minute or two of reflection:

• The company eked out a surprise profit this quarter. But it says that profit margins are going to be cut in half for the next quarter: It’s telling Wall Street to expect adjusted EBITDA of about $10 million on revenues of around $123 million; this quarter it posted EBITDA of $23.6 million on $121 million.
• There’s the whole “what happens to a company that makes money by attracting job seekers and employers and selling advertising if the whole economy bottoms out?” question. That one has always loomed for LinkedIn, and as that revenue chart shows, the company muddled through the dark days of 2009 pretty well. Here’s hoping we don’t have to see them prove they can do it again.

Ancient history, at least as far as the Internet’s concerned: Marketers spent $7.3 billion on U.S. Web ads in the first three months of 2011. That’s a record for Q1, says the Interactive Advertising Bureau.

That number represents a 23 percent year-over-year increase. I’ve gotten used to adding caveats here, pointing out that these boosts are coming off a low base, but that’s no longer the case, either–2010 was pretty good for most of the Web ad business, too. Unless you’re talking about Yahoo or AOL, which have lagged the market.

And, as always, it’s worth remembering that these stats are largely a reflection of Google’s health, since the search giant represents a big chunk of the IAB’s totals.

[Image credit: Steve Jurvetson]

The Santa Clara, Calif., company reported its best year ever in 2010, helped by a surge in demand for tech products after a pullback in spending during the recession. Yet Intel’s shares are up only 3.1% since the end of 2009 as investors have focused on the company’s struggles to expand in the fast-growing mobile arena.

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Take Equilar Inc. Last year, the Redwood City-based compensation-research firm handed out pullover fleeces with the company’s logo as an end-of-year gift to its work force. This year, the firm held a Thanksgiving lunch and went one better: It gave out Apple Inc. iPads, which start at $499, to all 74 employees.

“We wanted to thank everyone for a great year,” says David Chun, Equilar’s chief executive. He adds that the 10-year-old company is up 30 to 40 percent in revenue this year.

Equilar is one of dozens of Silicon Valley start-ups ramping up their rewards to employees in a reflection of improving business. While many companies were still recovering from the recession last year, this year has been marked by revenue improvements across much of the technology industry, along with stepped-up hiring and increased venture-capital funding of start-ups.

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Cue disbelief from people who have indeed cut the cord. Or at least want to cut the cord.

Today’s episode comes courtesy of Viacom CEO Philippe Dauman, during his company’s earnings call this morning. Guess what he said after an analyst asked if his recent Netflix deal would push cable subscribers to bail out and go Web-only?

Okay, no need to guess. PaidContent’s David Kaplan jotted down Dauman’s response:

Even through this powerful recession, TV viewership held up. There is much ado about nothing, when it comes to talk of cord-cutting. We have seen subscribers on more networks increase, because we’ve seen incremental distribution from the telcos. We don’t see cord-cutting happening. If anything, it’s the economy that holds down subscribers. As it returns, so do the subscribers.

Since we’re going to see/hear this movie many more times for quite some time, it may be worthwhile to start figuring out how both sides could be right.

Here’s a theory to start with: Cord cutters are real, but they’re a very vocal minority, and they’re dramatically overrepresented on sites like this one. And even if you’re not a cord cutter, I’d guess that if you’re reading this site you’re much more likely than the average American to have a media- and tech-savvy friend who has cut the cord.

The flip side of the argument is that pay TV numbers may still be increasing, but not by much. And if the cable guys are right, and the losses they’ve been seeing are because the economy is lousy, then that strikes me as much more important than they’re letting on: Who gives up TV, and how can the cable guys not figure out a way to sell them TV at a price they can afford?

So, again, I’m just spitballing. Take it from here, or let me know what you think.

The long recession only tiptoed through the 2,300-acre office park, with many start-ups here expanding their operations over the past 18 months. One prominent tenant, solar company Nanosolar Inc., began producing solar panels in March and plans to add space and more employees to its 350-person work force.

Scientific-equipment maker Stratedigm Inc. moved into a 6,000-square-foot space in Edenvale—more than double its old office size—as it revs up sales. And several biomedical start-ups that were started under one roof also upgraded to bigger offices in the park.

Edenvale shows how Silicon Valley’s start-up economy has quietly broadened beyond information technology. It now includes a growing cadre of bioscience and “clean technology” firms, presaging a more-diversified economic base and bolstering the valley’s status as the world’s innovation hotbed.

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Cisco Systems is expected to report strong fourth-quarter earnings later today after the markets close, which should be another boost to the tech market.

The Internet computer-networking equipment maker is being buoyed by a return to spending by customers eager to upgrade after recession pullbacks.

Wall Street expects San Jose, Calif.-based Cisco (CSCO) to earn 42 cents per share with $10.9 billion in revenue. In the same quarter a year ago, its net income was 19 cents per share–adjusted earnings were 31 cents–on $8.5 billion in sales.

Either way, that’s a big improvement.

But analysts also expect Cisco to have an even better outlook for 2011, as spending on Internet infrastructure grows. That includes everything from data centers, to routers and switches, to all kinds of networking equipment.

In other words, CEO John Chambers gets to crow a little bit.

Cisco stock, which has been slightly down recently, closed at $24.31, down 1.9 percent, or 46 cents, yesterday.

BDO reached this conclusion by studying the risk factors listed by the 100 largest tech companies by revenue in their annual 10-K filings with the Securities and Exchange Commission. While the top handful of potential problems a business may face tend to remain the same year after year–things like increased competitions and failure of a new product to catch on–the recession was clearly on the minds of many companies when they addressed 2010.

Failure to execute was listed in 68 filings for fiscal year 2010, compared with 27 a year ago. Labor concerns were listed in 49, up from 22 a year earlier, and the chance that customers, partners, and suppliers might have financial problems was listed in 48 filings, up from 33, according to the study.

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The company’s 38-year-old chief executive, Evan Williams, a serial entrepreneur, is exhilarated by the growth. He spoke recently from backstage at San Francisco’s Palace of Fine Arts, where the company was hosting a developer conference, about the company’s surprisingly difficult hunt for Bay Area talent in a sluggish economy and what makes Bay Area Tweeters unique.

WSJ: What percentage of Twitter’s 170 employees are from the Bay Area?

Mr. Williams: Our educated guess is 80% of people hired during the first quarter of the year were from the Bay Area. We are importing people from around the U.S. and the world.

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Symantec Corp. (SYMC), the security software company behind such programs as Norton, every month cleans out its industrial-sized spam filters and issues a monthly State of Spam & Phishing report based on the result. In its April 2010 report, the company found the tea leaves suggest economic prospects are picking up, at least according to spam email using economic terms.

“While the United States consumer sentiment remained unchanged in March 2010, top ten subject lines containing economic keywords show that spammers have an optimistic view of the economy with job offer spam among their top spam subject lines,” Symantec said in its report.

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The latest evidence for the rebound came Thursday, when Internet giant Google Inc. (GOOG) posted a 37 percent profit jump for the first quarter and chip maker Advanced Micro Devices Inc. (AMD) reported a 34 percent revenue increase to record levels. The results follow the strong showing of bellwether Intel Corp., (INTC) which Tuesday announced quarterly profit that nearly quadrupled on a 44 percent jump in sales.

The trio of results kicks off what is likely to be a strong earnings streak as tech spending by companies and consumers picks up. Next week, Apple Inc. (AAPL), Amazon.com Inc. (AMZN) and Microsoft Corp. (MSFT), among others, are slated to report quarterly results. Tech-research firm ISI Group projects that overall revenues from such companies will rise more than 10 percent for the first quarter, compared with a 16 percent decline a year earlier. Meanwhile, Standard & Poor’s forecasts a 79 percent increase in tech earnings for the quarter from year-ago levels.

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The presentation catalyzed a movement. Start-ups everywhere adopted a lean, low-burn, low-investment model. To this day, companies seeking funding at our venture firm, Andreessen Horowitz, proudly proclaim in their pitch decks that they are raising tiny amounts of capital so they can run lean.

On the one hand, it is a fact that capital invested is negatively correlated with returns in the venture capital industry. Pumping too much money into a small start-up is unhealthy for both the company and the investor. On the other hand, Facebook has raised several hundred million dollars and is on track to produce fantastic returns for all of its investors.

So what’s a start-up to do? Much of what has been written and said about lean start-ups makes good sense. However, that advice is often incomplete, and some of the things left unsaid are the least intuitive. In this article, I will articulate some of those things left unsaid in arguing the case for the Fat Start-up.

Here is my central argument. There are only two priorities for a start-up:
Winning the market and not running out of cash. Running lean is not an end. For that matter, neither is running fat. Both are tactics that you use to win the market and not run out of cash before you do so. By making “running lean” an end, you may lose your opportunity to win the market, either because you fail to fund the R&D necessary to find product/market fit or you let a competitor out-execute you in taking the market. Sometimes running fat is the right thing to do.

What the hell do I know?

“Al Pacino couldn’t be no gangsta, DeNiro in ‘Casino’ he no gangsta
Wanna be, wanna see, wan’ get a shovel
dig Tookie up n*&%^!, cause he know gangstas”

–The Game

At this point, some of you are asking yourselves, “What the hell does Ben know? If he were really smart, then he’d know that thin is in.” It turns out that I have some experience in managing a fat start-up through the dot-com implosion of the early 2000s. This chart offers a brief summary of equity market history when I was CEO of Loudcloud and Opsware (click to enlarge):

Note that the Nasdaq index is very highly correlated to the start-up funding environment. During the two years I was CEO of Opsware, the Nasdaq fell 80 percent, far more than it has fallen during the current 2008-10 downturn. So the 2000-02 environment was at least as traumatic as this one for Silicon Valley companies–and arguably much worse.

Here is a brief summary of Loudcloud/Opsware’s fund-raising history during that time:

• September 1999: Loudcloud founded
• November 1999: Loudcloud raises $21 million at a $45 million pre-money valuation (Benchmark Capital is the lead investor)
• January 2000: Loudcloud borrows $45 million from Morgan Stanley (MS)
• June 2000: Loudcloud raises $120M at a $700M pre-money valuation
• March 2001: Loudcloud goes public on Nasdaq, raises $160 million and is valued in the public markets at approximately $480 million. Total funds raised to this point: $346 million.
• August 2002: Loudcloud sells the managed services business to EDS (this was the only actual business we had at the time) for $63.5 million and becomes a software company (and changes its name to Opsware).
• September 2002: Opsware trades for 35 cents per share or approximately a $28 million market cap.
• September 2007: Hewlett-Packard (HPQ) acquires Opsware for $1.6 billion

During this period, Loudcloud/Opsware had over 20 direct competitors. Almost all the competitors from the Loudcloud era went bankrupt, including MFN/SiteSmith, Exodus, LogicTier, Williams Communication, Global Crossing, WorldCom/Digex and Storage Networks. Those that survived got bought with valuations of less than $100 million (e.g., Totality) or still have very low valuations (e.g., Navisite).

How did we do it?

“I had a dream I could buy my way to heaven
When I awoke, I spent that on a necklace”

–Kanye West

So how did we navigate through the great dot-com crash, crush the competition, emerge as the No. 1 company in our space and sell the company to HP for $1.6 billion? Did we “cut spending, cut now, and preserve capital?” Did we make cash preservation our No. 1 priority?

No, we didn’t. To underscore the point, here are Loudcloud’s average monthly cash burn figures for the quarters ending in:

• Apr 2001:  $39 million
• Jul 2001:  $35 million
• Oct 2001:  $29 million
• Jan 2002:  $25 million
• Apr 2002:  $22 million
• Jul 2002:  $19.4 million

As you can see, we were aggressively investing in the business throughout 2001 and 2002. While we did reduce our cash burn, we did not make cash preservation our No. 1 priority. As it was, over the course of the transition from Loudcloud to EDS, we sadly laid off 400 employees and transferred another 150 to EDS. However, we didn’t scrimp and save our way to a $1.6 billion acquisition: Instead, it’s what we chose not to cut that ultimately got us there.

Loudcloud was a Web-hosting business. Today, we’d call it a “cloud services” business, but people weren’t quite ready for the “cloud” in 2001. We supercharged our hosting business with software (called Opsware) that automated our Web-hosting operations. The other cloud services businesses of our day also had software investments. However, as the macroeconomic climate changed, they all “cut deep and cut now.” In the end, they ended up putting their software in maintenance mode and stopped building new features.

As we weighed a decision to make the same deep cuts in our own software R&D efforts (a move advocated by the intelligentsia of the day, as well as nearly every MBA we had working in the company), I faced a hard decision: Cut deep and get to cash flow break-even quickly or continue to invest heavily in software?

In the end, I decided to run fat so that we could continue to invest in the Opsware software. At the end of the day, I realized that much larger companies like IBM (IBM) could hire smart people and train them. But without a lasting technology-based advantage, it would be increasingly hard for us to defeat them and build our customer base despite early wins with Ford (F), Fox Sports, and the U.K. government (to name just three of our early customers).

Running fat meant that I laid off zero software engineers so that we could keep on investing in our technology, find our product/market fit, and build a lasting technological advantage.

Still, we had to reduce costs or we would clearly go bankrupt. With this new view of the world, I decided that rather than divesting our intellectual property, I would divest our business. Now, that may sound logical the way I’ve described it, but consider these facts:

• We were generating $65 million/year from the Web-hosting business.
• We were a publicly traded company with a market capitalization of close to $200 million.
• All of our investors (pubic and private) believed in and invested in the Web-hosting business.
• We had close to 500 employees at the time. Nearly all of them were supporting the Web-hosting business.
• We had no other business. We had software, but we did not have a software product and certainly did not have a software business.

Despite all of this, we sold the Loudcloud hosting business to EDS and became Opsware the software company. It was not clear that this was a good idea at the time. In fact, the market thought it was a terrible idea: Our stock promptly lost 80 percent of its value, putting our market cap at about $28 million. It’s worth pointing out that this was about $40 million less than the cash that we had in the bank.

During the transition, we shrank our payroll from 450 employees to fewer than 100. Even with this massive reduction in expenses, it would take another three quarters to reach cash-flow break-even, a milestone we finally reached in Q2 of 2003.

One could argue–and many did–that we should have cut a lot deeper than we did given that we only had one customer. Although EDS was a very large customer (it generated $20 million/year in revenue), a brand new software company doesn’t need 100 people. We could have taken steps to reach cash-flow break-even immediately (clearly, that might have helped us get above 35 cents per share). In other words, we could have “gone lean” by cutting deep, cutting now, and preserving capital.

But rather than do what seemed obvious, I decided to keep on investing. Here’s why: In an economic boom, cash is great, but not necessarily a meaningful competitive advantage. If every company is well funded, being super-well funded doesn’t help you win. In fact, being super-well funded can actually screw you.

But in a bust (like the one we were in), having a lot of cash can be a huge competitive advantage because you can use that cash to put enormous pressure on your underfunded competitors. And that’s what we did.

We spent aggressively to match our best competitor’s product, feature for feature. And we used our public currency to acquire important adjacent functionality (network, process and storage management) that our competitors did not have and couldn’t acquire because they didn’t have the cash (or the equity).

In doing so, we were able to beat a really high-quality start-up (Bladelogic) that did not have the massive technical and cultural baggage that came from exiting the managed services business. Bladelogic was eventually sold to BMC (BMC) for $800 million. But I’m firmly convinced that had we not spent the money, Bladelogic would have emerged as the No. 1 company in the space and gotten the $1.6 billion exit instead of Opsware.

In the end, by continuing to invest aggressively in our technological advantage despite a hellacious funding environment, we were able to turn a doomed business into a winning one.

That is the very short version of how we won the market during the great tech recession of the early 2000s.

So did we learn?

“Hegel was right when he said that we learn from history that man can never learn anything from history.”

–George Bernard Shaw (1856-1950)

Every start-up is in a furious race against time. The start-up must find the product-market fit that leads to a great business and substantially take the market before running out of cash. As a result, the top two priorities are always to:

1. Find the product that 1,000 enterprise or 50 million consumers want to buy and grab those customers before your competitors do.
2. Raise enough cash and spend it intelligently so that you don’t go broke along the way.

Clearly, you can’t succeed if you don’t achieve both priority No. 1 and priority No. 2. So why is taking the market more important than not running out of cash? Because the only thing worse for an entrepreneur than start-up hell (bankruptcy) is start-up purgatory.

What is start-up purgatory, you ask? Start-up purgatory occurs when you don’t go bankrupt, but you fail to build the No. 1 product in the space. You have enough money with your conservative burn rate to last for many years. You may even be cash-flow positive. However, you have zero chance of becoming a high-growth company. You have zero chance of being anything but a very small technology business (see Navisite). From the entrepreneur’s point of view, this can be worse than start-up hell since you are stuck with the small company.

You recruited all the employees, you raised all the money and you made all the promises. You either see it through or leave–without your good reputation. No one wants to work for an entrepreneur who quits his or her own company. This is start-up purgatory, where you work just as hard, reap none of the rewards, and watch all your best people leave you. It sucks to be you.

The Bottom Line

Spending a little or spending a lot is a means, not an end. Choose the right strategy to win the market or you may end up going straight to purgatory.

As you listen to the virtues of the lean start-up–lightweight sales, light engineering, and so on–keep the following in mind:

• If you are a high-tech start-up, your value is in your intellectual property. Don’t stare at your spreadsheets so long that you get confused about that.
• You cannot save your way to winning the market.
• The best companies can raise money even in this market. If you are one of those, you should consider raising enough to wipe out your competition.

Thin is in, but sometimes you gotta eat.

Ben Horowitz is co-founder and general partner of Andreessen Horowitz. He co-founded Loudcloud, later renamed Opsware Inc., in 1999 and served as CEO of the company before it was acquired in 2007 by Hewlett-Packard. He was most recently vice president and general manager of Hewlett-Packard’s Business Technology Organization Unit.

Time Warner’s (TWX) magazine unit is showing off a redesign of Fortune magazine, which should be in subscribers’ hands shortly and on newsstands next week.

Like every other business magazine, Fortune took a pretty good beating from the one-two punch of the recession and traditional media collapse. And I don’t think overhauling the way its pages look and feel will do much to change that.

But it’s still interesting to hear editor Andy Serwer explain why he thinks it’s important, and he was kind enough to chat with me about that the other day.

Note how emphatic Serwer is about the standalone status of Fortune as a print product. The periodical is starting to overhaul its neglected Web site as well, and Serwer pays obligatory lip service to the notion of Fortune on Apple’s (AAPL) iPad, Amazon’s (AMZN) Kindle and other digital platforms of the future.

But he’s clear that the magazine’s success or failure will depend on how readers and advertisers respond to the pen-and-ink product it is selling in the present tense.

Not revelatory, but a good reminder.

]]> http://allthingsd.com/20100303/time-inc-s-newest-product-a-magazine-printed-on-paper/feed/ 0 http://allthingsd.com/20100301/chip-sales-on-the-rebound/ http://allthingsd.com/20100301/chip-sales-on-the-rebound/#comments Mon, 01 Mar 2010 15:23:12 +0000 John Paczkowski http://digitaldaily.allthingsd.com/?p=35772 The Semiconductor Industry Association’s prediction of healthy growth for chip demand in 2010 seems to be panning out. Though January is typically a weak month, global semiconductor sales rose slightly thanks to solid demand for personal computers, cellphones and other consumer electronics. Chip sales were up 0.3 percent in January from the previous month and up 47 percent year-over-year (see chart below; click to enlarge).

The chip industry’s Great Dark Times seem to be over.

“Worldwide semiconductor sales in January increased significantly compared to one year ago, reflecting today’s improving business environment for the industry,” SIA President George Scalise said in a statement. “January and February of 2009 were the low point of the industry downturn as the semiconductor industry and electronics manufacturers quickly responded to the global economic recession.”

Should the upward trend the SIA charted in January continue, the industry could see growth beyond its November forecast of $242.1 billion.

]]> http://allthingsd.com/20100301/chip-sales-on-the-rebound/feed/ 0 http://allthingsd.com/20100209/book-publishers-beware-at-itunes-expensive-music-equals-slower-sales/ http://allthingsd.com/20100209/book-publishers-beware-at-itunes-expensive-music-equals-slower-sales/#comments Tue, 09 Feb 2010 14:56:14 +0000 Peter Kafka http://mediamemo.allthingsd.com/?p=16092 After years of complaints, last year the music labels finally got what they wanted from Apple–the ability to raise prices on their songs. Last April, iTunes introduced a “variable pricing” scheme, which gave the labels the ability to move prices from 99 cents a song to $1.29 (and for some tracks, down to 69 cents).

The result? Music sales are slowing.

Warner Music Group (WMG) said this morning that it has seen unit sales growth at Apple’s (AAPL) iTunes decelerate since the price increase: Industrywide, year-over-year “digital track equivalent album unit growth” was at five percent in the December quarter, down sequentially from 10 percent in the September quarter and 11 percent in the June quarter.

And since iTunes sales make up the majority of Warner’s digital revenue, growth is contracting there, too. In the last quarter, digital revenue at the label was up eight percent compared with a year earlier, when that number was 20 percent.

The positive spin here is that music downloads are a “mature” business anyway. So by raising prices, the labels are simply extracting whatever value they can.

And indeed, Warner CEO Edgar Bronfman Jr. argued that the pricing change has been a “net positive” for Warner. But he also suggested that in hindsight, perhaps it wasn’t a great idea to raise prices 30 percent during a recession.

So here’s the question for the book industry, which has been working very hard to boost the price for its digital goods: Which lesson do you learn from this?

My gut is that the industry will see this parable the way Bronfman apparently does: If you can move prices up early in the digital adoption cycle, you’re much better off.

During the earnings call, Bronfman sounded a bit wistful as he noted the book industry’s apparent success, with the help of Apple, at raising prices above the $9.99 floor Amazon (AMZN) had set. “It’s interesting that the book publishing industry, on the iPad, has much more flexibility than the music industry had,” he noted.

The counter here is the one that seems obvious to everyone else: Lower prices and you can sell more stuff. Looks like we’ll be getting another real-world test of this economics lesson soon.

]]> http://allthingsd.com/20100209/book-publishers-beware-at-itunes-expensive-music-equals-slower-sales/feed/ 0 http://allthingsd.com/20100121/business-as-usual-again-for-google-wall-street-expects-big-things/ http://allthingsd.com/20100121/business-as-usual-again-for-google-wall-street-expects-big-things/#comments Thu, 21 Jan 2010 12:32:29 +0000 Peter Kafka http://mediamemo.allthingsd.com/?p=15334

Hard times? Sure, for mere mortals. But at Google, things are back to normal: The company signaled months ago that it has made it through the recession without much problem. And if that wasn’t clear enough, the company underscored the point by embarking on a serious shopping spree, which hasn’t ended.

Wall Street has gotten the message. It expects serious numbers when the search giant hands in its earnings report card this afternoon. As Silicon Alley Insider notes, analysts are expecting double-digit revenue growth from Google (GOOG) for the first time in a year.

Per Citigroup’s (C) Mark Mahaney, here’s a detailed breakdown of Wall Street’s expectations (click to enlarge):

Once Google reports, there will be plenty to talk about beyond its core financials, of course: Competition from Microsoft (MSFT) Bing, plans for mobile (Android, NexusOne, AdMob), YouTube’s profit potential, etc. I’ll be covering both the initial numbers and the subsequent analyst call, starting at 4 pm Eastern.

]]> http://allthingsd.com/20100121/business-as-usual-again-for-google-wall-street-expects-big-things/feed/ 0 http://allthingsd.com/20100115/the-one-year-report-card-of-yahoo%e2%80%99s-carol-bartz-financials-c/ http://allthingsd.com/20100115/the-one-year-report-card-of-yahoo%e2%80%99s-carol-bartz-financials-c/#comments Sat, 16 Jan 2010 07:48:21 +0000 Kara Swisher http://kara.allthingsd.com/?p=23102

Yesterday, BoomTown began grading the performance of Yahoo CEO Carol Bartz, after she gave herself a B- for overall performance for the year since she took over the troubled Internet giant.

But I decided to be more specific, splitting the grades into five categories: Management, financials, product innovation, deal-making and moxie.

For management, I gave Bartz an A-, because she has been a definite improvement on previous leadership in terms of decision-making, speed and essentially grabbing the mantle of control firmly from the start.

Some thought I was too generous and others thought the grade should have been an A+. Which means it was just about right!

Today, let’s look at financials–by which I mean Yahoo’s fiscal performance and its stock price.

In this regard, Bartz only gets a C++ (it’s a techie joke, get it?).

I could have given her a B- here, I guess, but–to me–C+ simply means financials have remained in a holding zone under Bartz, so she does not deserve to be completely decried, or applauded either.

Why? Well, let’s start with the stock.

While Yahoo (YHOO) shares are up about 38 percent for the year, which is a good thing, they still lag those of other Internet companies, as well as the market.

In the same period, the Nasdaq was up about 44 percent, Google’s stock has doubled and Microsoft (MSFT) shares are also up a lot more.

In an interview with Bloomberg recently, Bartz claimed that Yahoo was in the “penalty box” with investors–a hangover from former management, presumably–and this is the reason for its weaker stock gain.

Whatever. But Bartz has been the CEO for a year and Wall Street is still holding out. Thus, she has to fully take the blame instead of pointing at the previous administration.

In other words, former CEO and co-founder Jerry Yang and the Yangtanic are ancient history. So, all is forgiven, Jerry (call me!).

Bartz also blamed the recession for Yahoo’s continued revenue decline in 2009, about 12 percent overall in the most recent quarter.

She told Bloomberg, “We came out of one of the worst climates ever. And if you look at growth of Fortune 500 companies, only being down 12 or 15 percent is damn good. I’m not going to apologize for our growth.”

Again, whatever. But she runs a company in a high-growth industry and is not selling hams or socks, so perhaps bragging that being down 12 to 15 percent is “damn good” is a bit of a stretch.

(Microsoft certainly did not crow over its 14 percent decline in revenue in the most recent quarter even though it beat expectations, and its fiscal results rely a lot on something that does get profoundly affected–namely, sales of PCs–in a recession.)

Specifically, in the third quarter, Yahoo’s search advertising revenue was off 19 percent, and display was off eight percent at “Owned and Operated” sites on Yahoo.

Google, in contrast, reported a seven percent rise in its third-quarter results, and its execs projected a mood of smooth sailing ahead and no more econalypse. Financial performance at Amazon (AMZN) was also way up, as it was at Netflix (NFLX) and Apple (AAPL).

Still, Yahoo’s fiscal performance relies a lot on premium branded advertising, so it has remained weaker and will do so until the economy really comes back.

Many analysts are predicting exactly that, with double-digit sales growth in this area ahead.

And Yahoo’s bottom line is likely to get a boost when its costs are off-loaded to Microsoft, as part of the search and advertising partnership Bartz struck with the software giant earlier this year. The deal awaits regulatory approval, which is likely, and will then start to kick in later in the year.

Still, a dark cloud hangs ominously over the persistent search share declines Yahoo has suffered, which Bartz and others attribute to loss of toolbar and other distribution deals that Google (GOOG) and Microsoft picked up.

But query growth rates are also down and that’s a red flag, especially since Microsoft and Google are up a lot.

Nonetheless, depending on how these various parts of Yahoo revenue sort themselves out, along with Bartz’s cost-cutting, Yahoo’s bottom line is most likely to look better in the quarters ahead, so the stock could certainly go up quickly.

And so could her financial grade. Bartz is well known for being great at managing the bottom line and Wall Street expectations, so I suspect it is top of mind for her.

That said, once that registers, everyone will then be looking for not just a return to normal, but for actual growth.

And that can only come from product innovation–the name of the game in Silicon Valley–which is what will be on the grading block Monday.

]]> http://allthingsd.com/20100115/the-one-year-report-card-of-yahoo%e2%80%99s-carol-bartz-financials-c/feed/ 4 http://allthingsd.com/20100113/econalypse-r-i-p/ http://allthingsd.com/20100113/econalypse-r-i-p/#comments Wed, 13 Jan 2010 13:45:55 +0000 John Paczkowski http://digitaldaily.allthingsd.com/?p=32546 “The technology downturn of 2008 and 2009 is unofficially over.”

This, according to research firm Forrester, which claims technology spending will roar back to life in 2010, ending the econalypse once and for all.

“While the Q3 2009 data for the U.S. and the global market showed continued declines in tech purchases (as we expected),” the company said in its report, U.S. and Global IT Market Outlook: Q4 2009, “we predict that the Q4 2009 data will show a small increase in buying activity, or at worst, just a small decline.”

Forrester (FORR) expects U.S. IT spending to grow by 6.6 percent in 2010 after falling 8.2 percent in 2009. Meanwhile, global IT spending, which plummeted 8.9 percent last year, will rise 8.1 percent in 2010 to more than $1.6 trillion.

Driving the recovery: Software, hardware and communications equipment. According to Forrester, worldwide spending on software is set to grow by 9.7 percent in the months ahead, spending on hardware and other computer equipment by 8.2 percent and spending on comm gear by 7.6 percent.

Said Forrester principal analyst Andrew Bartels: “All the pieces are in place for a 2010 tech spending rebound. In the U.S., the tech recovery will be much stronger than the overall economic recovery, with technology spending growing at more than twice the rate of gross domestic product this year.”

But this assumes there will be no further financial disaster in 2010. If this is not the case, then we have something else to look forward to.

“The most likely alternative to our forecast that the U.S. and global IT markets will recover in 2010 is a faltering tech market due to a double-dip recession that returns in 2010 after a brief two- to three-quarter economic recovery,” Forrester explains. “Should this happen, U.S. tech purchases would decline by 3% to 4% in 2010, with a second-half decline offsetting a first-half tech revival.”

PREVIOUSLY:

• Econalypto: A Rightsizing Roundup
• Google: Whoops! Econalypse
• Econalypse Now
• Analyst: The Great Dark Times Cometh!
• Wall Street: Give Me Something to Stop the Bleeding
• GOOG at $398? Clearly, You’re Dyslexic.
• WaMu: Epic Bail
• Ballmer: Better Safe Than Lehman Bros.
• Lehman Brothers: $2.5 Billion for a Bankruptcy Well Done
• Here’s $39 Billion in Recognition for Your Hard Work on the Forthcoming Financial Crisis
• Weekend at Bernanke’s II
• Weekend at Bernankes

]]> http://allthingsd.com/20100113/econalypse-r-i-p/feed/ 0 http://allthingsd.com/20100108/all-things-digital-ces-netflix-ceo-reed-hastings/ http://allthingsd.com/20100108/all-things-digital-ces-netflix-ceo-reed-hastings/#comments Fri, 08 Jan 2010 23:34:32 +0000 John Paczkowski and Drake Martinet http://digitaldaily.allthingsd.com/?p=31989

The digital video revolution may be hastening the DVD toward its end, but there’s quite a bit of life left in the old format yet. Netflix CEO Reed Hastings said as much today when he remarked that the company’s DVD-by-mail business will likely continue until 2030. During a wide-ranging on-stage interview with All Things Digital’s Peter Kafka, Hastings discussed the deal Netflix cut with Warner Bros. earlier this week that will delay rentals of the studio’s films until 28 days after their DVD release and Comcast’s proposal to acquire a controlling stake in NBC Universal, a move that could impact Netflix’s Watch Instantly streaming service.

“When we first started years ago, we were literally going down to Best Buy and buying a bunch of DVDs and renting them,” Hastings said, reflecting on the Warner Bros. deal. He noted that Netflix (NFLX) is getting a better deal on DVD prices and that customers are going to see more streaming content as a result of its pact with the studio.

Video clip: Highlights from Reed Hasting’s interview

The future of the DVD was up for discussion as Netflix transitions into more on-demand, streaming content. “Pretty soon, we’re going to be a streaming business that rents some DVDs,” said Hastings.

He gave the DVD another 20 years though, projecting it will take that long for Netflix to get out of the disc-shipping business all together.

Hastings eschewed suggestions that Netflix might be looking to add a premium channel or sports to its services, but would instead focus on expanding the number of video game consoles on which you can currently steam Netflix content. Hastings said that streaming was the rocket Netflix wanted to ride.

Peter closed out the interview by asking Hastings about plans that go bump in the night, specifically wondering what Hulu or Comcast (CMCSA) might put together.

Hastings said, “Any time a competitor doubles in size, that’s capitalism, but not good for us. We’re movie-centric, and commercial-free. We license a lot of content. As we get more subscribers, we can write bigger checks to license more content.”

Subscribers = good, more subscribers = better.

What was better going to look like? Hastings laid it out in a closing remark.

“We’re about three things right now: Expanding the platform, expanding the content and expanding the user interface, making it better and better.”

More Posts and Articles from CES

• Reed Hastings Highlights Video
• Reed Hastings Full Session Video
• Reed Hastings Slideshow
• CES Full Coverage on AllThingsD.com
• Walt Mossberg interviews Google VP of Engineering Andy Rubin
• Peter Kafka interviews Netflix CEO Reed Hastings
• Kara Swisher interviews Palm CEO Jon Rubinstein

]]> http://allthingsd.com/20100108/all-things-digital-ces-netflix-ceo-reed-hastings/feed/ 0 http://allthingsd.com/20100107/tech-show-reflects-optimism/ http://allthingsd.com/20100107/tech-show-reflects-optimism/#comments Thu, 07 Jan 2010 22:05:54 +0000 Don Clark and Yukari Iwatani Kane http://voices.allthingsd.com/?p=19903 There are conflicting signs about how good a year 2010 may be for the technology world, but attendants of this year’s Consumer Electronics Show appear to be more upbeat than last year.

A bumper crop of new products, full hotel rooms and respectable crowds at the annual technology conference here are some of the most obvious differences from the CES held in January 2009, when the recession still seemed to be deepening.

Many consumer-electronics companies reported substantial improvements in the third quarter and say business continued to improve as the year ended.

“Compared with the same time last year, we feel much better,” said Zhou Houjian, chairman of the Chinese electronics manufacturer Hisense Co. Ltd., which is sending more than 80 employees to CES this year, compared with 40 last year. “We feel the U.S. economy got a lot of new energy.”

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]]> http://allthingsd.com/20100107/tech-show-reflects-optimism/feed/ 0 http://allthingsd.com/20091224/ces-honcho-is-upbeat-but-so-is-macworld-chief/ http://allthingsd.com/20091224/ces-honcho-is-upbeat-but-so-is-macworld-chief/#comments Thu, 24 Dec 2009 16:46:58 +0000 Don Clark http://voices.allthingsd.com/?p=19514 Gary Shapiro is quick to admit that last year’s Consumer Electronics Show–held during the darkest days of the recession–was pretty depressing. But his enthusiasm has recovered.

“I’m more excited about this CES than any in the 28 years I’ve been attending the show,” says Shapiro, president and chief executive of the Consumer Electronics Association, which organizes the event.

One reason is the contrasting activity in the months leading up to this year’s show, which is scheduled for January 7-10 in Las Vegas. Last fall, as the magnitude of the meltdown became apparent, many companies cut back on the number of employees they send to the show or pulled out entirely.

This fall, Shapiro says, the pattern reversed, as exhibitors and attendees have signed up at an accelerating rate. “We blew through all our goals for the last five months,” he says.

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