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Google Stumbles (GOOG)

Google Inc. (NASDAQ: GOOG) just posted earnings and the search giant posted $4.63 non-GAAP EPS and $3.9 Billion in ex-TAC revenues. 

First Call estimates were  $4.74 EPS on $3.87 Billion in revenues. 

Google Suits Up For Earnings Duel (GOOG)

After the close of trading today, we will get to see earnings out of search and online ad giant Google Inc. (NASDAQ: GOOG).  The company will be competing for earning attention as Microsoft is also reporting after the close.

The estimates out of First Call are $4.74 EPS on $3.87 Billion in revenues.  Google has never given any formal guidance ahead for future earnings but for comparison Wall Street expects Q3 to see $4.99 EPS and $4.09 Billion in revenues and for Fiscal 2008 (Dec.) it expects $20.14 EPS on $16.18 Billion in revenues.

ValueClick: An Omen for Online Ad Spending? (VCLK)

This morning ValueClick (NASDAQ: VCLK) came out and dropped the bomb on forward guidance.  The immediate guidance isn't such a bad issue but the forward guidance is.  It lowered revenue guidance by 2% to $163 to $164 million, but cost cuts helped earnings guidance to $0.17 to $0.18 (up $0.02 on both).

The online ad company cut its 2008 guidance from $730 to $745 million down to $655 to $675 million and cut prior EPS range of $0.81 to $0.83 down to a new lower range of $0.69 to $0.71.

There is a much more important issue than this company itself though, and one which could have ramifications if the company is right.  Tom Vadnais, CEO, said, “Due to increasing macroeconomic uncertainty, we no longer anticipate the seasonal strength in ad spending we typically see in the second half of the year.”  This concern might be analogous to the tail wagging the dog. 

ValueClick is essentially the last man standing on an independent basis in the online ad impression sector.  Its market cap is also only about $1.1 Billion after a drop of 16% to $11.50 this morning (a new 52-week low).  But this may have ramifications elsewhere.  Google (NASDAQ: GOOG) bought DoubleClick. WPP acquired 24/7 Real Media (formerly TFSM).  Microsoft paid a vast sum for aQuantive (formerly AQNT).  And every other major media and content company has been making their online ad spending acquisition plays.

There are two scenarios here and both are as logical as a coin toss.  Either the slowdown in online ad spending is systematic and is going to slow everywhere.  That would be really bad for the giants who spent billions to buy players in this field.  The second possibility is that customers are opting to just bypass ValueClick since they don't necessarily need an independent online ad placement firm.  With the dominance of Google and others, it is possible that online advertisers are just going direct to the top 4 or 5 online destinations directly as they all have their own departments for this.

We are now in the midst of a full fledged earnings season with literally dozens and dozens of companies competing for headline attention.  This is one of those situations that may get overlooked, but it will be critical for all online ad players and online media companies who live on online ad payments.  We'll probably get a better handle on this after the close of today when Google and Microsoft report earnings.

Jon C. Ogg
July 17, 2008

3 Value Scenarios for Yahoo!: $17, $22, or $30 (YHOO, GOOG, TWX, MSFT, IACI)

The ongoing Yahoo! Inc. (NASDAQ: YHOO) merger saga with Microsoft (NASDAQ: MSFT) or its potential sidebar deal with Google Inc. (NASDAQ: GOOG) and the fight with Carl Icahn has been covered about every which way that could be imagined.  But what we wanted to look into was how this actually compares to what various valuation scenarios could look like after the company reports earnings and more importantly after its most widely awaited annual meeting in history since the year it came public.

The next best thing to owning a crystal ball that would tell you the future is to run basic analysis on the possible outcomes over the next 20 to 35 days.  We have run various estimate scenarios for Yahoo! stock and come up with three scenarios to determine an implied value upon various outcomes.  Many would argue that intrinsic values are always near the current price of the stock, but we are trying to derive the likely forward valuations based upon the outcomes of the three scenarios. The base scenario is around the current efficient market theory and the other two are the more extreme scenarios.  We admit that there are more than three scenarios, but these are probably the most logical and are in descending order rather than any order as being the most likely.

Scenario 1:  YHOO $30.00
Scenario 1 could come in the form of either of two sub-scenarios, and both could generate up to this $30.00 value.  Sub-Scenario 1 is where Jerry Yang has a great realization and decides to admit the errors of his (and board's) decision to go it alone.  In this scenario he is able to bring Microsoft (NASDAQ: MSFT) back to the table and secure a reduced price of $30.00.  He'd still have future question marks, but he wouldn't go down as the largest wrecker of value.  Sub-Scenario 2 is one where Carl Icahn is able to win all of his efforts, kick out management AND secure a revised deal in some form or fashion with Steve Ballmer as has been telegraphed.  Icahn's board would also have to begin a rapid process of monetizing all of those added properties that Yahoo! has been able to put together itself and might require the favored approach of Icahn in a very leveraged share buyback.  Regardless of which sub-scenario were to occur, this implies that the underlying economy for web properties and for their underlying business partners does not get much worse than today.

Scenario 2:  YHOO $22.00
This second scenario is one where things continue sort of on an as-is basis today and implies something similar to a +/- 15% range above and below that level depending upon the bias of the market.  This also fits into the perfect market or efficient market theory if you are inclined to believe in that notion.  This scenario is one where Jerry Yang and board members win some of their initiatives and lose on some initiatives to Carl Icahn.  It would signal that Yang and friends are forced to capitulate at least some and are forced to make some changes whether they want to or not.  That is also somewhat the current consensus from our discussions with industry people and the traders we have spoken with.  Does that "consensus opinion" mean anything? No, because we are still two weeks or more from even seeing all the preliminary data and likely 3-weeks or 4-weeks away from knowing an outcome and from knowing if either side will accept the voted outcome.  This price range still includes an embedded call option for the possibility of future actions such as deals, takeovers, and/or value enhancements.  This price range also is more indicative of a choppy economy rather than one that is going to get far worse.  At $22.00+, YHOO trades with a current forward multiple of 45.8 based on stock prices of today. We also looked at the AUG-2008 put and and call options with a $2.00 directional bet for either in determining a portion of our +/-15% range on either side.

Scenario 3:  YHOO $17.00
This scenario is an implied value based upon the severe drop in the markets AND is geared around the basis that Jerry Yang and kids win all or most of their initiatives after the board meeting and just stay on their current path alone.  Under this scenario Carl Icahn is not able to get anything done and he has to go away to just eat losses from this entire exercise.  Also Microsoft (NASDAQ: MSFT) would have entered into more than just discussions with another competitor like Time Warner Inc. (NYSE: TWX) via AOL or even doing a deal with Barry Diller and IAC/InterActiveCorp. (NASDAQ: IACI) on a post break-up basis, meaning they did a deal elsewhere and signal absolutely no hope for ANY future Yahoo! tie-up. This also assumes that Panama and other issues continued to lose some ground to Google (NASDAQ: GOOG) and assumes that the remaining search engine competitors and competing web properties maintain their current market share in each field with some competitors making additional inroads on gaining market share at Yahoo!'s expense even if Google's share keeps goes higher.  For a forward valuation and assuming the estimates for 2008 are actually met, then YHOO trades here (at $17.00 hypothetical price) with a forward price/earnings ratio of about 35.  That is still expensive for a lower-growth Internet stock. Google's current forward estimate is 26.5 based upon today's prices and YHOO trades with a current forward multiple of 45 based on $22+ stock prices of today.  This scenario could happen even if the economy stays choppy, but would still imply serious valuation premiums to Google and to the overall market even if Yahoo! meets its estimates.  This scenario also means that Wall Street has taken away any potential deal and the embedded call option premium is taken entirely out of the share price; and it essentially removes extra premiums for other possibilities and implies a multi-year road to recovery led by unresponsive management.

We acknowledge that these are subjective scenarios and also very subjective price values, but they are based on actual data and on assumptions that are in-line with many. There is no crystal ball that can be applied here.  Of all the Wall Street analysts, the average price target is roughly $24.50 to $25.00 for a one-year target as of today.  There are many higher and many lower price targets, but there are very few targets under $17.00 and very few above $30.00.  We also looked at shorter-dated and longer dated call options and put options to try more mathematical calculations for six months out.  Either way, there are many variables that could prove any of these scenarios equally true or false.

Jon C. Ogg
July 16, 2008

eBay Tops Estimates, But Too Conservative Ahead (EBAY)

We just got earnings out of online auction giant eBay Inc. (NASDAQ: EBAY).  The company posted $0.43 EPS (non-GAAP) and $2.2 Billion in revenues, which compares to First Call estimates of $0.41 EPS on $2.17 Billion in revenues.

The company gave guidance of $0.39 to $0.41 EPS and $2.1 to $2.15 Billion revenues and gave 2008 guidance of $1.72 to $1.77 EPS and $8.8 to $9.05 Billion revenues.  First Call had estimates of $0.41 EPS and $2.18 Billion in revenues for next quarter and $1.74 EPS and $9.01 Billion in revenues for the full year.

It ended with $3.7 Billion in cash and equivalents at the end of the quarter and spent roughly $566 million to repurchase 19 million shares of common stock during the quarter.  Operating cash flow in the quarter was $738 million and free cash flow was $617 million.

Many traders had high demands for the online auction giant but its shares closed up 4.5% at $28.10 on a strong day.  Its shares are initially trading DOWN by 5% at $26.70 in after-hours trading and its 52-week trading range is $25.10 to $40.73.

Jon C. Ogg
July 16, 2008

Financial Website June Traffic: Yahoo! (YHOO) And AOL Still Out Front

Statistics for June visitors and pageviews at financial websites showed Yahoo! (YHOO) Finance and AOL Money (TWX) well ahead of competitors based on comScore data. Yahoo! had 17.538 million unique visitors followed by AOL at 15,235 million. A fairly distant third among the portals, MSN Money came in with 12.286 million uniques.

Among the large business sites, Dow Jones online was in front with 8.304 unique visitors, followed by Forbes at 5.797 million. CNN Money had 5.218 million unique visitors and TheStreet.com had 4.854 million. Reuters.com was close behind at 4.271 million.

BusinessWeek and Bloomberg were in a dead heat. Bloomberg had 1.812 million unique visitors to BusinessWeek's 1.916 million.

Personal finance sites SmartMoney had 675,000 unique visitors and Kiplinger had 1.122 million.

Among newer, independent financial sites, SeekingAlpha had 671,000 unique visitors, Minyanville had 116,000, and Street Insider 151,000.

Douglas A. McIntyre

Turner Broadcasting Hooks Up With Yahoo! (YHOO): A Meaningless Gesture

In another in a string of fairly useless announcement, Turner Broadcasting System and Yahoo! (YHOO) have entered a multi-year strategic alliance that will allow the two companies to collaborate on advertising and sports-related content.

Turner will exclusively represent online advertising sales for the NBA, golf and NASCAR pages of Yahoo! Sports. Additionally, Yahoo! Sports will gain access to basketball, golf and NASCAR content from NBA.com, PGATOUR.com, PGA.com and NASCAR.com, league sites managed by Turner.

Douglas A. McIntyre

Yahoo!'s (YHOO) New Search Tools And The Conflict With Google (GOOG): The Enemy Of My Friend

The enemy of my friend is my enemy. Or, the enemy of my friend is my friend. Or, the enemy of my enemy is my enemy.

Yahoo! (YHOO) is finding out that being friends with any other large internet operation is not terribly good for its future. The search company launched a new product which will make it easier for software firms to use Yahoo!'s platform to create search functions of their own. According to The Wall Street Journal, "Yahoo hopes the service will increase the number of searches done through its service and generate more advertising revenue, since sites that incorporate the tool will eventually run Yahoo search ads."

The entire program is an effort to take search market share and ad dollars from Google (GOOG). That is the same Google which is supposed to set up a partnership with Yahoo! to use its Adsense program to improve the embattled portal's revenue. By some estimates this arrangement could add several hundred million dollars to Yahoo!'s earnings and help it make the case that it should not sell itself to Microsoft (MSFT).

All of that may make Google think twice about aiding Yahoo!, but it probably won't.

Google understands that it Yahoo! uses Google's search platform, over time Yahoo! will be tempted to abandon its own development to save money. Google also understands that Yahoo! may well be bought by Microsoft or that Yang & Co. will buy AOL which will be an integration nightmare. Both anecdotal and rigorous research show that big M&A deals rarely work.

Google can sit back and watch Yahoo! fall apart one way or another. Or, it can form a partnership with Yahoo! which will make most of the smaller company's software redundant.Yahoo! can go after Google all it wants to.Its opportunity to make that work is in the past.

Douglas A. McIntyre

Despite Upgrade, VeriSign Problems May Only Be Starting (VRSN, WWWW, ENTU)

VeriSign inc. (NASDAQ: VRSN) has had more than a tough week.  Shares are seeing a winning day so far as it was upgraded this morning over at R.W.Baird to an Outperform rating.  While we did expect someone to upgrade the stock based upon price/valuation, we are genuinely concerned here that VeriSign's problems may still have more life in the legs. 

Just two weeks ago, we issued a SPECIAL SITUATION alert to our newsletter subscribers with a short sell or put option strategy based upon many current and recent concerns we have.  We sent out an alert on Monday night asking for holders to cover HALF of the position.  This gain on Tuesday morning would have been approximately 20% on the stock, but the options trade (DEC08 $32.50 PUTS) would have generated more than a 100% gain.  You can see the actual report sample document here now that this is off of embargo.

Right before the long weekend, the company announced that its CEO was vacating the top spot. While that was the catalyst that prompted our profitable call to bet against it, that is likely the second shoe to drop among many.  Yes, the second.  The first shoe to drop was the April resignation of its CFO and of its Controller simultaneously.  Sorry, but that is more than a flag and cannot just be a coincidence.

So what else is there to not believing the current value of this stock?  Competitors such as Website Pros (NASDAQ: WWWW) (or Web.com), Entrust (NASDAQ: ENTU), Register.com, GoDaddy, 1and1, and others offer far cheaper services, and while we argue that VeriSign is the Rolls Royce of the web we believe that the small business migration growth from the waves of "accidental entrepreneurs" will have to seek lower priced services at shops that offer turnkey solutions.  There is some political risk here after 2009 depending on the US Presidential election, and there are many new domain extensions coming online. 

We also believe that its divesting strategy is taking far too long and is going to generate far less than was initially spent on some of these businesses.  Another isue is teh share buyback, which we believe Wall Street gave the benefit of the doubt over on the entire amount and then some all up front without considering the risks.  The company's recent expansions may also not pan out for VeriSign as quickly as it hopes.

Lastly, we believe that this last departure puts the bias for a real miss to earnings as a very likely scenario.  That is pure speculation though, as the company didn't change its May guidance recently on the CEO departure.  We also believe that its operating costs are going to grow, and we also believe that it will have a hard time passing down additional price hikes for domain registration.

There are many risks to staying negative after such a sharp and fast drop.  Butthat is why we believe that only a half position should be maintained in a bet against the company. We have continued to favor Website Pros, Inc. (NASDAQ: WWWW) for our "10 Stocks Under $10" newsletter and just issued a new alert on that one this last weekend.

Risks in staying negative in VeriSign here revolve around the company suddenly selling units that have been on the block, accelerated share repurchases, accelerated and above expectations new orders and expanded orders from key customers, domain growth, and more.

Jon C. Ogg
July 9, 2008

Yahoo! Inc. Denies Yang Resignation Rumors (YHOO)

There have been light rumors floating around that Jerry Yang was going to resign from Yahoo! Inc. (NASDAQ: YHOO).

We just put in a call to the company and this is a strong denial of any such rumor.  We spoke with Brad Williams in investor relations who said in response to "Is this a false rumor?" and he responded "Definitely! There's no basis."  He also said they have no idea where the rumor came from.

There is good news here and bad news here.  If Carl Icahn gets his way, Yang (and current friends) won't have to worry about whether or not he (or they) intend to resign or not.  It could happen for them against their wishes.  It also shows that Yang is going to fight for his agenda, whether some shareholders like it or not.

Yahoo! shares are down 1% at $24.39 today, and there is not even abnormal trading volume.

Jon C. Ogg
July 9, 2008

Vonage & Comcast Work On Standards (VG, CMCSA, CMCSK)

Comcast Corporation (NASDAQ: CMCSA) (NASDAQ: CMCSK) and Vonage Holdings Corporation (NYSE: VG) have announced a collaborative agreement this morning to address "the reasonable network
management of Internet services."

Comcast committed to work together with Vonage to ensure that network management techniques are chosen that effectively balance the need to avoid network congestion with the need to ensure that over-the-top VoIP services like Vonage work well for consumers.

Keep in mind that this is more of a protocol working arrangement for open standards or "platform-neutral" rather than a contract collaboration.  It might be more of confederacy than anything solid.  Comcast has announced other collaborations with BitTorrent, Inc. and Pando Networks, as well as participation in the P4P Working Group and elsewhere.

This isn't even helping Vonage stock today.  Shares are down 3% at $1.55 right after the open.

Jon C. Ogg
July 9, 2008

Google's (GOOG) YouTube Disaster

Google (GOOG) paid something around $1.7 billion to buy YouTube, which is by a wide measure the most popular video site in the world. By some accounts, one billion videos are watched at the site each day.

According to The Wall Street Journal, YouTube revenue is only running about $50 million a quarter, which makes the buy-out seem very expensive. Google executives blame some of the poor revenue numbers on the own advertisement placement systems. But, that is only a small part of the problem.

The real drawback to YouTube as a marketing medium is its content. The most popular video of all time on YouTube is called "The History of Dance", a short comedy feature shot in resolution so poor that it is barely visible. It is cult classic for buffoons. And, it has been viewed almost 92 million times. Not far behind that is a clip of a laughing baby. The content is sophomoric and the quality of the video is hideous.

YouTube will never do well until that great majority of the heavily trafficked content is high-quality video with high-quality content. Big TV advertisers like Chevy and Bud really don't want to be found in the company of video clips taken with cell phones and posted for the bizarre amusement of the great unwashed.

For now, YouTube is toast, at least as an ad medium

Douglas A. McIntyre

Yahoo! (YHOO) Looks At AOL (TWX)

In a fit of desperation not rivaled since the Grande Armee retreated from Moscow, Yahoo! is trying to find a refuge from onslaughts by Carl Icahn, Microsoft (MSFT), and its own employees who check out of the company by the score.

Yahoo! management's latest idea is to go back to Time Warner (TWX) and see if it can get a deal to buy AOL. What would happen, according to The Wall Street Journal, is "an arrangement whereby Time Warner would fold AOL into Yahoo and take a minority stake in the combined venture."

It looks nice on paper. AOL combined with Yahoo! would have a larger audience of users than any other internet company in the US. Because of AOL's Advertising.com network, a new merged company would also have the biggest display ad platform. And, Yahoo! could push its search products to AOL's users.

Because the Yahoo! shareholder base wants the company to be sold, a deal with AOL would probably drive the portal company's stock down below $20. It sits there now, off from being well over $30 after Microsoft's takeover offer.

Yahoo!'s market cap is down to $28 billion. That could fall to $20 billion if the market becomes unhappy with an AOL deal. Time Warner management knows that, and cannot afford to be viewed as fools who took bad paper. And, Yahoo!'s shares would qualify.

Yahoo! suffers from the fact that any deal it does now, short of selling the company, will devalue its shares. In other words, there is no transaction that does its shareholder any favors.

Douglas A. McIntyre

Will Cisco Systems Ask Jerry Yang To Leave Its Board? (CSCO, YHOO, MSFT)

Most people think of Jerry Yang as the Chief Yahoo! over at Yahoo! Inc. (NASDAQ: YHOO).  But there is another Jerry Yang role, and we aren't talking about him living up to the branding of "chief Yahoo!" in more ways than one.  We have gone over and over how Jerry Yang and kids managed to destroy value for shareholders.  If there had been a long-standing record or a current path that was working this entire situation and reasoning would have been different.  But those suppositions include the "IF, THEN" factor and the truth is now the exact opposite.

The role of Jerry Yang that he currently holds that gets very little attention is his role as a member of the board of directors at Cisco Systems, Inc. (NASDAQ: CSCO).  He has actually been on the board of directors over there since July 2000, according to Capital IQ. 

We looked over the other anti-takeover provisions at CapitalIQ to see what else was there. We also looked over the corporate governance section over at Cisco's website.  Yang is on the investment/finance committee of the board at Cisco.  But CapitalIQ notes that Cisco does not have a classified board, its member terms are for 1 year, and it lists its "removal of directors only for cause" as NO.  Shareholders do have the ability to act by written consent, although it may be a far stretch to believe that this represents any such issue that shareholders would want a special meeting.

The company has sent out the general proxy materials to shareholders in September for each of the last two years for the annual shareholder meeting to be held in November. 

It is probably doubtful that John Chambers or today's board of directors would go out of their way to make any direct actions on an interim basis.  Yang also isn't in the position to sink Cisco either as an independent, even if he is on the investment/finance committee for Cisco.  The one thing that may save Yang and keep him valuable is that the competition for Cisco with Yahoo!'s merger adversary at Microsoft (NASDAQ: MSFT) may now have enough forward competition that the company could keep him on for that matter. 

Sometimes it is good to clean house a little, and keeping a Jerry Yang around for 2009 probably isn't as attractive and probably doesn't offer quite the same insight as in many of the years before. 

In today's world of the Internet, anything is possible.  Reinvention is possible.  New business segments that didn't exist are possible.  And even redemption is possible.  Either way, the Doubting Thomas analogy is a hard one to get past.

Jon C. Ogg
July 2, 2008

Getty Images Goes Bye-Bye (GYI, GOOG, MSFT)

The long-awaited $34.00 cash buyout of Getty Images, Inc. (NYSE: GYI) by Hellman & Friedman looks as though it is coming to an end.  The company has issued a statement that today is the closing date and this is the last day that Getty shares will trade because of going private and being de-listed at the NYSE.

What is interesting is that Hellman & Friedman bought DoubleClick back in 2005 in a deal that was valued around $1.1 Billion, and within three years this was a leading huge Internet acquisition where the firm sold DoubleClick to Google (NASDAQ: GOOG).  The private equity firm sold DoubleClick to Google for around $3.1 Billion.

Getty Images was our top performing Special Situation Newsletter pick where we identified the company's structure in early 2007 as one that would fall victim to the equivalent of an effective industry de-merger.  We saw the issues affecting Getty and taking it far south and the total buyout price was still under our expected price return exit.  That's because the erosion we expected came far faster and even harder than we expected.

Getty Images is roughly worth $2 Billion today.  You could argue that the entire DoubleClick profit is being used to buy Getty.  We think Getty will actually do better as a private company for now and the company has taken many steps (which readers and critics have written about how personally Draconian the measures were) to protect their business interests.  Hellman & Jordan may do the same and it may not. 

We aren't inclined to predict who will own Getty Images after 2010 or 2011, but we are fairly certain that it will look different as an operating company or via who runs it.  Hell, Bill Gates may even want to be a free agent by then and there is another shot for a monopoly or at least a highly dominant market share... and we aren't talking about Microsoft (NASDAQ: MSFT)

Jon C. Ogg
July 2, 2008

Icahn Files Proxy Against Yahoo! (YHOO)

Carl Icahn has made his proxy filing today with his formal nominees for the Yahoo! Inc. (NASDAQ: YHOO) board of directors.  His stake is also listed as holding 4.98% in the company.

His new slate of board members is Lucian A.  Bebchuk, Frank J. Biondi,  Jr., John H. Chapple,  Mark Cuban,  Adam Dell,  Carl C. Icahn, Keith A.  Meister,  Edward H. Meyer and Brian S. Posner.

The good news is that Mr. Icahn is a billionaire and he's got a solid track record.  The bad news is that for now he's just wasted his time by messing around with Jerry Yang & Kids.... and wasted a few million dollars of spending money.

Covering the Yahoo! saga is becoming about as exciting as watching the stock ticker right now.

Jon C. Ogg
June 26, 2008

Video: Game, Set, Match To YouTube (GOOG), MySpace (NWS) Hammered

If a company is in the video business, and it is not Google (GOOG) YouTube, it might as well shut down. According to new numbers from HitWise YouTube had over 75% of the US visits to video sites in May. That was up 26% from the same month a year ago.

News Corp's (NWS) MySpace had a share of 9%, down a shocking 44% from May 2007. The social network's visitors clearly do not want to watch clips. No TV ad revenue for MySpace.

Yahoo! (YHOO) Video's market share was down 31% to under 2% of the US pie.

Everyone else in the market was from hunger.

Douglas A. McIntyre

Earlybird TMT Analyst Calls (ADBE, AEIS, ASML, CLWR, DT, LRCX, MVL, TI, VRGY, YHOO)

These are the early bird calls we are seeing in telecom, media, and tech:

• Adobe Systems (NASDAQ: ADBE) raised to Overweight from Equal Weight at Morgan Stanley.
• Advanced Energy Industries (NASDAQ: AEIS) raised to Buy from neutral at Goldman Sachs.
• ASML Holding NV (ASML) Raised to Buy from Neutral at Goldman Sachs, but slight lowering of estimates.
• Clearwire (NASDAQ: CLWR) raised to Hold from Sell at at Citigroup.
• Deutsche Telekom (NYSE: DT) raised to Overweight from Equalweight, but target cut to EUR13 from EUR 14.50.
• Lam Research (NASDAQ: LRCX) raised to Goldman Sachs Conviction Buy List from Sell at Goldman Sachs.
• Marvel Enterprises (NYSE: MVL) raised to Outperform at RBC.
• Telecom Italia (NYSE: TI) raised to Outperform at Bernstein.
• Verigy (NASDAQ: VRGY) removed from Goldman Sachs Conviction Buy List on valuation.
• Yahoo! (NASDAQ: YHOO) Downgraded to Underweight from Market Weight at Thomas Weisel.

Jon C. Ogg
June 24, 2008

Amazon.com Follows UPS Lower (AMZN, UPS)

Shares of Amazon.com (NASDAQ: AMZN) are trading lower in after-hours trading.  The company hasn't issued any new news, but the problem is that United Parcel Service (NYSE: UPS) gave an earnings warning.  The tie here isn't directly the higher fuel prices, but that comment about softening demand "on lower than expected package volume." 

Amazon.com closed down 0.5% at $80.68 in normal trading with a weak NASDAQ today, and shares are down about 1.4% in after-hours at $79.55 on about 89,000 shares.

The reason for the tie is even more simple that the overall mail delivery ties from one company to another.  If you order through Amazon.com you are almost assured that it will be delivered by UPS.

Jon C. Ogg
June 23, 2008

News Corp (NWS) Can't Keep Its Advantage: Facebook Passes MySpace

The two largest online social networks are Facebook, which is a private company, and MySpace, which is owned by News Corp (NWS). MySpace has always been the larger property. Facebook was a distant second, but gaining.

The News Corp deal to pick up MySpace was always viewed as a brilliant move by Rupert Murdoch. He paid $580 million for the operation in mid-2005. Facebook was recently valued at $15 billion. so the Australian got a discount by moving into the market early.

Unfortunately for Mr. Murdoch, his front-runner status is gone. According to audience measurement firm comScore, in May the unique visitors to Facebook hit 123 million. MySpace had only 115 million uniques. The FT writes "Facebook, the fast-growing social network, has taken a significant lead over MySpace in visitor numbers for the first time, according to one popular measure of internet traffic."

Over the last year, Facebook's visits have almost doubled. MySpace is only up 5%.

Does it matter? Probably not. Over at News Corp, MySpace has been missing its revenue targets. Murdoch hoped the operation would do $1 billion last year. It was off that by about 20%.

Social network sites will probably never do well financially. That is only a recent discovery, but it makes the news no less damaging. Visitors to these sites go to build profiles of themselves, mostly juvenile and overblown portraits. Their friends and complete strangers can go online and check all of this dreck. But, it has little value to advertisers. Organizing social network users into unique "buckets" is hard. At Google (GOOG), marketers can target users by search topic. At Yahoo! (YHOO) content areas are broken down by subject--finance, news, sports, jobs.

The number of people using social networks may continue to grow quickly, but they have little value to GM (GM), Procter & Gamble (PG), or IBM (IBM), because no one knows why Facebook users spend their time online trying to make themselves look better than they really are.

Douglas A. McIntyre

Google Keeps Drumming Yahoo! (GOOG, YHOO, MSFT, TWX, IACI)

Nielsen Online has a report out for MAY 2008 data on the top U.S. SEARCH PROVIDERS.  As a reminder, this is "US SEARCH" rather than global search.  But it shows that Google Inc. (NASDAQ: GOOG) is still killing Yahoo! Inc. (NASDAQ: YHOO).  This shows that total US search grew by 9.5% in May 2008 over May 2007.  A couple standout names were the large increase seen at Microsoft (NASDAQ: MSFT), followed by additional gains at IAC/InteractiveCorp. (NASDAQ: IACI) with its Ask.com, and lastly the drop seen at Time Warner Inc. (NYSE: TWX) for its AOL search unit.

Provider                          Searches(000)  Y/YChange MarketShare
ALL Search                        7,849,553         +9.5%       100.0%
Google Search (GOOG)      4,654,624        +15.4%        59.3%
Yahoo! Search (YHOO)       1,328,667        -13.8%        16.9%
MSN/Windows Live (MSFT) 1,043,848        +72.4%        13.3%
AOL Search (TWX)                322,454        -15.6%         4.1%
Ask.com Search (IACI)          168,568        +18.4%         2.1%

As a reminder, every single search measurement out there gives different levels of readings and frequently the data conflicts from source to source.

Jon Ogg
June 19, 2008

Eleven Billion Videos Viewed In April, And No One Made A Dime (GOOG)(NWS)(CSCO)

comScore reports that eleven billion videos were watched in the US in April. Of those 4.2 billion were watched on Google (GOOG) sites, which mean YouTube. No one on Wall St. thinks YouTube makes any money. The poor quality, user created content of dogs doing magic tricks and Nascar clips are not compelling to major marketers.

Fox Interactive, part of News Corp (NWS) was in second place with 558 million videos viewed for the month. Most of those are from MySpace, the social network for people in state prisons and agoraphobics. The lion's share of these people are also in the amateur video business and use cellphones to collect the content that they then post on their personal pages.

Cisco (CSCO) recently observed that video traffic on the internet would explode between now an 2011. If most of that content remains personal material posted by people who like to see their own creations online, there will be large costs to host and transport the data, but getting advertiser interest will never materialize.

Douglas A. McIntyre

Answers Raises Cash (ANSW)

Answers Corporation (NASDAQ:ANSW) has entered into agreements for a private placement to raise cash up to $13 million via the sale of convertible preferred stock and warrants to Redpoint Ventures.  Thomas Weisel Partners LLC acted as lead-placement agent and Canaccord Adams acted as co-placement agent for the offering.

The transaction was listed as yesterday and consisted of $6 million of series A convertible preferred stock, convertible into 1,333,333 shares of common stock at a conversion price of $4.50 per share, with 50% warrant coverage at an exercise price of $4.95. Redpoint was also issued a second tranche warrant, exercisable over the next 12 months, to purchase up to an additional $7 million of series B convertible preferred stock, convertible into 1,272,727 shares of common stock at a conversion price of $5.50 per share, with 50% warrant coverage at an exercise price of $6.05.

Answers Corp. closed yesterday at $3.92, and its 52-week trading range is $3.30 to $13.40.  prior to this offering, its market cap was a mere $30.8 million.

Answers is the creator of the answer engine offering Answers.com(TM) and WikiAnswers.com(TM).  Redpoint is a Menlo Park, CA, based venture capital firm that specializes in early stage and growth capital investments for the Internet and technology sectors.  Redpoint's Allen Beasley will join the board of directors at Answers and the firm will get a second board seat if it exercises its second financing.

You can join our open email distribution list to hear about other mergers, IPO's, secondary offerings, private financings, activist investors, and more.

Jon C. Ogg
June 17, 2008

Sony (SNE) To Launch New Show Online, Alienate Customers

Sony (SNE) is about to launch it new "Angel of Death" program online. It hopes the trick will get people to buy the DVD of the show down the road. Content companies now release this kind of programming without putting it on to TV or into theaters. The "junk" content makes more money that way. It is cheap to produce and would not hold up the the tastes of people who go to the movies to see "Shrek III".

The launch has one flaw, and perhaps a fatal one. According to The Wall Street Journal, "The series will be released online eight minutes at a time, over 10 weeks, on various Sony-affiliated Web sites." Of course, consumers are anxious to go back to their PCs ten times to see a program which was not worthy of theater release.

Sony's move is an example of how not to use the internet. It is not a medium for promotion gimmicks. Online media consumers can get too much YouTube and premium content for free. NBC releases many of its TV shows gratis for online viewing, as do other large media companies.

Asking people to watch programming ten minutes at time is like asking them to put burning sticks into their eyes.

There are a lot of takers for that one.

Douglas A. McIntyre

Yahoo! (YHOO) Gives Up A Mint By Rejecting Microsoft's (MSFT) Second Offer

Microsoft (MSFT) told its employees that it offered Yahoo! (YHOO) $8 billion in cash for 16% of the company and $1 billion to buy its search operations.

According to Reuters, "The proposal also included a revenue-sharing partnership that would have delivered $1 billion a year in additional operating income to Yahoo due in part to a three-year guarantee of better rates for advertisements tied to its search results."

A Yahoo! partnership with Google (GOOG) does not appear nearly so good, although Yahoo! has opted to take it. The world's largest search company may add $500 million to the operating income at Yahoo!.

The portal's board screwed the company's shareholders again.

Douglas A. McIntyre

Yahoo!, Google, Microsoft Ties Getting More Complicated (YHOO, GOOG, MSFT)

The WSJ has reported that that long-standing rumor of a search advertising deal between Google (NASDAQ: GOOG) and Yahoo! Inc. (NASDAQ: YHOO) is close to being consummated.

Yahoo has concluded talks with Microsoft without reaching a deal, and is close to a search-advertising pact with Google. Full article coming soon.

You can expect that a large billionaire activist investor by the name of Carl Icahn will be keying in on this before the end of the day.  If Microsoft Corp. (NASDAQ: MSFT) was going to have any interest in coming back to the table, that may be turning into mere wishful thinking depending on how in-depth this deal really will be.

Google shares are up 1% and yahoo! shares are now down 2.5% at $25.49.  Perhaps Jerry Yang should watch his share price before he signs that deal. 

As a reminder, some have argued that any such "ad search" deal would come under antitrust review even though it isn't a merger.

Jon C. Ogg
June 12, 2008

S&P Hikes Amazon.com Corporate Credit Ratings (AMZN)

Standard & Poor's Ratings Services has raised its corporate credit rating on Amazon.com (NASDAQ: AMZN) to 'BB+' from 'BB'. While this is still junk status, it is now just a notch under "investment grade" rated for corporate credit ratings.  Amazon has also been removed from CreditWatch with positive implications that were imposed in February.

S&P raised the rating on the company's 4.75% convertible subordinated notes due February 2009 and its 6.875% premium adjustable convertible securities to 'BB+' from 'B+' and assigned both issues a recovery rating of '3'.  That indicates the expectation of meaningful  recovery noted as a 50% to 70% in the event of default and the outlook is positive.

This reflects Amazon's trailing 12-month growth rate of 39.4% as of March 31, as well as its  ability to manage sustained growth with beneficial impact on credit measures from the recent redemption of the $500 million 4.75% convertible subordinated notes.

Jon C. Ogg
June 11, 2008

SourceForge CEO Out.. Slashdot.Org and ThinkGeek (LNUX)

SourceForge, Inc. (NASDAQ: LNUX) announced after the close that its  President & CEO Ali Jenab has resigned from the company, with an effective date of today.  Interestingly enough, Ali Jenab had been at the company for nearly eight years.

The company's board of directors has appointed Robert Neumeister, Jr. as the company's interim President and CEO.  Neumeister is a not only a current member of the board of directors, he's the Chairman.  The company does note that this is an "interim" basis as it has formed a search committee and will start the process of looking for a new CEO immediately.

SourceForge said it intends to take aggressive steps to accelerate the growth of its core Internet properties: Slashdot, SourceForge.net and ThinkGeek.  For those of you who are tech-web addicts you know these, but if you do not then you will be interested to know that these properties are all widely watched and have long-standing readership numbers.  In fact, if you look below we are showing you the US-rankings for Alexa and the overall measured ranking from Quantcast:

                            Alexa   Quantcast   Est. users
Slashdot                1,404     3,562         693,964
SourceForge.net     133        949           2.0 Mil
ThinkGeek              1,181    12,117       186,413

While these numbers might not sound like the rankings of Google, Yahoo!, MSN, or others, these are very large numbers for advertisers looking for targeted audience ads.

This hasn't been the greatest time for SourceForge as a stock.  Shares closed down 2.2% at $1.32 today, another 52-week low.  The prior 52-week trading range was $1.35 to $4.45.  This also puts the company within basic striking distance of 5-year lows.  Shares were even under $1.00 back in early 2003 and late 2002, but they were exponentially higher back in the bubble days.

the company did swing to a net loss last quarter after results.  Is market cap is roughly $90 million, while its last quarter showed cash and investments were about $61 million and all liabilities were $11.068 million.

Jon C. Ogg
June 10, 2008

Overstock.com's Distressed Property Play (OSTK)

Overstock.com, Inc. (NASDAQ: OSTK) has announced its official debut of its real estate search application through the O-Hot Value Indicator.

The company site can be accessed at http://realestate.overstock.com.  Overstock believes the site is unique as it helps shoppers identify great deals from more than three million classified, foreclosure, and hard-to-find auction homes for sale.  The site is supposed to automatically highlight auction, distressed, and foreclosed properties.

If you are seeing tools like this launched, you have to wonder if perhaps the foreclosures, auction, and other troubles are very close to reaching their own bubbles.

Jon C. Ogg
June 10, 2008

Yahoo!'s New Icahn Battleship: U.S.S. Defiant (YHOO, MSFT)

Yahoo! Inc. (NASDAQ:YHOO) has filed its own proxy materials for its August 1 shareholder meeting, and it is essentially asking shareholders to follow it 100% with no concessions to activist and raider Carl Icahn.  Jerry Yang and friends are seeking a re-election of all of its directors and is not including any of the Icahn-selected director candidates.

As the company noted, "...we are executing on our strategy to create value that is gaining traction. In addition, in responding to Microsoft Corporation’s proposal to acquire the company and exploring strategic alternatives, Yahoo!’s board has been focused on one central goal: how best to maximize stockholder value."

The company is still maintaining that it is open to a transaction with Microsoft if it maximizes shareholder value.  The company is also still maintaining that it is seeing gains from Panama.  It also noted that the purchases of Right Media, BlueLithium, Zimbra, and Maven Networks have all helped advance core strategies and that it is winning new or expanded relationships to the likes of WPP, Wal-Mart, CBS, and more than 770 newspapers in its newspaper publishing consortium.  It is also still looking for its new advertising management platform called AMP! from Yahoo! to grow its ad presence.

What is perhaps most important is that this says in big bold letters, "Carl Icahn Has No Credible Plan To Create Value" and even noted further, "In our opinion, Mr. Icahn and his slate are not the right individuals to guide Yahoo! as a standalone company."

Jerry Yang and friends might be right about Carl Icahn not offering any value, and they might not be right.  It is very understandable that they wouldn't step down just because a billionaire like Carl Icahn gets up their you what. 

In the end the company should consider some of the nominees like Mark Cuban or Frank Biondi, at least if it wants to bring in new ideas and have some checks and balances.  Don't bet your retirement money on it though.  That suggestion may be like asking the wolves to protect the sheep from predators.  The truth is that Yahoo!'s current board doesn't want any of Icahn's nominees regardless of who they are.  The bad news is that Yahoo! needs more shaking up even if Icahn is overstepping his boundaries.

Before the end of summer it is likely that one of these parties will make some concessions, with the key word being "some."

Our own verdict before the trial has even started is that Microsoft (NASDAQ: MSFT) saved untold billion of dollars by not acquiring Yahoo!.  We recently compiled a list for our Special Situation newsletter subscribers of eight other software, tech, and new media companies which Microsoft could acquire for close to or roughly the same amount of cash over the next twelve to eighteen months.  The company also wouldn't find itself in as deep of regulatory reviews with any of the companies.

Jon C. Ogg
June 9, 2008

What's Up At Stamps.com? (STMP)

It's always interesting to peruse the 52-week highs and lows for trading ideas.  Sometimes you see some head-scratchers and sometimes you get Eureka.  A review of the highs today showed a more than interesting move in Stamps.com (NASDAQ: STMP).  The company does exactly what you would guess, internet-based postage solutions.  It is part of the USPS-approved PC Postage Service.

Today the stock is up 5% at $15.10 with about 20 minutes to the close, and its 52-week trading range is (was) $8.47 to $15.00.  Interestingly enough, it has only traded about 122,000 shares and its average daily volume is about 150,000 shares.  This now has a $292 million market cap.  It's liquidity as of last quarter was more than $90 million in cash, equivalents, and long-term investments, while it has essentially no long-term debt.

This is one is extremely thin on coverage with First Call noting 3 estimates and a consensus of $0.63 EPS on $87 million in revenues for 2008.  So there is nothing in the remedial analysis that screams total bargain basement nor anything that screams grossly over-valued here.  There have been no major analyst calls.  Back in April this was trading under $11.00.

Could this be genuinely as simple as people not using gas to go to the post office?  Of course not.  There may still be some excitement about last month's approval to protect its "tax net operating losses."  It also has a provision that any holder acquiring more than 5% of the shares outstanding has to first obtain a waiver from the company’s board of directors and those holders who already hold more than 5% cannot make any additional purchases of Stamps.com stock without a waiver.

Here was the description of that move:
Stamps.com currently has approximately $250M in Federal NOLs and $150M in State NOLs, with a potential value of up to $95M in tax savings over the next 15 years. The value of these NOLs could be significantly impaired unless the Company avoids potential transfers of its stock that could trigger such an “ownership change” under Section 382.

We had looked at this one for our Special Situations newsletter before, but we had to pass on it because the stock options to hedge the stock were too illiquid on the surface.

You can join our open email distribution list to hear about other secondary offerings, mergers, special financings, IPO's, restructurings, and other special situations.

Jon C. Ogg
June 4, 2008

Exchanges And Financial Websites Battle Over Real-Time Quotes

Yahoo! (YHOO) Finance began to offer real-time stock quotes recently. It got around the huge fees changed by NYSE and Nasdaq by pulling the data from the Bats ECN, an electronics exchange that handles about about 10% of the volume for stocks traded in the US each day. The two exchanges get a large amount of their revenue for charging for real-time quotes, so the Yahoo! deal is a threat to their business.

A few days after the Yahoo! launch, Google (GOOG) Finance began to offer real-time quotes from Nasdaq. The search site did not make any mention of if or when it would offer a similar service from NYSE. Several Dow Jones sites carry the new service, but none of the participants have said why only Nasdaq is offering its real-time quotes at no charge.

It is widely assumed within the industry at that AOL Money site will also begin to put the Bats or the Nasdaq service on its site. It is hard to imagine that it would want a service that does not include NYSE real-time data. If AOL goes the Bats route with Yahoo! about 50% of visitors to finance sites will be using the system.

What is not clear is whether the Bats service will eventually end up being used on all of the major financial sites because it is free or whether the portals will elect to license the data from the major exchanges. Based on conversations with management at the internet companies, running the exchange data could cost $3 million a year.  If use of quotes directly from the exchanges becomes widespread, it is not a competitive advantage for any of the financial sites. The NYSE and Nasdaq will be receiving tens of millions of dollars for something that is likely to become useless for pulling in extra traffic for any single site. Once everyone has it, the power of being early to market is gone.

The Bats program may pressure the exchanges to exit selling real-time quotes to individual investors. Bats data is not identical to exchange data because it only shows prices for a percentage of all trades. But, especially for widely-traded stocks, the quotes are likely to be identical to those streamed from the NYSE and Nasdaq. For stocks with less volume there may be some price dislocation. What casual investor want to pay a monthly fee for something which is available for free?

Institutional traders will continue to need exchange data for its completeness. Heavy retail traders usually get real-time exchange data from their discount brokers. For most people who simply want current price data that is not delay for 20 minutes, Bats is more than adequate.That means that the exchanges are about to lose a piece of their revenue, unless they want to substantially lower their prices.

Douglas A. McIntyre

Explanation of Level 3 Communications Volume & Price Surge (LVLT)

It has been hard to not notice the movement and trading activity in Level 3 Communications Inc. (NASDAQ: LVLT).  This set up an alert for us over at VOLUME SPIKE earlier this morning and we wanted to do some digging since this is one of the more stocks and frequently covered on our "10 Stocks Under $10" newsletter.

This was looking like a head-scratcher if you only looked at the headlines available on the surface and overlay them with the trading volume and movement from yesterday and this morning.   Yesterday we noticed a 2-times volume day with an 8% rise to $3.74.  Then this morning we have seen a sharp move with another 8% gain to $4.04 after 90-minutes of trading.  Shares have come back off a bit and are at $4.00 on lst look.  While the volume is already almost 17 million shares (24.6 million average daily volume) it isn't off the charts for this stock.  So we wanted to dig further.....

There are two things that account for this.  First and foremost, a JPMorgan analyst has been reported as making positive comments with a $5.00 valuation.  We have not gotten that full note nor any of the details, so we are just treating that as hearsay until that is better described at the source.  There was a note yesterday that UBS had reiterated its "Neutral" rating.

More importantly, the company made a presentation yesterday at at the Oppenheimer Annual Communications & Technology Conference.  Some of the highlights are as follows:

• Expects to be free cash flow break even in aggregate for rest of 2008;
• Expects to be free cash flow positive for full year 2009;
• Core 2008 revenue growth expected 8% to 13%;
• Debt maturity schedule no issue until 2010 or beyond;
• Debt/EBITDA expected to be 6.6X for 2008, down significantly from last three years.

At the end of April this was under $3.00 and it was under $2.00 at the end of March.  This is also the first time the stock has seen north of $4.00 since October 2007.  With this being a 6-month high, expecting some profit taking might be prudent until we are closer to more new data from the company or until we get any game changing calls from analysts.

Jon C. Ogg
June 4, 2008

Wal-Mart (WMT) Sets Out To Kill The Newspaper Industry

Newspapers have been hit by so many arrows that it is a miracle that they are still standing. As internet ads have taken away much of their revenue and costs of printing and transportation have moved higher, margins at daily newspapers are disappearing.

While national and local ads at many papers are off 10% or better this year, it is the classified business that is really hurt. Some of the largest newspaper have lost 20% to 30% of their classified ad revenue this year. Most of this comes from the damaged real estate, auto, and job sectors.

One of the great enemies of the industry has been Craigslist, the huge online classified website. Now, Wal-Mart (WMT) is joining the phalanx set against newspapers.

According to The Wall Street Journal, "Walmart.com Classifieds claims a reach of more than five million consumers each month through a network of sites, including newspapers, portals such as Lycos and online communities such as Military.com." And, it is giving the ads away for free.

Wal-Mart's theory seems to be that giving classifieds to its customer will improve their loyalty to the world's largest retailer. That may be true. It makes sense.

But, over at the local newspaper, another piece just got torn out of its heart.

Douglas A. McIntyre

Google (GOOG) Beats Yahoo! (YHOO) Like A Rented Mule

comScore (SCOR) and other analysts made the mistake of saying that Google's click-through rates on the text advertising that runs next to its search results we not doing very well in Q1. Earnings from the search company showed otherwise. The stock soared and that was that.

Now, comScore has come out with it April figures and Google's click rates are rising with its share price. The Wall Street Journal writes "according to comScore, Google saw better-than-expected 20% growth in U.S. paid clicks in April compared with the same period a year earlier."

The numbers for Yahoo! (YHOO) dropped 4.4% from the same month a year ago. Microsoft's (MSFT) performance was off 9%.

Does it matter if Microsoft buys Yahoo!? Based on the fact that both are losing search share, a marriage may do little. Now it appears that the advertising systems at the No.2 and No.3 search operations are losing momentum while Google moves forward like a clipper ship under full sail.

The competition for search may be ending, so the portals like MSN and Yahoo! may have to find a new way to make money. Both are getting deeply into the targeted display ad business which could increase efficiency for that kind of marketing on the web.

It better work.

Douglas A. McIntyre

Rating The Online Financial Sections At The Top 25 Newspapers

The war for newspapers to stay profitable, and, perhaps long-term, to stay viable has become a race between the fall-off in their print advertising and the increase of their online sales. Based on a look at the numbers from publicly traded companies in the industry, things are going badly. The sole exception may be The New York Times Company, where online revenue is now well over 10% of the total.

One of the critical sections of most online newspaper sites is the financial and business area. Marketers tend to be willing to spend higher rates on business readers because they have money that the readers of the sports sections may not.

24/7 Wall St. looked at the business and finance sections of the online editions of the top 25 newspapers in the US based on their circulation as of March 31, 2007 taken from the Audit Bureau of Circulations.
The sites got ratings of “A” through “F” based on:  1) strength of content, 2) ease of use and navigation, 3) use of new web technology including comments sections, message boards, and multimedia 4) lay-out, and 5) presence of a strong set of current advertisers.

The Wall Street Journal and USA Today were not rated. They are national newspapers. The business content of WSJ.com is well beyond the reach of any other daily. USA Today has a very modest business section based on its desire to keep the news hole of both the paper and the website small. These are two of the 25 on the list.

The list of websites below runs from largest to smallest based on print circulation:

1. The New York Times. It would be hard for any other metropolitan daily to compete with the Times. It has substantially larger editorial resources than any other metropolitan operation. Its most significant drawback is that it runs a reasonable amount of copy which is duplicated elsewhere, particularly by Reuters and The Wall Street Journal. NYT.com makes impressive use of blogs, charting, video, and other interactive features. Perhaps the best content run in the section on a regular basis are the “DealBook” area which covers the financial sector and “Bits” which covers technology.  Ideally, the NYT business section would not have to run such a large amount of copy which overlaps with other sources, but being complete trumps that.  Grade: A

2. Like most of the other online financial editions on this list, the LA Times runs a great deal of copy from sources like Bloomberg and the AP. As might be expected, entertainment and real estate news are overrepresented in the paper, but that is almost certainly in the interests of the readership. Except for the standard buttons for Digg and Facebook after each story, the section does a fairly poor job of engaging readers. The stock and investing tools portion of the site are weak. “The Biz” section on entertainment and “Money & Co.” parts of the site are very good. Grade: B-.

FCC: Broadband And Socialism

The FCC will have another of its interminable airwaves auctions soon. Telecom and tech companies will run in to buy spectrum so that they can send voice, video, data, and junk without having to hang wires or bury wires in the ground.

The agency may put a little twist into the next auction. According to The Wall Street Journal "The Federal Communications Commission is considering a plan that would require the winner of a planned airwaves auction to offer free wireless-Internet service to most Americans within the next few years."

Those receiving the "free" internet could not use it to look at porno or other nasty stuff. It would not be good for the FCC to help promote that kind of behavior.

The agency would like to have its cake and eat it, too. Private companies will pay the agency a ton for spectrum which they can use for commercial purposes. In exchange, they can give a part of that away and spend money helping to bring broadband to every man, woman, and child. Those airwaves cannot be used to support any bad behavior.

Someone needs to call a psychiatrist for Kevin Martin.

Douglas A. McIntyre

The Xbox, The Playstation, And The Holy Grail Of Search (YHOO)(MSFT)(GOOG)(SNE)

Several presentations at the All Things Digital conference this week made it clear that Microsoft (MSFT) has probably lost its appetite for buying Yahoo! (YHOO). According to Reuters, "Yahoo Inc Chief Executive Jerry Yang said on Wednesday a potential deal with Microsoft has tremendous power, but the software giant appears no longer interested in a full merger."

The news may serve to drive down Yahoo!'s share price and vex the company's board and takeover king Carl Icahn who wants to have control of the portal firm. But, the news says much more about Microsoft than it does about Yahoo!.

Somewhere deep in its heart of hearts, Microsoft believes that it can challenge Google on the search company's own ground and have some success. As implausible and audacious as that sounds, it is within the Redmond culture to think such things can be done.

Seabiscuit was not supposed to beat the larger and stronger War Admiral in 1938, but he did.

It would appear that casting Microsoft as an underdog at anything makes little if any sense. It may be the most successful technology company of the last fifty years, but the firm was far too late at seeing the search business would be the key to internet domination.

Microsoft does have a history of coming from behind. Netscape had the lion's share of the browser market in the mid-1990s. Microsoft took that away with its Internet Explorer. No one thought Redmond could challenge Sony in the game console business, but