Archive for April, 2007

Someone on the IMSI/Design/TurboCAD forum asked me why I wasn’t blogging more company info.  Great question.  Here was my response:
Sorry for delayed response.
The trial version should be ready this week (please check the TurboBLOG — — for announcement).  I’ve always been embarrassed that no matter how much science you put into it, the process of finally getting a product out-the-door always ends up behaving more like art.  Thanks for your patience. 
Note, for what it’s worth, we really are on a pretty intense development schedule… seven major releases, a few updates, a few localizations, and a bunch of website work… all in the span of a few months.
Re: my blog:  I’ve labored over this one for quite a while.
Officially, we try to communicate through the forums, newsletters, email announcements, and through the press and opinion makers.
We’ve also created the official company blog, TurboBLOG (referenced and URL above).
My blog, on the other hand, is really based on my hobby… instead of birds, I watch stocks (smile).  I’ve been watching stocks for as long as I can remember.  My dad and I would pour over the stock pages and talk about stocks that were moving (up or down) and why.  Obviously, my hobby focuses on online advertising these days, an industry that I think will stay on its current trajectory through the end of the decade.
I’ve labored over whether to add IMSI/Design stuff to my blog and decided not to do this at this time for a number of reasons:
First, we already have a corporate blog and I think a single contact point with customers is always more effective.  And, to be frank, for a corporate blog to be effective, it has to be consistent.  Clearly I’m not the consistent blogger in the family (so to speak).
Next, as I’ve been upfront and honest about from the very beginning, I’m not a CAD expert.  It would not be genuine of me to give anyone the impression that I am an expert by commenting on either the on-goings or the interworkings of the CAD industry. 
At least not for now.
Finally, while I’m not a CAD expert, I think I’m capable with big picture software directions.  I’d like to believe we’re seeing things in the industry that others have missed. 
As such, I’m a bit reluctant to talk about the stuff we’re working on.  Partially because we’re not going to talk the talk, rather, we’re going to walk the walk (or however that expression goes.)  And partially because I believe our strategic direction is a competitive advantage for us… don’t really want to tip our hand at this early stage.
Suffice it to say, we’ve validated our strategic direction with some of the smartest people in the CAD industry… their enthusiasm, as you can imagine, has us pretty fired up.
So while we may be more quiet than we should be, please make no mistake, we *are* working on a ton of really exciting things… our partnership with Google re: TurboSketch Studio — the *first* company in North America to do such a thing with Google — is just the beginning.
Overall, what I hope is obvious:  I didn’t come to IMSI/Design for "business as usual."
We appreciate everyone’s patience… we think you’ll like what you’ll see from us in the future.
Heard an amazing GOOG compliment the other day: 
Google is probably one of the very, very few companies that actually knows where it will be in 2015.
Clearly, technologists are running GOOG.  And not at YHOO.
Everyone knows that I track headlines… this one says it all about GOOG’s quarter:
As they say in the comic books, "’nuff said."
P.S.  Notice how GOOG stated exactly how much option related expenses were in their quarterly announcement?  So that all the reporters could pick up on it.  Which they did.  Like they have nothing to hide.  Because they don’t.
On the other hand, I haven’t found in any of the press reports what YHOO’s option related expenses were.  So that none of the reporters would pick up on it.  Like they have something to hide.  Because apparently they do.
Looks like there was $39.4 million in G&A option related expenses at YHOO this quarter.
If past awards are an indication, I think the bulk of these go to Terry Semel, YHOO’s CEO.
Assuming (for sake of this observation) that they all went to him… and adding that $39.4 million back to the net income figure… and assuming the total dilution doesn’t change (which of course it would)… and adjusting for the tax consequence…
…then I’m calculating about a 12 cent gain instead of a 10 cent gain… which would have beat consensus of 11 cents… and possibly avoided yesterday’s blood bath.
But, I don’t know if I’m actually doing this calculation correctly.  And, I can’t remember if companies are reporting with or without these figures these days. 
So, I’ll dig around to find these answers.
First blush, though, it looks like Semel’s option package all by itself knocked off about $5.4 billion in YHOO shareholder value yesterday.
Again YHOO disappointed.  Can’t remember the last time they didn’t have ugly headlines.
Lesson #1 for YHOO CEO Terry Semel should be:  Don’t go out of your way to brag about the quarter unless you’re going to knock it out of the park.
Lesson #2:  Don’t say lightning rod type things like:
     "I feel really good," he said. "The results are great and we are very happy with what we have done so far."
#1:  Why do you feel good?  Your stock is down almost 12% as of this writing.
#2:  Why are the results great?  They clearly fell short and you clearly had to know that.  That’s why your stock is down almost 12%.
#3:  Why are you very happy with what you’ve done so far?  What you’ve done so far is fall farther behind GOOG in virtually every metric.
To be fair, this quote could easily be taken out of context.
What’s not being taken out of context is Jim Cramer’s opinion:
     "I believe that this Terry Semel-Sue Decker management team must be the best thing that ever happened to Google."
Wow.  Ouch.
Another disappointing quarter, another data point for why non-technologists should not run technology companies.
Makes you wonder how Semel continues to get huge stock option grants, eh?

Cash And Not Stock?

Posted: April 15, 2007 in Uncategorized
GOOG just bought DoubleClick for $3.1 billion in cash.
About this time two quarters ago, GOOG bought YouTube for $1.65 in stock.
Back then, I speculated that GOOG was queued up to have a great quarter because it was all stock. 
Meaning, could you imagine how angry YouTube employees and VC investors would have been if their acquisition price was significantly devalued a week or so after the acquisition?
And, if the deal had any built-in downward stock price protection, then GOOG shareholders would have felt absolutely ripped off with any precipitous stock price declines.
So the only positive outcome doing an acquisition for stock and announcing it the week before earnings was the insiders knew:  The quarter was in the bag.
I’m trying to think through what an all cash offer announced the week before earnings now means. 
Certainly, they may not have had a choice timing-wise, MSFT and YHOO were hot after DoubleClick, too.
The best thing that I’ve read about this was in a piece by Vishesh Kumar today where Kumar said Google considers its own stock undervalued and therefore would rather have used cash.
This is plausible.  I’ve been in this position before… and I’ve heard other CEO’s discuss the exact same thing.
So is GOOG undervalued?  From Yahoo Finance:
GOOG  P/E: 47; Fwd P/E: 25; QTR Rev Grwth (yoy): 67%; QTR Earn Grwth (yoy): 177%
VCLK  P/E: 48; Fwd P/E: 30; QTR Rev Grwth (yoy): 38%; QTR Earn Grwth (yoy):  52%
MSFT  P/E: 24; Fwd P/E: 17; QTR Rev Grwth (yoy):  6%; QTR Earn Grwth (yoy): -28%
YHOO  P/E: 61; Fwd P/E: 43; QTR Rev Grwth (yoy): 13%; QTR Earn Grwth (yoy): -61%
IACI  P/E: 63; Fwd P/E: 19; QTR Rev Grwth (yoy):  3%; QTR Earn Grwth (yoy): -85%
The fact that GOOG is 20x larger than VCLK and is still running circles around them and everyone else in the sector continues to be mind-boggling.
So, how does an all cash offer bode for the quarter?
I’ve always been surprised at how candid GOOG is.  They pretty much say what they mean.  So it’s quite possible they really do think their stock is cheap. 
I guess what’s nagging me is it just doesn’t feel as bullish as an all stock offer, does it?  Maybe I’m too much of an entrepreneur but in these situations, I always like it when risks are aligned.
With, of course, the big exception that GOOG is buying this from super private equity firm Hellman & Friedman so no entrepreneurs are really involved.
Ultimately, unlike last quarter, I don’t think there’s much of a tell one way or the other here. 
The bigger tell continues to be the operating story:  GOOG continues to pick up search volume while the competition continues to drop.

Leaving Nielsen In The Dust

Posted: April 3, 2007 in Uncategorized
Nice overview & editorial of GOOG / EchoStar announcement at AdRants.
     Bypassing all the ratings foolery in which the industry is enmeshed, Google hopes to bring true value to inventory by supporting it with tangible numbers.
     Google has made and will continue to make mistakes as it follows its path towards world domination but we have to give it to them for cutting through all the crap and, as Nike has always said, just doing it.
Just read about the Google/EchoStar hook-up.  Here’s another brilliantly simple concept from Google: 
     Each day, Google will analyze anonymous data culled from the set-top boxes of the Dish network subscribers and only bill advertisers for the segment of the audience that watched a commercial a designated amount of time.
The article goes on to quote a VP of
     The ability to quickly analyze how many households watched a specific ad is one of the best things about Google’s system, said Steve Jarmon, vice president of brand communications and partnerships for  "We are really intrigued with the idea," Jarmon said. "We think these measures could give us a much more accurate picture of how our money is being spent."
So here is the value proposition for TV advertisers today: 
     You pay me upfront, then we can both guess at how many people actually saw the ad.
And here is what Google is proposing: 
     We know how many people actually saw the ad, so you only pay me for those folks.
Pay for performance.  Immediate feedback.  Same elements Google used to dominate online advertising. 
What a freakin’, stone cold, drop dead, no brainer for TVland.