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http://www.fool.com/investing/general/2011/12/06/3-things-to-think-about-before-buying-apple.aspx
3 Things to Think About Before Buying Apple
By Rick Aristotle Munarriz | More Articles
December 6, 2011 | Comments (30)
Disney (NYSE: DIS ) CEO Bob Iger figured he would put his money where his new board seat is last week, buying $1 million worth of Apple's (Nasdaq: AAPL ) stock shortly after being added to the tech giant's board of directors.
Let's get this straight: Iger's move was strictly symbolic.
There's no point in arguing that Disney's impressive helmsman is rich and that $1 million isn't necessarily a lot of money to him. It's always a lot of money to anyone. The reason why the purchase appears to be done primarily as a public show of confidence is because Iger has known Apple all too well for years.
It was Iger that orchestrated Disney's purchase of Pixar from majority shareholder Steve Jobs, a move that made Jobs Disney's largest single investor. Apple and Disney have been partners early and often under Iger, as Disney video content made its way to the once-fledgling iTunes digital video store when the other major studios were still unsure.
If you want more proof that Iger snapping up a chunk of Apple's stock at $375 is more for show than for investment purposes, consider that Iger was buying into dividend-less Apple around the same time that he was jacking up Disney's yield by 50%.
Bulls will argue that the circumstances don't matter. Iger is making a shrewd purchase. Apple is growing a lot faster than its earnings multiples in the low teens suggest. Apple is the undisputed tablet king, and it's raking in the lion's share of the profits in smartphones. Nearly everything Apple touches turns to iGold. Who would be silly enough to bet against the class act of Cupertino?
Well, let's go over three things to consider before investing in the world's most valuable tech darling.
1. Apple's future doesn't necessarily have to be better than its present
The head-turning days of ridiculous growth for the iPhone and iPad treated Apple brilliantly in the past, but its growth is decelerating. Analysts see earnings climbing by 25% to $34.62 a share this new fiscal year and a mere 12% to $38.86 a share in fiscal 2013.
Yes, Wall Street's targets value Apple at a seemingly cheap 11 times fiscal 2012 earnings and a little more than 10 times the following year's projected profitability, but analysts have gone from underestimating the tech giant's earnings power to overestimating bottom-line results.
After years of consistently trouncing analyst estimates, Apple came up short in its latest quarter. Investors dismissed the oversight on the iPhone 4S delay, as if analysts don't know what they're doing. Well, it happened.
Right now Apple is losing market share in both tablets and smartphones. Amazon.com (Nasdaq: AMZN ) has reportedly shipped millions of Kindle Fires over the past month. Google's (Nasdaq: GOOG ) Android has been gaining market share at Apple's expense for several quarters now. Android phones have gone from 25.3% of all smartphone sales a year ago to 52.5% now, according to tech tracker Gartner. The iPhone in that time has shrunk from 16.6% to 15%.
The bullish crutch is that Google may be giving away Android, but Apple's the one hogging up all of the profit share in smartphones. Well, that may be true, but as developers shift their attention to Android's wider adoption rate, paying a premium for iOS phones and tablets won't make as much sense in the future.
2. Steve Jobs is gone
Maybe it's just a coincidence that Apple's first quarterly miss in years happened under CEO Tim Cook. Maybe it's just a fluke that consumers were underwhelmed by Cook's introduction of the iPhone 4S. However, if I ask customers walking out of an Apple Store who Apple's CEO is, I'm guessing that less than half know that it's Cook.
There's nothing wrong with having a helmsman who doesn't gravitate to the spotlight. Disney is better off with Iger than it was with the flashier Michael Eisner. However, Apple needed Jobs to let consumers know that a smartphone didn't need to have physical keyboards and that a tablet was magical.
Cook will have no problem improving on Apple's product line with next year's iPhone 5, iPad 3, and full-blown high-def television. Unfortunately, the marketing message will suffer.
3. The halo effect cuts both ways
Apple has been one of the market's biggest winners over the past decade, and it all started with the 2001 introduction of the iPod. Apple's success in portable media players -- and the iTunes ecosystem that launched two years later -- created a halo effect, boosting sales of Apple computers.
The iPod has been fading for several quarters now, but the success of Apple's iPhone and now iPad are keeping the halo effect alive.
However, the same thing is happening at Amazon and Google. The success of the Kindle stirred up interest in Amazon's entry-level tablet. Google's market-trouncing popularity in smartphones is finally starting to carry over into tablets. The next Apple won't be Apple.
It doesn't matter that Apple has a growing network of namesake retail locations to keep the ambassadorships growing. Gateway and Dell (Nasdaq: DELL ) had stores. Even Microsoft (Nasdaq: MSFT ) is setting up in select malls. Apple is really only as popular as its ability to grow its reach, and that's easier said than done in a crowded room of halos.
If you want to see what the tech giant does next, consider adding Apple to My Watchlist.
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.The Motley Fool owns shares of Google, Microsoft, and Apple. Motley Fool newsletter services have recommended buying shares of Amazon.com, Apple, Google, Walt Disney, Microsoft, and Dell. Motley Fool newsletter services have recommended creating a bull call spread position in Apple. Motley Fool newsletter services have recommended creating a bull call spread position in Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
Longtime Fool contributor Rick Munarriz calls them as he sees them. He does not own shares in any of the stocks in this story, except for Disney. Rick is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early.
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Report this Comment On December 06, 2011, at 10:19 AM, desertracer1 wrote:
You know what.....we have eleven..11...Apple products in our family and love them. And most everyone I know has at least one..IPhone, IPad, IPod or Mac. Get off these stupid articles that are only intended to scare investors off. Apple is the Lamborgini, Ferrari or Cadillac of its class.
Report this Comment On December 06, 2011, at 10:30 AM, IraLA wrote:
<<Apple is the Lamborgini, Ferrari or Cadillac of its class.>>
More specifically -- and more generally -- Apple is the Lamborgini, Ferrari or Cadillac in every product cagegory it offers. If you value your time and you want virtually flawless operation from the time you open the box, then the slight premium on the front end is an investment in your sanity and peace of mind. Period. Anything else is sniping. What's in your wallet? What are you thinking!
Report this Comment On December 06, 2011, at 10:31 AM, neilweinstock wrote:
There are a few items here I would take issue with:
"Investors dismissed the oversight on the iPhone 4S delay, as if analysts don't know what they're doing."
If you look at the history of analyst estimates, you might indeed come to that conclusion. Or, at minimum, you would conclude that analysts are definitely *not* in the business of giving the most accurate estimates possible.
"Maybe it's just a fluke that consumers were underwhelmed by Cook's introduction of the iPhone 4S."
Apple's marketing message might indeed suffer a bit under Cook, but that's a ridiculous example to cite.
1) I think he did pretty well considering that he gave that presentation while knowing Jobs was on his deathbed.
2) People like to forget that consumers were often underwhelmed by Jobs' product introductions (exhibit A: iPad).
3) Consumers were so underwhelmed by the 4S introduction that Apple is going to sell 30 million of them (or so) this quarter.
"...but as developers shift their attention to Android's wider adoption rate,..."
App developers will go where the money is, and right now that is iOS. The iOS app ecosystem is consistently *far* more profitable for developers than Android's. iOS is likely to continue to be the first mobile OS of choice for developers for quite some time, despite lower market share.
Report this Comment On December 06, 2011, at 10:45 AM, Zankudo wrote:
Up, up and away...wasn't that a house in a Pixar movie...amen to the comments...aapl is far and above anything anybody else has. I have had them all. There is a reason customers are loyal. The same reason stores are full and lines before a new iPhone are around the block. It may stumble. It may fumble. But Siri is the first shot of the new century.
Report this Comment On December 06, 2011, at 10:46 AM, SellbyOctober wrote:
I have great respect for this web site but this article is vacuous.
Report this Comment On December 06, 2011, at 10:46 AM, TMFNewCow wrote:
I don't think Rick is making an outright bearish case here, Fools. Rather, he's pointing out some very legitimate points that an investor should consider before buying AAPL, and even as a bullish shareholder myself, I agree with all 3 of his points as risk factors to acknowledge. Heeding risk factors makes you a better investor.
-- Evan
Report this Comment On December 06, 2011, at 10:55 AM, JCSEN wrote:
This article misses on the most important part of Apple. The software, it's the best in the world, very easy to use, and sticky, no one can catch up on them on software. Both the hardware and software is what makes Apple products so great. If apple had Android software in their computers they would not go very far. Disney have their own products that still work now, Apple will do the same, you can try and copy them but without the secret ingredient.
Report this Comment On December 06, 2011, at 11:02 AM, chitownfool68 wrote:
"Well, that may be true, but as developers shift their attention to Android's wider adoption rate, paying a premium for iOS phones and tablets won't make as much sense in the future."
Stupid comment! Developers go where the money is and the numbers prove iOS makes more money. The development tools are better, and you make more money. Market size matters not when everyone using the larger market are cheapskates.
As for users, if Apple has proven anything since 2007, it's that you get what you pay for. Everyone I've known that doesn't love their Android phone (and believe me, it's MANY) understands this and are now willing to pay the premium you seem to think is too high.
On Steve Jobs, another stupid comment. Every investor with half a brain knows that a four month delay in Apple's product cycle lead to weaker purchases in the interim. Not Tim Cook. Hell, I was even telling all my friends not to buy until the new iPhone and I own A LOT of Apple. At least twenty of my friends waited.
On your halo effect comments, there's just so much wrong here to pick apart, it makes me think this is either just blatant Apple bias or incompetent analysis. You need to look at the numbers my friend and have a point before you speak.
Report this Comment On December 06, 2011, at 11:04 AM, Oldfool103 wrote:
China!
Report this Comment On December 06, 2011, at 11:18 AM, CraigNotGreg wrote:
"The bullish crutch is that Google may be giving away Android, but Apple's the one hogging up all of the profit share in smartphones."
This isn't so much a crutch as a financial fact. It's also the reason smartphone OS market share means nothing, as long as Apple continues to increase the number of iPhone units sold.
"Maybe it's just a fluke that consumers were underwhelmed by Cook's introduction of the iPhone 4S"
They were so underwhelmed they limited their purchases to 4 million units on the first weekend
"t doesn't matter that Apple has a growing network of namesake retail locations to keep the ambassadorships growing. Gateway and Dell (Nasdaq: DELL ) had stores. Even Microsoft (Nasdaq: MSFT ) is setting up in select malls"
The Apple stores are among the most profitable retail stores on the planet, so yes the advantage they give Apple does matter. Your comment about Microsoft rolling out retail stores doesn't even warrant a response.
Do you have any real concerns?
Report this Comment On December 06, 2011, at 11:36 AM, deemery wrote:
There's reasonable things that can be said about Apple. Unfortunately, this article concentrates instead on FUD.
For real analysis, best to go to Horace Dideu's website http://www.asymco.com, where he discusses things like 'marketshare' vs -the size of the market- (If the size of the market grows and for example Apple keeps its share, Apple still grows. And that's before you consider the relative profitability of Apple vs other offerings in a given market.)
And let's see how well Apple does in the next quarter, as measured against their performance for the same quarter last year, before passing any judgement on Tim Cook.
Report this Comment On December 06, 2011, at 11:41 AM, Rokclimber1 wrote:
Just absurd. Grant it the 3 points are something to consider but it really is mind boggling how every friggin 'investment site', just loves to rag on apple.
Is Apples future success guaranteed? No of course not.
NOTHING in the future is 'guaranted'....
But by all financial metrics, apple is actually very undervalued right now, yet every single day I can find tons of 'articles', 'ANALysts' and anybody with a voice/keyboard, BASHING apple.
All I can say, is if you like apple, buy it, if you dont, stop the bashing and put your money where your mouth/keyboard is and short apple......
Part of me wonders if since apple stock has done great and gone up alot if many of these 'people' with their negative slants, thought apple had risen too high too fast and hence shorted apple already and now must do the 'bash apple theme' everyday to try to help their short position.
Most have disclosure policies but not all of them so is it possible we are seeing some attempt at manipulation? No, im not some conspiracy theory nut, but lets be real, the market is all about manipulation by the big boys and anybody that thinks otherwise is wearing blindfolds......
Report this Comment On December 06, 2011, at 12:02 PM, 1984macman wrote:
For a truly well-written analysis of Apple based on hard work and research rather than snide inuendo and petty snarking, go here:
http://seekingalpha.com/article/311859-apple-unlocking-the-p...
By this account, Apple is about to have a truly blowout quarter.
So who are you going to believe? A dude that writes like Rush Limbaugh, or a sensible analyst who can actually admit he screwed up last quarter, and tells you exactly why?
Report this Comment On December 06, 2011, at 12:10 PM, truthisntstupid wrote:
Yup. That bandwagon sure is crowded. When a bandwagon gets that crowded, I for one am staying off of it.
Report this Comment On December 06, 2011, at 12:28 PM, deemery wrote:
> Yup. That bandwagon sure is crowded. When a bandwagon gets that crowded, I for one am staying off of it.
In many respects, there's more insight in this comment than in the article above. But I think there are 2 different bandwagons to consider:
1. Individual investor bandwagon, i.e. the people who comment here and on other stock blogging sites, etc.
2. Institutional investors and advisors.
What's fascinating is the relatively long-term track record of each group in predicting Apple. See the most recent analysis here: http://tech.fortune.cnn.com/2011/10/19/apple-earnings-smackd... From this entry, you can get to reports on previous per-quarter analysis.
Report this Comment On December 06, 2011, at 12:42 PM, mjmine wrote:
The thing about Apple is the ability of their product to engage the customer or viewer ,if you will, visually in a way that other products do not. I laughed out loud when I saw the commercial about the phone{microsoft I think} with the cumbersome graphics and the pitch that you won't have to be a slave to your phone. Clearly the competition still doesn't understand what it is about apple that mesmerizes us. It keeps us looking. All the math and science in the world is not going to replace that experience even if it facilitates it.
Report this Comment On December 06, 2011, at 12:52 PM, CraigNotGreg wrote:
One more thing (as SJ used to say..),
Motley Fool is supposed to be a site that centers on topics related to investing. It shouldn't be a forum for cheerleading for Company A or bashing Company B based on emotion. You clearly love Google and dislike Apple (I'm basing this conclusion on your last five articles) which is your right, but articles written with an obvious lack of objectivity are out of place here.
As an example of how your objectivity is compromised, look no further than your equating Apple retail stores (wildly successful by any measure) to Gateway and Dell's retail efforts (abject failures by any measure). That bit of "analysis" is an embarrassment.
Report this Comment On December 06, 2011, at 1:35 PM, Geldej wrote:
I think consumers realize after a while that apple was a FIRST MOVER.
But its not anymore
Look at samsung or motorola
their phones are way more adavanced than apple
faster, brighter, bigger in just about every way
apple still doesnt even have 4g?
thats pretty much STANDARD on any new phone today
I have a galaxy sII
I consider it flawless
friends with iphones ask where the heck did I get that thing because they wish theirs was this good
period
I call it writers block and not listening to consumers only to what you think they want
mtv made the same mistake years ago and almost paid for with their life
so did mcdonalds when in 2004 almost went bankrupt
or gm
can happen to any business
to be a leader you have to be a follower
Report this Comment On December 06, 2011, at 2:46 PM, Homecooken wrote:
I have a Droid X my son has a Iphone 4. Soon as my upgrade is here I getting the Iphone. Tired of the Droid freezing up all the time.
Report this Comment On December 06, 2011, at 3:03 PM, SkippyJohnJones wrote:
@Rick Aristotle Munarriz - What's the objective of this article, other than to provoke AAPL bulls? At each point of your argument, you suggest a less bullish outcome, then immediately make a statement with no data as though it's a fact:
------
1. "The bullish crutch is that Google may be giving away Android, but Apple's the one hogging up all of the profit share in smartphones. Well, that may be true, but as developers shift their attention to Android's wider adoption rate, paying a premium for iOS phones and tablets won't make as much sense in the future."
There is no credible information suggesting that developers are throwing more attention at Android in favor of iOS. Could it happen? Sure. But you put it out there as an inevitable outcome of the market share. By most counts, Apple still has roughly twice the selection of apps on Android. More importantly, the quality of the apps (as determined by revenue) is an order of magnitude higher.
-----
2. "Maybe it's just a coincidence that Apple's first quarterly miss in years happened under CEO Tim Cook. Maybe it's just a fluke that consumers were underwhelmed by Cook's introduction of the iPhone 4S."
When you use 'maybe' like that, you are leading your readers to think 'maybe not' - it's a very suggestive term. I'm a lot more concerned with the performance of the 4S than the initial response to Cook's presentation. Nobody is questioning Jobs' flair for the dramatic, but ultimately Apple is sustaining today because of the quality of its products. Customer satisfaction can't be created through marketing, and Apple's is off the charts compared to the competition in every product category. You are correlating the financial performance of a very specific quarter with a presentation that occurred in the following quarter. These are two unrelated data points. And for the record, Oppenheimer went out of his way to warn in advance that the quarter would be weaker than analyst expectations, due to a "future product transition" that everyone knew was the new iPhone. Analysts ignored his commentary, then called the performance "disappointing."
-----
3. "The success of the Kindle stirred up interest in Amazon's entry-level tablet. Google's market-trouncing popularity in smartphones is finally starting to carry over into tablets. The next Apple won't be Apple."
Your first two sentences don't go together. What does Kindle have to do with Android smartphones and tablets? One is not an extension of the other. And of course the next Apple won't be Apple - it's a $350 billion company.
-----
You make plenty of valid points, but you undermine each argument with suggestive language seemingly aimed more at rising the ire of bulls than dispensing financial advice. I look to TMF as a teaching forum, but articles like this one are very disappointing. If you are really trying to put out a conservative viewpoint on AAPL, just keep it clinical - I'm sure you'll find the comments will still light up and the click through will still be high. Bulls are more likely to listen to an argument if it doesn't sound argumentative.
Report this Comment On December 06, 2011, at 4:31 PM, bailinnumberguy wrote:
I'm long Apple and have no concerns about its ability to hold and grow its market share, maintain healthy margins and continue to innovate better than its competition.
Of course, strictly by the numbers Apple is undervalued. You have to make several pessimistic and dubious assumptions to argue otherwise. I think a $500 price target is realistic, but will be difficult to pull off. Anyone who thinks the stock is going to $1000 needs to take off those rose-colored glasses. Apple's stock #1 w/ hedge funds and programs that regularly beat down this most liquid of stocks. Most of us have observed the process for some time now. Some negative articles, patterns of selling at the opening which trips stop-losses and the stock inexplicably starts diving inexplicably below the market. It always bounces back, but its manipulation is pretty hard to miss.
Report this Comment On December 06, 2011, at 6:01 PM, hbofbyu wrote:
@ Geldej
Every argument you make could have been made when they introduced the MAC. My guess is you are an engineer or computer programmer (something in hard sciences). This is why engineers don't make good salesmen. They don't understand the benefits of form. You don't understand marketing and image and how it changes satisfaction. In blind tastes tests Pepsi wins over Coke. In taste tests where the label is showing Coke wins every time. The Coke brand is more valuable than Pepsi. The percieved value of Apple is huge. They just need to keep backing it up with great products.
Report this Comment On December 06, 2011, at 6:06 PM, GregLoire wrote:
Apple stock is so ridiculously cheap right now that practically anything negative imaginable about the company is already factored into the price.
Report this Comment On December 06, 2011, at 6:19 PM, truthisntstupid wrote:
If more people bought Apple stock, it would be driven up in price. It's that simple.
However, one thing that works oddly against that happening may be Applemania itself.
People see this stock that apparently all the great products, all the earnings growth, and all the fervor and all the Applemania can't budge above a value PE...and realize that if it can't win a higher multiple with all that going for it...
The odds of getting a great return might be far better elsewhere.
Report this Comment On December 06, 2011, at 7:07 PM, racchole wrote:
Once again - AAPL-related article, bombarded with AAPL-loving people, all with nothing of any substance to say. Why do we even bother on this site to write about AAPL?
Report this Comment On December 06, 2011, at 7:12 PM, truthisntstupid wrote:
Aw, c'mon, rachole...
Maybe you'll like this:
http://caps.fool.com/Blogs/apple-is-in-no-danger-of/669367
Report this Comment On December 06, 2011, at 7:32 PM, Geldej wrote:
@ hbofbyu
Just so you know im no where near any of the hard sciences.
Last year at MSU Mankato
Major in Law Enforcement and minor in Communication Studies
I loves social sciences
I could pick out coke from pepsi any day with a blind fold on
pepsi: way more syrup
just my opinion.
fyi both of those companies competing every year with new products
trying to follow the consumer
Far as I see Pepsi pepsi loves making the new mountain dews
coke loves working on the vitamin waters and healthier products
thats just what I see though.
Apple has great marketing: agreed
They could put out a freakin BRICK
and people would buy it
but eventually people wake up
in my opinion.
as shown in my examples.
im sure 30 years ago no one thought gm or mcdonalds would be on the brink of failure
but fact is
they were
or RIMM ten years ago
Report this Comment On December 06, 2011, at 7:38 PM, Geldej wrote:
Nice guess though on the major, I can totally see where your coming from. My roommate won't buy a smart phone until it pretty much makes him a pizza along with doing 20x more than his hp computer.
What is he? Engineer. lol
Report this Comment On December 06, 2011, at 7:46 PM, ayaghsizian wrote:
Any stock can go up or down. With this in mind, there is no rational reason AAPL will go down anytime soon.
Report this Comment On December 06, 2011, at 7:53 PM, richwee8888 wrote:
I think the author is trying to catch readers' attention by displaying his constant fear that AAPL will drop price. He's probably convinced that he needs to play the devil's advocate..
All his reasons were lopsided. The comments that follows are very good in combating point by point the author's concerns.
I thank you for your thoughts...but I think you didn't do good homework and neither did you consider the full picture..
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Wi-Fi and the Mobile Meltdown Hotspots may be the workaround for the spectrum 'shortage.'By HOLMAN W. JENKINS, JR.How many themes in our hopper will, on reconsideration, turn out to have a Steve Jobs connection? One more is Wi-Fi, which Cees Links, a former Lucent executive, reminds us was promoted by Steve Jobs, when he demanded cheap wireless networking for the 1999 Apple iBook laptop. PC makers saw how popular it proved, and Wi-Fi quickly became standard on all laptops.
You've come a long way, Wi-Fi. In their dueling filings over the Justice Department's effort to break up AT&T's merger with T-Mobile, now hanging fire in the courts, both sides agree on one thing: There is no substitute for mobile except mobile. This sounds right but may mean nothing in the Wi-Fi world that Mr. Jobs helped birth, where the distinction between the fixed and mobile networks is getting blurrier and blurrier.
Notice, for one thing, that the biggest deliverer of data to smart phones and related devices isn't any of the wireless carriers. It's Wi-Fi, which accounts for 33% compared to 8% for AT&T and 18% for Verizon.
Hmm.
Look at your AT&T iPhone in Manhattan. You're getting four bars and yet broadband is agonizingly slow because too many users are trying to jam bits through at the same time. Look again. Five, 10, 20 or more Wi-Fi networks are also in range of your device. Altogether, within the radius of a single cell tower might be dozens or hundreds of Wi-Fi transceivers.
Hmm.
Virtually every mobile device today comes with Wi-Fi capability. The first iPad was Wi-Fi only. Amazon's new Kindle Fire tablet will, at least in the first installment, be a Wi-Fi-only device.
Hmm.
At the same time, going or gone are the days when most Wi-Fi hotspots were user jigged-up things, with a wireless router picked up at Radio Shack. Today, your cable or DSL modem increasingly comes with a Wi-Fi base station built in, where it can be professionally monitored and controlled by your broadband network operator.
Hmm.
Some shook their heads when cable operator Cox this summer abandoned plans to create its own cellular network, for which it had bought $550 million in spectrum at federal auctions. Here was evidence, then, that wireless is congealing into an AT&T and Verizon duopoly, right?
.Wrong. Cox isn't abandoning wireless. It's rolling out new offers all the time, though based on buying wholesale capacity from Sprint rather than building its own network. Other cablers are charging down a different trail, pioneered by Cablevision. They're seeding their market areas with Wi-Fi hotspots, even experimenting with rolling Wi-Fi on commuter trains.
These might seem like competing cable strategies—a 4G mobile network vs. Wi-Fi hotspots. But they're getting ready to meet in the middle. The middle is a world where traffic flows opportunistically across many networks, fixed and wireless. Cable operators are serious about giving subscribers a mobile option, even if seeking different ways to build into what, at some point, will become a single network. Cablers know if they don't deliver video to their customers' iPads, somebody else will—likely beginning the unraveling of cable's ownership of the big-screen video user back at home.
Mobile and fixed are converging, and doing so most obviously via the medium of Wi-Fi. Wi-Fi uses unlicensed spectrum and small circles, perhaps 200 feet in radius. A cellular network uses licensed spectrum and larger circles (a mile or two). Those are the only important differences, when you come down to it.
Wi-Fi is being professionalized. Network operators are unfolding thousands of hotspots into organized mesh networks. AT&T alone offers access to nearly 190,000 globally, either operated by AT&T itself or through roaming agreements. These lighten the load on AT&T's traditional cellular network.
Far along is the ability for seamless handoffs as a device moves between hotspots. Possible soon will be, say, a Comcast arranging with homeowners to open a public channel in their home Wi-Fi networks for the cable operator's other customers to use. Comcast could then contract with, say, Verizon to dynamically shift mobile data load from Verizon's towers to Comcast base stations.
Why are we telling you this? In its opposition to the AT&T and T-Mobile deal, Justice pigheadedly refuses to credit the wide-open, evolving nature of the network operation business.
On another front, the Federal Communications Commission has been sounding the alarm about an alleged spectrum shortage, and is scrambling to engineer a politically dubious, one-time shift of airwaves from the broadcast sector to the wireless carriers. But the crisis talk is overdone. Spectrum is an input, like land. When land is cheap, build out. When land is dear, build up. In other words, let's have a little more faith in technical and contractual innovations to manage our growing bandwidth demand while Washington engages instead in a more orderly rethink of spectrum policy.
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Justice Condemns AT&T/T-Mobile: Three Reasons Silicon Valley Should Worry
http://www.forbes.com/sites/larrydownes/2011/09/01/justice-condemns-attt-mobile-merger-three-reasons-silicon-valley-should-worry/
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Monday, 13 Jun 2011 08:07 AM
By Frank Gaffney
Remember how you felt when Nancy Pelosi told us that we would know what was in the Obamacare bill after it had been passed by the House of representatives?
For a lot of Americans — in and out of the tea party movement — that quintessential expression of political elitist arrogance and contempt for the public was the last straw. It powered a revolution that cost Pelosi and her party control of the House.
Unfortunately, there was always a risk that, in entrusting the "people's house" to the Republicans under John Boehner, there would soon be more of the same. Sweetheart deals with special interests and highly paid lobbyists engineered behind the voters' backs. Infringement of our constitutional rights. Bills whose sweeping implications for our economy, our society, our way of life, even our national security would only become clear after they were passed.
To be sure, Speaker Boehner and other Republican leaders have been at pains to allay such concerns.
Yet, in one of the first tests of the authenticity of that commitment, the Republicans appear poised to pull a "Pelosi.": Imbued with a sense of elitist entitlement and the confidence they know better what is good for the voters than those who actually cast ballots.
A case in point is the GOP leadership's plan to bring a so-called "patent reform" bill to the House floor as early as next week.
In fact, this legislation amounts to an effort to alter fundamentally the first right enshrined in our Constitution (it is found in Article I Section 8, before the amendments known as the Bill of Rights were added in): the right to intellectual property. And unlike the formal process laid out for amending that founding document, the patent bill has been rushed as just another piece of legislation with the most cursory of review and negligible debate, in a manner that reeks of Pelosi-esque high-handedness.
The stated purpose of this bill is to "streamline" the process whereby inventors, the engine behind American entrepreneurialism and economic vitality, can be given patent protection for their products. While that sounds like an unobjectionable goal, the way it is to be accomplished is by "harmonizing" the U.S. patent system with those employed in Europe, China and elsewhere around the world.
Since literally the founding of our republic, the U.S. patent system has conferred patents on those described as the "first to invent." This approach incentivizes and rewards the innovative. It has been instrumental in making us the country we are today and the envy of the world with unprecedented economic opportunity that has underpinned both American prosperity and liberty.
The alternative to which we are now being told we must conform recognizes instead the rights of the "first to file." Given the costs and myriad bureaucratic steps involved in patent applications, such a system generally redounds to the benefit not of the often-cash-strapped start-up, but of big multinational and other private sector and state-owned corporations.
That is especially true in instances in which commercial espionage or other acts of intellectual property theft enable the well-heeled to file faster than the actual inventor.
Not surprisingly, countries like China, nations of the European Union and conglomerates are pressing hard for such "patent reform." On the one hand, these changes will play to their financial and legal advantages in the competition with small businesses and other underfunded U.S. inventors.
On the other, it will level the playing field by ensuring that American entrepreneurs are handicapped by the same impediments to innovation that characterize non-U.S. patent systems. This is what is meant by "harmonization."
Intense lobbying has brought to the cusp of enactment a bill that is very much to the liking of those who seek to dispense with the traditional American patent process. Consideration by the full House now scheduled for next week is the last major hurdle, with all previous actions in committee and in the Senate being lopsidedly in favor. That may have something to do with the fact that reportedly no impecunious inventors, small business entrepreneurs or venture capitalists have been asked to testify by the Senate and House Judiciary Committee chairmen, Democratic Sen. Pat Leahy and Republican Rep. Lamar Smith, respectively.
To date, only a few patriots, notably Reps. Steve King, Dana Rohrabacher, Jim Sensenbrenner and Sen. James Risch, have expressed strenuous objections. All other things being equal, however, with very few among the public aware of the mischief afoot, let alone the stakes, chances are that legislation fundamentally and ill-advisedly amending our constitutional rights to intellectual property will be approved.
All other things may not be equal, however. Several aspects of the patent bill have begun to draw attention, and fire. Some, including the bipartisan leadership of the House Appropriations Committee and House Budget Committee Chairman Paul Ryan, have lately expressed concern about the fees the Patent and Trademark Office (PTO) would be able to charge and retain to fund its operations.
Another problem is the prospect that the present bill may clear the way for patents to be issued for inventions of human organisms, a moral and ethical concern of the first order. Legislators concerned about Israel should know that inventors there, one of the most dynamic drivers in that nation's stupendous growth, are extremely dependent upon the protections afforded by the U.S. patent system, since Israeli patents are systematically ignored by other nations.
There are also potential national security repercussions, particularly if, as is likely under the "harmonized" patent system, China winds up being a principal beneficiary of expanded access to, and opportunities for exploitation of, American inventions. As ever, some of those breakthroughs will determine future military and intelligence capabilities. The problems with Chinese commercial and other forms of espionage, cyberwarfare and theft of intellectual property are bad enough as things stand now; we should do nothing to exacerbate them.
There is no small irony that Congress is trying to take an action that is so problematic on so many grounds even as the Supreme Court has just ruled overwhelmingly in favor of our present patent system and the rights it upholds. In a 7-2 ruling, Chief Justice John Roberts wrote for the majority: "Although much in intellectual property law has changed in the 220 years since the first Patent Act, the basic idea that inventors have the right to patent their inventions has not.''
While patent rights may seem an unlikely basis for Republicans in Congress to find themselves repudiated by the tea party movement and others who "threw the bums out" in November 2010, they persist in Pelosi-style legislative malpractice at their own risk.
For their own political survival, if not the many substantive reasons enumerated above, John Boehner and his team would be well advised to take the time necessary to conduct full and thorough hearings before tampering with our constitutional right to intellectual property.
Frank J. Gaffney, Jr. is president of the Center for Security Policy, a columnist for the Washington Times and host of thenationally syndicated program, Secure Freedom Radio.
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I challenge you to watch the film while you can for FREE and then tell me what you think!!!
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China, Patents and U.S. Jobs
A new report suggests better intellectual property protection by Beijing could create 2.1 million American jobs..MATTHEW J. SLAUGHTER
Nearly two years into recovery, America's labor market remains extremely fragile. Unemployment sits at 9.1%, with more than 24 million Americans unemployed or underemployed. The 108.9 million private-sector jobs today is the same number we had nearly 12 years ago. Does anyone in Washington have any ideas about how to create the millions of good jobs at good wages that America needs?
Actually, yes. Last month the U.S. government issued a remarkable report that details how one policy change could eventually create up to 2.1 million U.S. jobs. Oh, and it wouldn't cost taxpayers a dime in new government spending. Thanks to higher payroll tax receipts it would probably help close, not expand, America's massive fiscal deficit.
The report? "China: Effects of Intellectual Property Infringement and Indigenous Innovation Policies on the U.S. Economy," by the U.S. International Trade Commission (ITC). And the policy change? Getting China to better protect the intellectual-property rights of American companies.
The ITC surveyed 5,051 U.S. companies in industries such as high-tech manufacturing, publishing and software to gauge the incidence and extent of infringement of their copyright, trademark and other intellectual-property rights in China. Firms say infringement there is widespread, and it affects not just large multinational firms but many small and medium-sized U.S. companies as well. Extrapolating from survey responses, ITC estimates that all U.S. IP-intensive firms lost at least $48.2 billion in 2009 alone—perhaps even as much as $90.5 billion—from foregone sales, royalties and license fees.
The surveyed companies report that improved intellectual-property rights protection in China could boost their annual revenue there by as much as 20%—more than $100 billion a year—thanks to both higher U.S. exports and higher local-market sales by their Chinese affiliates. More revenue, in turn, would expand their U.S. labor demand by as much as 5%—which could mean over 900,000 new U.S. jobs.
And thanks to supplier linkages, expansion by IP-intensive firms would boost sales and hiring in dozens of U.S. industries. ITC economists calculate that up to 2.1 million new U.S. jobs could be created in total if China raised its intellectual-property protection to U.S. levels. Construction, still one of America's hardest hit industries, could gain almost 200,000 new jobs, a boost of 3.6%. That's because IP-intensive companies based in states like California and Florida will expand sales and hiring, which in turn will generate more demand for home building.
China may be on the rise, but the U.S. retains a comparative advantage in knowledge-intensive activities, thanks to such strengths as outstanding universities and a culture of risk-taking. For American IP-intensive companies, weak intellectual-property protection abroad curtails their sales and hiring opportunities every bit as much as do traditional trade barriers like tariffs and quotas.
Stronger intellectual-property protection in China would also help China. The country has achieved remarkable productivity and income gains since its liberalization began in 1978, and its recently released five-year economic plan wisely aims to expand employment in knowledge-intensive "strategic emerging industries" such as information technology and clean energy. To do this, China will need to strengthen its IP laws and practices. China will not become a global leader in innovation if its government does not safeguard the fruits of its research and development.
The broader message for Washington is that something needs to replace monetary and fiscal stimulus if we are going to have real growth. Unprecedented monetary easing and fiscal deficits will, sooner rather than later, need to be withdrawn and reduced. We need to replace them with imaginative policies that spark private-sector hiring and related investment.
American businesses competing in the global marketplace often worry less about exchange rates than issues like market access and intellectual-property protection. U.S. policy makers have spent far too long hectoring our largest foreign creditor over its monetary policy. They should instead work with China on issues like strengthening intellectual-property rights that will clearly benefit workers and create prosperity in both countries.
Mr. Slaughter is associate dean and professor at the Tuck School of Business at Dartmouth. From 2005 to 2007 he served as a member on the Council of Economic Advisers.
Sixteen caustic COMMENTS to this WSJ Article
http://online.wsj.com/article/SB10001424052702303657404576363781889157222.html?mod=WSJ_article_forsub#articleTabs%3Dcomments
U.S. Probing Tech Giants' Patent Deals .THOMAS CATAN
The Justice Department is scrutinizing likely bidders for a trove of patents being sold by the bankrupt Canadian telecom-equipment maker Nortel Networks Corp. amid concerns the patents could be used to unfairly hobble competition, according to people familiar with the matter.
The antitrust review has enveloped some of the U.S.'s largest technology companies, including Apple Inc. and Google Inc. It's the latest sign the Justice Department has heightened its interest in whether patents are being used to stifle competition in high-tech industries.
Nortel's trove contains some 6,000 patents spanning key portions of the modern world, including wireless video, Wi-Fi, Internet search, social networking and a next-generation mobile data technology now being adopted by carriers, known as LTE.
The department's antitrust division is reviewing Google's $900 million opening bid for the patents, although it hasn't found major competitive issues that would lead it to challenge its purchase, the people said.
The agency, the people said, has greater concerns about Apple, another possible bidder, which has often tangled with rivals in patent suits. Apple has been in talks with the Justice Department to address its concerns, the people added.
Apple and Google declined to comment, as did a spokeswoman for the Justice Department.
The unusual sale of such valuable assets has sent ripples through the tech industry and stirred worries at the Justice Department and elsewhere that patents could be misused to stifle rivals or demand high-tech ransom payments.
"You're acquiring a stockpile of nuclear weapons as far as patents go," said Alexander Poltorak, chief executive officer of General Patent Corp., which isn't advising any of the parties involved in the Nortel auction planned for June 20.
Others said to be interested include BlackBerry maker Research In Motion Ltd., and several patent-licensing firms. RIM didn't respond to a request seeking comment.
Tech companies are increasingly suing each other for patent infringement, especially in the mobile phone sector, drawing regulatory scrutiny. In April, the Justice Department forced a consortium of companies—Microsoft Corp., Apple, Oracle Corp. and EMC Corp.—to promise it would not use a portfolio of 882 patents it was acquiring from Novell Inc. to unfairly hurt other companies. As part of the deal, Microsoft was forced to give up the patents it was buying and license them instead.
The deal to buy Novell's patents raised fears among proponents of the Linux open source operating system because of Novell's extensive work in this field. Linux underlies software used in a wide array of devices, from network servers to smartphones running on Google's Android operating system.
In a third investigation, the department has been examining whether a group representing top technology firms is trying to smother a free, rival technology backed by Google for delivering online video, according to people familiar with the matter.
The target of that formal antitrust probe, a company called MPEG LA collects royalties on a video compression standard called H.264 that is used by everything from video-streaming services like Netflix Inc. to Blu-ray disc players and other hardware.MPEG LA, has denied it's acting in an anticompetitive manner.
Antitrust enforcers are investigating whether MPEG LA or its members are trying to cripple a free, alternative format called VP8 released by Google by creating legal uncertainty over whether users might violate patents by employing that technology, these people added.
The Justice Department's newly aggressive role in such cases reflects the personal interest of its antitrust chief, Christine Varney. In private practice, she specialized in high-tech matters, and represented Web browser pioneer Netscape in its antitrust battle with Microsoft.
"There seems to be an increase in co-called 'trolling' claims that only surface well after an innovator has built the technology into a new product," Ms. Varney said in a May 2010 speech. "We will watch developments in this area closely, attentive to actions that appear designed to create or preserve unearned monopoly power."
Taken together, Ms. Varney's speeches and the growing number of investigations add up to a significant shift in emphasis by the Justice Department. "The Obama administration certainly has been very interested in the intersection of antitrust and intellectual property law," said Logan Breed, a lawyer at Hogan Lovell in Washington.
The patent system has long been an engine of U.S. innovation, giving ordinary Americans and companies incentives to seek innovations that have added greatly to the nation's wealth. But some believe a proliferation of poorly-drawn software patents has resulted in the opposite outcome: innovation is being thwarted because almost any new successful product is held to infringe some patent.
Complicating matters are several patent-rich companies that have gone bust in recent years, threatening to dump thousands of sensitive patents in the hands of litigious companies or "patent trolls."
Gary Reback, a Silicon Valley attorney, likens the situation to the end of the Soviet Union. "These patents are like loose nukes rolling around," he says. "Now you have these entities that have gone around solely for the purpose of financial exploitation buying up all these loose nukes."
Companies with a large number of patents can threaten to counter sue, which often results in a settlement. As a big, yet relatively young company, Google is at a disadvantage in this fight. It's now looking to acquire its own deterrent in the shape of Nortel's patents.
"One of a company's best defenses against this kind of litigation is [ironically] to have a formidable patent portfolio, as this helps maintain your freedom to develop new products and services," Google general counsel Kent Walker wrote on the company blog in April.
Google has been sued for patent infringement numerous times in recent years, including by Oracle and by Microsoft co-founder Paul Allen. Apple has also sued handset makers using Google's Android interface, such as HTC Corp. and Samsung Electronics Co. Ltd.
Large companies such as Google have the financial wherewithal to defend themselves but others do not.
"What this really demonstrates is Google feels induced to stump up $900 million just to be allowed to stay in the game," said Karsten Gerloff, president of the Free Software Foundation Europe. "Companies that are too small to play this game risk ending up as economic road kill."
—Yukari Iwatani Kane contributed to this article.
Write to Thomas Catan at thomas.catan@wsj.com
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Digital Innovators vs. the Patent Trolls
The Supreme Court hears its seventh major patent case in six years..Article Comments (12) Text By PETER HUBER
Today the Supreme Court will hear argument in Microsoft v. i4i, the seventh major patent case it has accepted in six years. The Court's recent interest reflects the fact that our patent laws have drifted way off course.
Real innovators in the digital realm keep adding new software modules, chips and networking capabilities to the toolkit. Biochemists do much the same in their field, as they isolate genes and proteins and build new tools for re- engineering them. In these and many other areas of the economy, much of the innovation gets embodied in plug-and-play building blocks, which are then easily combined in different ways to perform a wide variety of tasks.
But the proliferation of smart building blocks keeps making it easier for most anyone to write up a patent that simply describes what a keen invention will do, contributing little more than a sketch for how someone might build it from off-the-shelf parts.
At the Patent Office, it's up to the examiner to find out why the patent doesn't significantly advance the art—the applicant isn't required to prove that it does, and skeptical outsiders don't participate. The typical patent gets eight to 25 hours of review. The Office now grants more than 4,000 patents a week—about four times as many as it did in 1980.
Only about 2% of patents end up in court, where they typically get, for the first time, meticulous scrutiny by an adverse party and a judge. But a judge-made rule—the one the Supreme Court is scrutinizing today—requires courts to defer to the Patent Office absent "clear and convincing" evidence that the examiner overlooked something.
Big companies that turn sketchy ideas into real chips, software, drugs and other high-tech products collect lots of patents along the way—but so do their competitors. They rarely sue each other because in highly innovative, fast-growing industries, competing for customers is much more profitable than competing in court.
"Patent trolls," on the other hand, now buy entire patent portfolios, often from failing companies, and then search for targets to sue. Venerable law firms that grew big representing large corporate clients are now being enlisted by hedge funds to run the sue side of a troll-and-sue business on a contingency-fee basis.
About one out of every seven patent suits is now filed in the Eastern District of Texas, renowned for down-home judges who hold quick trials and will send most any claim to a jury. A patent is property, good Texans believe in property rights, and that pretty much settles it.
The masterminds behind these lawsuits hire local counsel to supply the neighborly face in the courtroom. Personal-injury lawyers sidelined by strong tort reform laws are happy to switch from PI to IP. At oral argument in a 2006 case claiming that eBay's "Buy It Now" button infringed on another company's patent, Justice Antonin Scalia called the district "renegade."
The national picture is not much better. According to a recent analysis of national trends by PricewaterhouseCoopers, juries decided only one out of every seven patent cases in the 1980s; in 2009 they decided about seven out of 10. Juries also favor plaintiffs far more often than judges do—and award much higher damages.
The Supreme Court has clearly been trying to address the junk-patent problem. In a 2007 case, KSR v. Teleflex, the unanimous court called five times for the use of more "common sense" in evaluating patents that describe only a "known problem" and "an obvious solution." Last year, in Bilski v. Kappos, the Court unanimously rejected a patent on a process for hedging against price fluctuations in energy markets—an "abstract idea," Justice Anthony Kennedy concluded, that is "taught in any introductory finance class." Another recent case made it easier to get a judge to review validity soon after a patent is granted.
The business community is often sharply divided in these cases. It's all too easy to suppose that the terrific patent portfolio your company has spent so much developing is worth a fortune and forget that another 4,000 patents were being granted alongside each one of yours. And like many Texans, some conservative pundits applaud the trolls, believing that this is how the market moves private property into the hands of the people who value it the most.
But that's the rationale used to justify all litigation ginned up by contingency-fee lawyers. The issue isn't whether intellectual property rights should be enforced, it's whether we have a reliable process for working out who really supplied the intellect. We don't. A system that issues and upholds junk patents will devalue intellectual property much faster than one that scrutinizes patents more carefully and enforces only the good ones.
Mr. Huber is a senior fellow at the Manhattan Institute. His law firm filed an amicus brief in the Microsoft v. i4i case.
http://online.wsj.com/article/SB10001424052748704495004576264780115609572.html?mod=googlenews_wsj
Uncle Sam and the Hostile Takeover
Activist investors are often effective at raising corporate performance, but managements hate them and keep trying to skew the rules in their favor..Article Comments (11) more in Text By JONATHAN MACEY
Conflicts between a public company's top management and shareholders are seldom more intense than when an activist investor emerges with plans to make a substantial investment in the company's stock. These investors sometimes are hedge funds or "value investors" like Warren Buffett. Whoever they are, after they take a huge stake in the target company they have strong incentives to agitate vigorously for reforms that will increase the value of their investments.
Shareholders benefit from the reforms of corporate governance initiated by these activist investors. So does the economy generally, because the overall economy performs better when companies perform better. But managers are not so fond of this process because activist investors push incumbent senior managers hard to improve their performance. Occasionally they even fire them.
Since incumbent managers sometimes lose to activist investors in fair corporate elections, their preferred strategy for dealing with them is to hire legal talent and team up with friendly regulators to make new rules and to concoct anti-takeover devices like poison pills.
For example, J.C. Penney adopted a poison pill last October, soon after learning that the hedge fund Pershing Square Capital Management and the publicly traded Vornado Realty Trust had acquired a sizeable position in the company. The particular poison pill it adopted would dilute the voting rights of the two activist investors' shares if they further increased their holdings or attempted a takeover of the company by giving other shareholders the right to buy J.C. Penney shares at half-price.
The takeover process is currently governed by a 1968 law called the Williams Act, which is designed to balance the legitimate interests of outside bidders with the interests of incumbent management. Investors have the right to accumulate a sufficient block of stock in a potential target company so that they can be taken seriously by management. And managers have the time to respond to activist investors in order to convince shareholders that there is no need for a shake-up at the company.
But in the decades since the Williams Act was passed, the balance increasingly has come to favor targets as courts, lawyers and the SEC have erected more roadblocks like the poison pill. This is why returns to bidders have been slowly declining and returns to targets have been rising. This is also why the market for corporate control is relatively moribund, particularly when compared to the robust markets of the past.
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David G. Klein
.The way to evaluate the balance of power between bidders and targets is to compare the market returns of bidders with the returns to targets in corporate acquisitions. If the returns to bidders and targets are roughly equal, then the balance of power between the two groups is roughly equal. But if the distribution of returns to bidders and targets is lopsided, then the balance of power is lopsided as well.
Dozens of empirical studies have compared these returns, and the evidence is clear. The returns to the shareholders of public companies that make takeover bids approximates zero, while the returns to the shareholders of target companies are consistently in double digits. Activist investors like hedge funds, often privately held and more nimble than public companies, are the last bidders who still may be able to make money in the market for corporate control—at least for now.
Under Section 13(d) of the Williams Act, investors are free to acquire stock in a target company, but after they acquire a 5% stake, 13(d) gives them just 10 days before they must make public filings with the SEC. But last week Wachtell, Lipton, Rosen & Katz—a law firm that has long represented corporations fighting takeovers, and whose partner Martin Lipton invented the poison pill in the 1980s—proposed an amendment to the regulation that would replace the "10-day window" with a single day.
Since the target company's stock price jumps significantly when these public filings are made, this rule change to the Williams Act would make activist investments prohibitively expensive by increasing the price that these investors would have to pay for all shares acquired just one day after the 5% threshold is passed.
The rule change, in short, would shift the balance of power in the market for corporate control decisively toward entrenched managements and away from bidders and shareholders.
An obscure provision in the Dodd-Frank Act opens the door for the current proposed rule change. This provision authorizes the SEC to establish a disclosure deadline that is shorter than the traditional 10-day window.
In its letter to the SEC proposing the rule change, the Wachtell law firm mentioned its concern that Pershing and Vornado were able to acquire more than 25% of J.C. Penney's stock before having to make an SEC filing within the 10-day window last October. In January, J.C. Penney agreed to give Pershing and Vornado seats on its board. Yet it is hard to see how this has harmed shareholders. J.C. Penney's stock price increased 60% from the date of its first mandated disclosure. It is now up almost 80%.
Proponents of the new rule ignore the fact that as a practical matter, one cannot gain voting control of a public company within the existing 10-day window. Consequently, the existing rule is serving its purpose: Management still has the opportunity to make its case to the shareholders.
Proponents also argue that changes in technology and other advances have made it possible for investors to buy shares and to file reports with the SEC in less time than before. The better argument is that investors should be allowed to benefit from these technological advances before new regulation destroys this opportunity.
Mr. Macey is a professor at Yale Law School and a member of the Hoover Institution Task Force on Property Rights.
http://online.wsj.com/article/SB10001424052748704608504576208900109315200.html
'bulldzr'
From one who has graced this board with 7,567 FREE posts since you joined us, I consider your judgment and advice to be entirely unwarranted.
STINVESTOR
'bulldzr'
Well, my fine friend......if you think the posts you object to are SPAM, by all means do your duty and TOS them.
Personally, I think you are FULL OF CRAP!!!!!!
STINVESTOR
'zdog' It is far beyond my technical knowledge to even offer an informed reply to your post.
I wish that I had directed the article to Data Rox and asked him for his observations or indeed his speculation about IDCC's Barcelona's presentation and Shuttleworth's reporting on what he saw demonstrated there.
I was surprised to read this article from a WSJ Opinion Writer and his apparent considerable insight into this burgeoning problem that confronts all carriers.
He is really clued in or he found an expert source to guide him in writing a very authentic article.
STINVESTOR
What Price the Cloud? Companies betting heavily on high-speed mobile networks and high-powered applications have yet to confront the question of how the bandwidth will be paid for. By HOLMAN W. JENKINS, JR...Article Comments (14) more in Text The rise of companies like Google and Amazon created the know-how to manage vast server networks with millions of users. The sudden ubiquity of small, powerful handhelds tied to high-speed mobile networks creates the opportunity for high-powered applications that can go anywhere and be accessed on the run.
Because such applications can be done, they will be done. And because they will confer competitive advantage, companies will be forced to adopt them.
This explains why the companies that once dominated industrial-strength computing—the IBMs, the Oracles, the H-Ps—now nervously tug their forelocks around Apple and Google. It explains why Google and Apple are acting like punks on a street corner, grabbing their crotches and trying to one-up each other in the number of devices "activated."
It explains why Apple is even sacrificing its precious margins to keep up with Google in mobile device market share.
You can almost smell the fear, as the cloud revolution promises to be as disruptive as the PC revolution once was. No wonder many are turning to a timely new book, "The Limits of Strategy," by veteran consultant Ernest von Simson, who saw up close how once-great firms like Digital Equipment and Wang Labs were felled by the PC.
The scariest part: Even leaders who grasp what's happening to them often can't change cost structures and business models fast enough to survive.
But an unappreciated wild card in the cloud revolution is the price and availability of broadband, especially mobile broadband. A fight in Canada, which is just ahead of the U.S. in introducing usage-based pricing, has bloggers and politicians accusing Bell Canada of unconscionable "profiteering" from usage caps. The company, they rage, is reaping huge fees for additional units of bandwidth that cost Bell Canada virtually nothing to provide.
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Corbis
.This critique, which is common, could not more comprehensively miss the point. Another car on the roadway poses no additional cost on the road builder; it imposes a cost on other road users. Likewise, network operators don't use overage penalties to collect their marginal costs but to shape user behavior so a shared resource won't be overtaxed.
Netflix is one of the companies most threatened by usage-based pricing, and it has quickly geared up a lobbying team in Washington. In a recent letter to shareholders, CEO Reed Hastings downplayed the challenge to Netflix's video-streaming business. In the long run, he's probably right—the market will settle on flat-rate pricing once the video-intensive user has become the average user.
In the meantime, however, Netflix shareholders had better look out.
A new wave of much cheaper mobile devices will soon give millions more people a reason to be online all the time. Today, it costs an operator $600 to put an iPhone or competitive Android phone in the hands of a subscriber. Soon it will cost less than $100, now that all the functions of a smart phone can be built on a single chip.
Then there's the tablet wave. An iPad generates five times as much data traffic as a smart phone, which generates 24 times as much as a feature phone.
Then there's the fact that current networks are built with downlink capacity much greater than uplink. The average user is considered a consumer of content, not a producer of it. With HD movie cameras built into smart phones, and with applications like Apple's FaceTime encouraging users to engage in video chat, the flow of video is likely to become a lot more two-way, adding to the pain of network operators.
Net neutrality lobbyists in Washington are already in cognitive meltdown over the challenges that the video explosion poses to their hobby horse. You can see it in their attacks on MetroPCS, which has come out with a new low-priced mobile Web service that picks and chooses which Web resources users can tap. It won't let you use Netflix. It won't let you use Skype.
The religion of net neutrality is offended by this, but who's to say consumers can't judge for themselves if the restrictions are worth the price? Yet every other potential solution is also opposed by the net neut crowd, including metered pricing. And landing with a thud is a new A.T. Kearney report promoting the ultimate net neut bête noire. It finds the economics of the Internet "ultimately unsustainable" unless bandwidth costs are somehow shifted back to the shoulders of the big traffic generators, the Netflixes and Googles, if only to give them an incentive to use bandwidth efficiently.
All along, what the net neut crazies have lacked in intellectual consistency they've made up in fealty to the business interests of companies that fear their services would become unattractive if users had one eye on a bandwidth meter. That's why opposition to "Internet censorship" morphed into opposition to anything that might price or allocate broadband capacity rationally. But such a stance is rapidly becoming untenable, whether the beneficiary is Google, with its advertising-based business model, or Netflix, Apple, Amazon and others who hope to capitalize on the entertainment-streaming opportunity.
All are betting heavily on the cloud. All need to start dealing realistically with the question of how the necessary bandwidth will be paid for.
http://online.wsj.com/article/SB10001424052748704758904576188520842024838.html#articleTabs%3Darticle
See ALSO The COMMENTS!!!!!!!!!!!!!!!
What Price the Cloud? Companies betting heavily on high-speed mobile networks and high-powered applications have yet to confront the question of how the bandwidth will be paid for.
STINVESTOR
http://online.wsj.com/article/SB10001424052748703560404576189153930311330.html?mod=WSJ_newsreel_politics#articleTabs%3Darticle
Senate Passes Patent System Overhaul .
A Chance to Veto a CEO's Bonus
http://online.wsj.com/article/SB10001424052748703399204576108680208010522.html?mod=WSJ_newsreel_markets
HEAR! HEAR! Right on Paheka!
STINVESTOR
Net Neutrality and the TV Wars
http://online.wsj.com/article/SB10001424052970203418804576039393870805846.html?mod=WSJ_Opinion_LEADTop
UT Starcom, Inc settles SEC lawsuit alleging bribery charges; relocating to China.
http://online.wsj.com/article/SB10001424052748704369304575632720306013354.html?mod=WSJ_newsreel_personalFinance
U.S. in Vast Insider Trading Probe .
http://online.wsj.com/article/SB10001424052748704170404575624831742191288.html
The Huawei Security Threat
http://online.wsj.com/article/SB10001424052748704300604575555121880239064.html
Nokia's Smartphone Chief Quits Text By GUSTAV SANDSTROM And JENS HANSEGARD
LONDON—The transformation at the top of Nokia Corp. continued on Monday with the resignation of Anssi Vanjoki, the head of its smartphone unit, on the eve of the company's annual product showcase.
The resignation comes three days after Nokia said Chief Executive Olli-Pekka Kallasvuo would be replaced by Microsoft Corp.'s Stephen Elop, its first non-Finnish CEO.
Mr. Vanjoki, an executive vice president and a Nokia veteran who took over the smartphone business in May, has a six-month notice period and will continue in his position for now.
Anssi Vanjoki resigned on Monday.
."I felt the time has come to seek new opportunities in my life," Mr. Vanjoki said in a brief statement. "At the same time, I am one hundred percent committed to doing my best for Nokia until my very last working day."
Mr. Vanjoki wasn't immediately available to comment further. Nokia didn't comment on the search for a successor.
The 15th Nokia World event takes place Tuesday and Wednesday in London, where the company is expected to showcase its new flagship smartphone, the N8, and an upgraded version of its Symbian mobile platform.
Mr. Vanjoki, who turned 54 years old on Monday, joined Nokia in 1991. He previously headed a number of units at the company and was a key architect behind Nokia's N-series smartphones and its new MeeGo software platform.
In May, Mr. Vanjoki was appointed to spearhead a new mobile-solutions unit to focus on smartphones—the key battleground with rivals like Apple Inc. and BlackBerry maker Research in Motion Ltd.—and mobile computers, in addition to Internet services.
The move was part of a wider shake-up as the company tried to recover its leadership in the premium smartphone segment and to move on from recent profit warnings.
Mr. Vanjoki's departure could signal further management changes at Nokia as Mr. Elop is likely to appoint new high-level managers as he reviews the company's strategy in coming months, said Nick Jones, vice president at research firm Gartner.
A Cautious Call On Nokia By HESTER PLUMRIDGE
Nokia has made a brave call, but is it brave enough?
Beset by criticism on innovation and falling market share, the Finnish mobile-communications giant announced Friday that chief executive Olli-Pekka Kallasvuo is to be replaced by Microsoft's Stephen Elop. The market welcomed the news, sending Nokia's shares up 4%. But caution is required.
Sure, external expertise should benefit Nokia. While rivals are dissolving barriers among hardware, software and services on mobile phones, PCs and televisions, Nokia's historical dominance of the mobile-handset market is ebbing.
Nokia has named Stephen Elop CEO to help the world's largest handset maker reverse steep declines in earnings and market share that have decimated its share price. Simon Constable and Lauren Goode discuss the challenges ahead for Nokia's new leader with WSJ's Drew Dowell and Eric Savitz of Barron's.
.Mr. Kallasvuo spent his career at Nokia, whereas Canadian-born Mr. Elop, the firm's first non-Finnish CEO, has extensive experience at U.S. companies, including Adobe Systems. He currently runs Microsoft's hugely successful business division, responsible for the hegemony of its Office software suite. Nokia hopes he will bring the Silicon Valley know-how to accelerate its transformation from handset developer to a software and services-led group.
But while making Nokia's software more user-friendly is important, its problems run much deeper. Rival Apple has developed a suite of products such as the iPhone and services such as its online music store that operate seamlessly together, and has created a buzz around its brand. Google's open-source Android operating system challenges the industry.
Nokia needs better business integration, and an image overhaul. A divisional Microsoft manager is not the most obvious choice for this role. Nor is Mr. Elop used to fighting back from an underdog position.
Meanwhile, the timing of the announcement, on the eve of Nokia's biggest trade-and-customer fair, looks ill-judged. With Mr. Kallasvuo due to depart on Sept. 20, Nokia's annual opportunity to grab the market's attention with its technological wizardry risks being overshadowed by Mr. Elop's appointment. That suggests a crisis of confidence at Nokia.
The company trades on a ratio of 14.9 times 2011 earnings, expensive given the limited visibility on its recovery, notes Credit Suisse. Mr. Elop will need to engineer a brave reinvention to convince investors Nokia is back on track.
WATCH OUT AIG....WITH DINGBAT BATTS on the bench..you are in grave danger!!!!!
Eliot Spitzer's Last Admirer
Though he keeps losing in court, Andrew Cuomo won't drop the case against Hank Greenberg..ArticleComments (23)more in Opinion Text You can't blame New York Attorney General Andrew Cuomo for decisions made by his predecessor, Eliot Spitzer. But with another famous Spitzer case ending in another embarrassment for the AG's office, and with still more evidence of prosecutorial misconduct, New Yorkers can raise a fair question: Why is Mr. Cuomo unwilling to break with the Spitzer past?
Judge Deborah Batts in the Southern District of New York will soon decide whether to approve the settlement of a class-action shareholder lawsuit against AIG and its former CEO, Hank Greenberg. Members of the class were allegedly harmed by actions that led to the company's 2005 financial restatement. Both the restatement and the 2005 firing of Mr. Greenberg were demanded by Mr. Spitzer, who also forced a $1.6 billion settlement on the company and filed civil charges against Mr. Greenberg.
Regular readers of this space know the dubious nature of the Spitzer charges, the most serious of which collapsed years ago. But what's significant about the pending settlement is that, assuming the judge signs off, there will not even be a theoretical damages claim on which New York can continue to sue Mr. Greenberg. He settled with the investors, and the investors have now settled with AIG.
Under the unanimous 2008 Applied Card decision (another Spitzer defeat) at New York's highest court, the Attorney General can't seek damages under the state's Martin Act on behalf of victims who have already agreed to a settlement over the same set of alleged offenses.
And yet Mr. Cuomo shows no signs of dropping the remaining Spitzer claims against Mr. Greenberg. His office has even continued the Spitzer policy of stonewalling requests for documents.
Under New York's Freedom of Information Law, former AIG employee and current Greenberg associate Howard Smith has sought records of contacts between Mr. Spitzer's office and AIG, as well as documents related to Mr. Spitzer's communications with the press. Such documents certainly exist. And unlike conversations Mr. Spitzer had with his staff lawyers about policy or prosecutions, his contacts with AIG, his discussions of media strategy and his leaks to reporters generally cannot be considered privileged. Yet so far New York hasn't produced a single email or other communication written by Mr. Spitzer.
One would think that Mr. Cuomo would want to end the era of stonewalling, especially after the defeat his office sustained last month on still another Spitzer-created prosecution. Manhattan Supreme Court Justice James A. Yates vacated the felony convictions of two former employees of Marsh & McLennan Companies because the Attorney General's office had failed to turn over potentially exculpatory evidence to the defense.
Although prosecutors had earlier assured the court that "We don't want to be accused of hiding anything," Judge Yates found that the Attorney General's office had failed to turn over more than 700,000 pages of documents, plus deposition testimony from key witnesses.
Once the evidence came to light, defense lawyers argued that many of the documents directly contradicted the testimony of government witnesses at trial, and Judge Yates appears to agree. "While each item of evidence taken individually may present a reasonable possibility that the verdict would have been different, taken as a whole, the evidence raises not only a possibility, but a probability that its disclosure would have produced a different result," he said.
By now, most reasonable people have concluded that the Spitzer method is to be shunned, not emulated. A genuine government reformer might also wish to shine the light on the way the AG's office operated during the Spitzer era. But Mr. Cuomo can't seem to let go of the Spitzer cases, nor turn the page on his predecessor's penchant for secrecy.
Mr. Cuomo is now running for Governor, promising to clean up Albany and make New York a more inviting place for business and investment. Those are worthy ambitions. The Democrat also has a huge lead in the polls and can't possibly think that breaking with the Spitzer method would give his opponents an opening. His refusal, so many years and legal setbacks later, to let go of the Greenberg case doesn't speak well of Mr. Cuomo's reform sincerity.
JULY 19, 2010.Government Drops the Ball on Patents Without guidance from Congress or the Supreme Court, industry turns to self-help.By L. GORDON CROVITZ. The government may control much of the financial, auto and oil-drilling industries, but when it comes to intellectual property, it's been remarkably slow to act. It will be fascinating to see how copyright and patent protections evolve at a time when technology is changing faster than legislators can set new rules of the road—leaving people to resort to self-help.
To understand how intellectual property law no longer makes sense, consider Stephanie Lenz's son. In 2007, Ms. Lenz posted a video on YouTube showing the boy, then 13 months old, dancing to the beat of Prince's "Let's Go Crazy." Universal Music Group demanded that the video, less than 30 seconds long, be taken down as willful copyright infringement subject to a hefty fine. Years of litigation ensued, with "fair use" still undefined.
Last month YouTube sidestepped legal uncertainties by doing a deal with music licensing company Rumblefish. People can pay $1.99 to add one of among 35,000 songs to noncommercial videos they post. And musicians get paid for their work. This self-help, market solution came after years of waiting vainly for Congress to make sense of how technology alters the enforcement of property rights.
Patent law is a few years behind copyright when it comes to self-help. Patents are at the tectonic plate shift between the Industrial Age and the Information Age. That's because so much new technology, especially software, becomes valuable only when combined with other innovations. This is very different from protecting a new plowshare or cotton gin.
Uncertainty about what can be patented has become a huge tax on innovation. Last week Ars Technica, a widely followed technology site, reported that "eBay is the latest target of patent trolls. XPRT Ventures is suing the auction house for $3.8 billion." That was the complete write-up. In other words, the level of respect for patent law is at the point where the presumption is that cases are brought by trolls with tenuous arguments whose only manufacturing operations are the production of lawsuits.
There were great expectations when the Supreme Court took its first big patent case in many years. At the oral arguments in Bilski v. Kappos, justices joked about the absurdities of business-process patents, with Sonia Sotomayor asking about patents for speed dating and Stephen Breyer asking about his "great, wonderful, really original method of teaching antitrust law." These are arguably less silly than some real patents, such as for exercising cats and even for the process of obtaining a patent.
But the court offered no help. Justice Anthony Kennedy's majority opinion, on the last day of the term last month, stressed the urgency for clearer rules—while saying the court could not clarify anything. "The Information Age empowers people with new capabilities," he wrote, "puts the possibilities of innovation in the hands of more people and raises new difficulties for the patent law. With ever more people trying to innovate and thus seeking patent protections for their inventions, the patent law faces a great challenge in granting monopolies over procedures that others would discover by independent, creative application of general principles." Then he added, "Nothing in this opinion should be read to take a position on where that balance ought to be struck."
It will take real work to distinguish among different industries and determine what types of patents would best promote what the Constitution calls "the Progress of Science and useful Arts." The pharmaceutical industry, which must invest fortunes to clear regulatory hurdles for new drugs, needs a different approach to patents than do software companies. The "machine or transformation" test that courts crafted doesn't provide clear guidance for digital innovations of software code that sometimes lead to a new physical object and sometimes don't.
Congress has punted on its task of balancing the complex technological issues. We need a new approach for patents that are "constructed around the unique and indeed miraculous properties of the virtual machine, a specific form of protection for 'Information Age' inventions," argues Larry Downes, author of "The Laws of Disruption." He also acknowledges that the "chances of that solution being implemented, needless to say, are too slim to be visible."
Instead, companies like Microsoft, Intel and Verizon invest in firms that buy up patents, then license them. This is considered cheaper than the risk of being sued by patent trolls for alleged violations.
This self-help by the country's most innovative companies may be good business, but it's done out of the desperation that results from bad government. If only someone could patent a way for Congress to establish clear rules of the road for intellectual property.
MAY 10, 2010.Investors Start to Make Their Voices Heard on Pay Text By ERIN WHITE
Investor rebukes of executive-pay practices last week at Motorola Inc. and Occidental Petroleum Corp. mark a significant shift in the relationship between corporate boards and shareholders.
The messages came via "say on pay" votes at the companies' annual meetings. Corporate activists have been arguing for an advisory vote on executive pay for years, but such votes have only recently become commonplace thanks to Congress, which required them for companies that got federal bailout funds, and voluntary adoption by others.
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REUTERS
Protesters gathered in San Francisco last month during Wells Fargo's annual shareholder meeting.
.Last year, not a single major U.S. company lost a vote, despite widespread complaints over excessive pay. Some governance watchers wondered if the measures lacked teeth, or if ordinary investors just didn't consider pay to be an issue. After the defeats at Motorola and Occidental, that has changed.
"This does demonstrate that shareholders will use it to express their dissatisfaction," says Carol Bowie, head of the Governance Institute at RiskMetrics Group Inc.'s ISS, which advises fund managers on how to vote in corporate elections.
Some 300 say-on-pay votes are expected this year, and boards and investors are watching to see how they pan out. Legislation pending in the Senate would require all public companies to hold an advisory vote.
The votes aren't binding, but they can draw attention and force boards to consider a wider range of interests when setting pay.
Evidence from the U.K., which has mandated such votes since 2003, suggests the requirement does have an effect.
After the first big rejection in the U.K.—at GlaxoSmithKline PLC in 2003—British boards started talking more with shareholders about compensation, says Stephen Davis, executive director of the Yale School of Management's Millstein Center for Corporate Governance and Performance.
A 2007 study he conducted reported that British top-executive pay had continued to increase—but at a slower pace—and that the level of variable pay linked to performance targets had grown. Golden parachutes shrank, as well.
"It did make progress in better aligning pay with performance," Mr. Davis says. "It pried open a dialogue between boards and investors," and U.K. boards now "build into their routine preparations an outreach to investors."
Motorola gave shareholders a say-on-pay vote last year, and the 64% support level was among the lowest of any company.
The vote covered 2008, when Motorola awarded co-Chief Executive Sanjay Jha total compensation of $104 million after wooing him from Qualcomm Inc. to turn around its struggling cellphone division.
In 2009, Mr. Jha earned much less—$3.8 million in total compensation, while Motorola's shares rose 68%.
But investors said they objected to the windfall he would receive whether or not Motorola, as planned, splits its mobile-phone and set-top-box business into a new company he would head.
If the deal goes through, Mr. Jha will get a 1.8% to 3% stake in the new company. If the split doesn't happen by June 30 of next year, he gets $38 million.
RiskMetrics advised fund managers to vote against Motorola's pay practices this year partly because of that arrangement, says Ms. Bowie. The American Federation of State, County and Municipal Employees, whose pension funds hold shares, objected to the guarantee.
A Motorola spokeswoman says "we take these matters very seriously and will continue to engage with our shareholders," and that Mr. Jha's "compensation is aligned to the success of this business."
Occidental this year offered investors a say on pay for the first time and failed to win majority support. CEO Ray Irani, who received total compensation in 2009 of $31.4 million, has long drawn criticism as one of the highest-paid chiefs in the U.S.
"The board compensation committee will continue to expand its dialog with institutional investors to assess the views, and we'll use that input to re-evaluate the company's compensation philosophy, objectives and policies," Occidental spokesman Richard Kline said Friday.
At some firms, even big dissents have prompted changes in pay practice. Berkshire Hills Bancorp Inc., based in Pittsfield, Mass., won only about 62% support for its pay practices last year. "We made changes particularly with a focus on long-term performance," says David Gonci, Berkshire's investor-relations officer.
For its long-term incentives, the board now looks at whether the company achieved targets over three years instead of one. It evaluates more metrics, including return on equity, rather than just earnings per share. Berkshire added more performance metrics to its annual incentive plan, too.
The company missed its targets in 2009, so the five top executives named in the proxy forfeited some compensation, Mr. Gonci says. Total compensation for CEO Michael Daly fell 15% to $916,683. At its annual meeting Thursday, Berkshire's pay practices won 97% support, Mr. Gonci says.
—Dana Mattioli and Niraj Sheth contributed to this article.
MAY 10, 2010.Improving Corporate Governance: A Memo to the Board
Corporate directors are doing a much better job than they get credit for, but here are a few suggestions for It is corporate proxy season, and one can expect the usual spate of stories about excessive executive compensation, lax directors and the failure of institutional investors to exert their influence over boards and management.
As a participant in the corporate governance process for a large investment manager for more than 25 years, I will take a contrary view. Over the past quarter-century, the performance of corporate boards has improved markedly. Yet there's room to go.
As one of the largest index fund providers in the world, Vanguard is, at a minimum, a 2% owner of just about every public company in the United States. While a large portion of the firm's assets are managed using a passive approach, the company hardly takes a passive approach to corporate governance. Vanguard is among the permanent shareholders of corporations, with a shared interest in maximizing long-term value, not in meeting short-term goals such as quarterly earnings and yearly stock-price gains.
Here are a few suggestions to keep corporate board improvement continuing:
1) Know that you are the shareholders' first line of defense. You are our hands-on supervisors of the management team. You are the individuals we rely on to ensure that the capital we've invested is well-stewarded. Permanent shareholders simply cannot, nor do they want to, get involved with the management of companies. As a result, their focus is on you, the members of the board; on your qualifications and character; and on your level of engagement with your owners.
2) Build value through mutual respect. All stockholders should respect the people who put the time and energy into governing public companies. In turn, you must respect your stockholders; not just tolerate us, but truly respect us, since we've tied our financial well-being to your success as a director and a management team. Always remember: It's not "your" company. There is an unfortunate supposition today among some regulators and much of the press that the relationship between stockholders and boards should be confrontational rather than collaborative. I simply do not believe that is a healthy or effective way to build value for people who supply capital.
3) Communicate. Great boards of directors listen and hear. They reach out to their most important shareholders for input on critical policy decisions, such as compensation structure or takeover defenses. Communication should be ongoing and consistent, not episodic or solely in the face of a crisis. Effective shareholder relations programs take care and feeding, and they mature over time.
4) Measure your success. Great boards are self-reflective and self-evaluating. Importantly, the appropriate measures are not simply stock price, earnings or cash flow for the trailing 12 months. Real, long-term success is about other things—such as succession planning, strategy, big-picture goals.
Now let's move from the conceptual to the concrete. Boards can further strengthen the governance process by adopting the following practices:
5) Compensate yourselves in equity. Paying directors predominantly in equity aligns the interests of the board to those of the permanent shareholders. I would suggest that every director of a public company should be required to hold a minimum of, say, five years' worth of his board pay in the form of company stock from the first day he joins the board and hold those shares until he or she leaves the board. An alternative would be for all compensation to be paid in stock (no cash) and required to be held until a director reaches the target ownership level.
6) Share your metrics. Stockholders already get a detailed report on how boards evaluate the CEO and management team through their pay. Boards should produce a similar (if less-detailed) document on how they evaluate themselves on the important measures outlined previously.
7) Hold yourselves accountable. Most boards would agree that the appointment and oversight of the CEO is the most critical function they perform. Recognizing that there are important implementation challenges, I'd suggest that directors be subject to clawbacks on pay if they fail to oversee an orderly transition in leadership.
8) Establish an "owner's relations committee." Similar to the compensation or audit committee, a group of directors should be charged with engaging the company's serious, long-term stockholders on a regular, meaningful and candid basis. Think about it: If you had only one owner of a private company, the board would be in contact constantly. Why not take the same approach, especially with your best shareholders who have been, and will be, with you through good times and bad.
Some boards already embrace these concepts. In fact, one of the most significant changes I've observed over the past two and a half decades has been a great attitudinal shift in boards away from doing what is right for the insiders to doing what is right for the shareholders. Importantly, this cultural change has been driven by board members themselves.
It is in this same manner that boards will adopt these best practices and make them standard operating procedure. Not by regulation nor by legislation, but by leading directors and leading boards leading the way.
Mr. Brennan is chairman emeritus of Vanguard. This is based on a recent speech at the Drexel University LeBow College of Business Center for Corporate Governance.
Broadband Trojan Horse!
MARCH 15, 2010.Broadband Trojan Horse
The FCC has a new plan but doesn't want a vote..Text .Health care isn't the only policy arena in which the Obama Administration aims to ram through controversial new rules. The Federal Communications Commission is set to unveil a "national broadband plan" opposed by industry and without any of the five commissioners voting on it.
Last year, Congress directed the FCC to develop a plan to make high-speed Internet available to more people. But given that 95% of Americans already have access to some form of broadband—and 94% can choose from at least four wireless carriers—rapid broadband deployment is already occurring without new government mandates.
Since 1998, the FCC has classified broadband as an "information service" subject to less regulation than traditional telecom services. The Supreme Court's Brand X decision in 2005 validated that classification, and the upshot has been more investment, innovation and competition among Internet service providers, all to the benefit of consumers.
In 2009 alone, broadband providers spent nearly $60 billion on their networks. Absent any evidence of market failure, the best course for the FCC is to report back to Congress that a broadband industrial policy is unnecessary. Instead, FCC Chairman Julius Genachowski is moving to increase the reach of his agency and expand government control of the Web.
Among other things, he wants broadband services reclassified so the FCC can more heavily regulate them. The national broadband plan, to be unveiled tomorrow, will call for using the federal Universal Service Fund to subsidize broadband deployment. The USF currently subsidizes phone service in rural areas, and Mr. Genachowski knows that current law prevents it from being used to subsidize broadband unless broadband is reclassified as a telecom service. Congress ought to be wary of letting the FCC expand its jurisdiction through back doors like this.
Mr. Genachowski wants more control over broadband providers so that he can implement "net neutrality" rules that would dictate how AT&T, Verizon and other Internet service providers manage their networks. To date, Congress has given the FCC no such authority. Nor has the agency had success in court. Based on oral arguments last month, the D.C. Circuit Court of Appeals is almost certain to rule against the FCC in a case involving Comcast's network management.
At the urging of liberal advocacy groups like Free Press and Public Knowledge, Mr. Genachowski also wants to use the national broadband plan as a vehicle for returning to the bad old 1990s era of "open access" regulations. He recommends forcing major broadband providers like Time Warner Cable and Qwest to share their high-speed networks with smaller competitors at federally set rates. We can't think of a better way to reduce capital investment and slow the build-out of high-speed networks.
Mr. Genachowski's proposals are meeting resistance from telecom companies and fellow commissioners, which is reason enough to put his broadband plan to an agency vote. Instead, the chairman is urging his colleagues to sign a general statement that endorses the goals of the plan and ignores the details.
"Instead of risking a split vote among the five regulators on approving the plan," reports National Journal, "Genachowski is seeking consensus on a joint statement, which sources said would provide him with some political cover for the controversies that are certain to be triggered by some of the plan's recommendations."
The FCC chairman and his staff have spent the better part of a year preparing a major report while keeping his colleagues largely in the dark. What happened to the Obama Administration's promise to be open and transparent?
Restoring Faith In Financial Markets!
http://online.wsj.com/article/SB10001424052748703436504574640523013840290.html?mod=WSJ_newsreel_opinion
STINVESTOR
frobinso:
BRAVO......agree 100%!!!!!
STINVESTOR
JimLur:
Fantastic news!!!!!!
STINVESTOR
'jai'
Nasgovitz's Executive Assistant:
msanville@heartlandfunds.com
STINVESTOR
Capitalism by Proxy Fight!
http://online.wsj.com/article/SB10001424052970203440104574404780012592404.html
Sounds like 'The Defense for the status-quo'!
COMMENTS are thought provoking!
Corporate Governance and Shareholder Rights
http://online.wsj.com/community/groups/corporate-governance-sharheolder-rights-585/topics/shareholder-rights-bill
'olddog'
Thank you for once again uncovering a highly informative and instructive post regarding present and proposed Shareholder Proxy regulations.
Looks like it might be a year early to mount a Proxy effort to place one or more Directors on IDCC's BOD.
With a December 2009 deadline for submission of a Shareholder Nomination under the 'old' Regulations this article would seem to dictate that we are up against the old 'stacked deck' for the 2010 ASM.
Am I correct in this interpretation?
STINVESTOR
'JimLur'
I am deep into a Nebraska-Kansas football game.
You answered vtem's question of how we can come up with 1% of shareholders to get the ball rolling. I agree that getting 440,000+ is no sweat.
I PMed loophole this morning to feel him out about his willingness to serve.....haven't heard back so he must be out of pocket this weekend. Haven't seen a post from Marchma or Data_Rox today either.
NOTHING will happen except more whining and hand wringing unless people declare themselves and step up to the plate.
If you have a means to contact Corp Buyer, I would suggest you feel hin out about his active involvement since he has the knowledge and experience having already done so. If his current employment precludes his active involvement....would he act as an advisor?
Many posters are reluctant to post the number of shares they control (they have been attacked for doing so in the past) by, I suspect the consistent attackers who own maybe 500 shares! I would suggest that anyone who is uncomfortable to do so, PM or call you (you have earned the trust) to establish that we can meet the the 1% requirement. The sooner, the better......time is growing short.
What's to lose except minimal time and effort to see if we can put together a viable attempt to take an activist involvement in "building shareholder value" to quote a much used cliche.
Get back to you later.
STINVESTOR
'FISH21049'
While I believe that your negative premise is well-intentioned, I do not agree.
Having served on at least a half-dozen BOD'd during my active career, I can assure you that even ONE Director with opposing views, depending on the forcefulness of the individual, can be HIGHLY effective.
JimLur's capital idea of placing two of the three put forth so far, IMO, could change the incestuous behavior of the current BOD immediately. In 2011 when Campagna's head is on the chopping block, believe me, that after a year of hearing the objections of one or two Directors we are successful in electing, he would get religion damned quick when he realized that the third was being nominated to replace HIM!
I take no issue at this time about the other changes you suggest should be given serious action,however what makes you think that Campagna would be the least bit swayed with his entire hand-picked current Board? Most all the proposed changes you suggest bear directly on Campagna's ability to continue operating his private piggy bank and the power to manipulate current Directors to rubber stamp his ongoing agenda. LOTS OF LUCK WITH THAT!
I further think, although having never seen them, that the Curriculum Vitae of all three of the names mentioned would make Campagna's look mighty slim by comparison. For all you know, ALL three have had prior BOD experience...not that it is essential.
I further believe, that Nasgovitz could be persuaded by interviewing, in person or by phone, to back ALL of them. IF he threw his voting power behind them, to say nothing of his contacts and influence within the institutional community, it would be a landslide.
JMHO
STINVESTOR
'vtem01'
Thank you for stepping up to the plate!
STINVESTOR
'JimLur'
I believe that ONLY 2 Directors are up for re-election at the upcoming ASM.
I could and WOULD deliver personally, and with family and friends I am responsible for putting in IDCC, a MINIMUM of 50,000+ shares to any two of the three you suggest.
STINVESTOR
'jai'
I could and WOULD support Marchma, Data_Rox OR LOOPHOLE!
STINVESTOR