Entrepreneur Watch

Google's earnings and stock

It's just a couple hours before Google announces earnings for Q4 2006. So I'd better make my guess now. These estimates are for entertainment purposes only.

My estimate: $2.96 billion revenues,      $750 million profit

Stock may open tomorrow between $520 and $525

Google is still taking share from Microsoft and Yahoo. Google's Q3 revenues were $2.69 billion. They are not going to decrease sequentially. Last year's Q4 they went up 22% sequentially. So I'm giving them a 10% sequential increase.

The Street consensus estimate (per Yahoo Finance) is: $2.19 Billion revenues, with a range of $2.05B to $2.31B.

As I write this the stock is trading at $503.45 

BTW, Internet Outsider is running a contest -- enter your own guess. Or enter it here and tell me why I'm wrong.

Get fired, get rich!

It's time to hand out a new Golden Boot Award, an idea I came up with at Upside magazine to acknowledge outrageous severance packages given to fired CEOs. It was supposed to be an annual award, but, alas, Upside folded.

This trend is fascinating and growing faster than a baseball player on steroids. CEOs screw up their companies and treat them like private bank accounts, then are rewarded  again for getting the boot. Man, that's great work if you can get it.

It should be a great trend this year, as more CEOs are fired for back-dating stock options.

I'm thinking of writing a book advising would-be CEOs how to cash in on the trend. How about "Finding Wealth Through Failure," or perhaps "It Is a Good Day To Be Fired!"?

The rules are simple. First, when you're hired, demand your god-given right to outrageous pay. After all, you're corporate royalty, with as much right to the riches of your company as Prince Charles is to the wealth of England. These days, CEOs are chosen by god. They just have to choose their corporate domain.

How else can anyone explain the fact that average CEO compensation for large U.S. companies in 2005 was 369 times the pay of the average U.S. worker, compared to only 36 times the average worker's pay in 1976? Obviously, commoners can't handle the job, or there would be more competition for it.

Then put together a back-slapping board of directors who are paid a couple hundred grand annually for meeting four times a year to rubber-stamp your decisions. Be sure to tell them that the company is in such danger that you're putting your reputation on the line by taking on the task. You need a severance package that will allow you to live like Aladdin after he found his genie.

Any board member who lacks genie-like qualities needs to be fired. Give him a good compensation package. A couple million ought to do it.

Then fire as many employees as you can under the theory that your slave ship ought to run faster with fewer slaves rowing it, thus lessening its weight. Screw customer service and R&D. They're just cost centers. And don't forget to back-date some options for the friends you hired to help you run the company into the ground.

Then act like a king, dammit. Be demanding and demeaning. Rule through belittlement. Piss off employees. And wait for your cost-cutting measures to damage the company's ability to biuld products or offer decent services. Viola! The stock drops, you're out of the company and in the money.

And so, my award goes to the man who best followed these rules to spectacular success, Bob Nardelli, who pocketed $210 million for destroying Home Depot! It took him just six years to do it.

Maybe I should apply for that job.

Sad tolls in Iraq

I wish to take a moment to acknowledge and express regret for all the innocent people who have died in Iraq because of the tragic U.S. invasion of that country.

Statistics on the number of Iraqi civilians killed since the beginning of the war have been sketchy, but the U.N. has just released an estimate that 34,000 civilians were killed there in 2006.

Nearly 3,000 U.S. soldiers have died in Iraq since the war began.

And all this from an ill-conceived and probably illegal war that our president justified after the horrific attacks on U.S. soil on 9/11, in which about 3,000 people were killed.

No reasonable person can argue these deaths were justified in any way. Yes, Saddam Hussein was a montser, but the war has killed more people than he did through decades in power. Most of the Iraqi casualties have been the result of Iraqis killing each other, but that civil war would not have happened if not for the U.S. invasion.

September 11 was only one of several false arguments for going to war, but it is doubtful that the war would have ever been rubber-stamped by Congress without that tragedy. To avenge 3,000, we have been responsible for the deaths of hundreds of thousands.

We need to reflect on this and remember. There are alternatives to war. While war may sometimes be justified -- I can't argue about invading Afghanistan -- we need to be wary of being too trigger-happy. The fact that the Bush Administration pushed this through with shaky and selective evidence to justify it is unforgivable. I hope we never let it happen again.

My bleeding heart goes out to all the families that have been devastated by the mounting death toll. Let us pray that sanity returns to the world soon.

Steve Jobs in trouble

As we naysayers expected, The U.S. Attorney in San Francisco and the SEC are looking closely at Steve Jobs' role in the options backdating scandal, according to an article in the Wall Street Journal.

The paper cites "people familiar with the matter." In this case, that likely means people at the SEC or at the SF attorney's office who agreed to leak the info without attribution.

Jobs looks in trouble over this one. According to the Journal, the "internal investigation" that exonerated Jobs of culpability blames the problem on three people who, conveniently, no longer work at the company. Can you say, "scapegoat"?

One was former Apple attorney Wendy Howell, who joined Apple right out of law school around 1997. She probably didn't know what hit her. Apple fired her last month.

Howell's attorney says that she was told to falsely date the options by  Apple's general counsel at the time, Nancy Heinen. The Journal says "Heinen left Apple in May for reasons that were unrelated to backdated options." Her attorney denies she gave the orders to Howell.

Further up the ladder, the Journal says the SEC also wants to talk to former CFO Fred Anderson, who resigned from Apple's board in October. Anderson's lawyer says he didn't play a day-to-day role in granting the options.

Oops. We have two people who said their orders came from higher up, and one person who said the act was done by someone lower down without his knowledge. Gee, someone seems to be missing here.

For people who think backdating options is no big deal, consider the fact that Apple has decreased back earnings by $84 million because of the fales dating. Since the stock price reflects earnings, regular stock traders paid too much for the stock because of the backdating, and the stock price now decreases because of the new charges to properly reflect earnings.

John Carney at Dealbreaker.com gives a good summary of why the apologists are wrong.

There are certain to be shareholder suits because of this, and rightly so.

This whole backdating practice seems to be something that was widespread throughout Silicon Valley for years, and is only now coming to light. Such practices have to be stopped, regardless of the high regard many of us have for the companies and people involved, the good work they have done, and the contributions they ultimately made to company stock.

If you're doing a good job, why cheat?

 

Conferenza still lives!

I'm embarrassed to say that I just noticed that Conferenza, formerly a newsletter writing about tech conferences, has been reborn as a blog. I must have missed the announcement.

Conferenza was started by Gary Bolles, a very smart journalist and consultant, and Shel Israel, a deceptively intellectual friend of mine who is co-author of Naked Conversations (now working on a proposal for a book called Global Neighborhoods.) I have been a contributor to Conferenza.

Conferenza is worth checking out. It lets you know what conferences are worth attending, and discusses what they're about. I miss the in-depth coverage that Conferenza Premium Reports used to have, but Gary and other contributors offer some good tidbits, such as this posting recommending  books on innovation by Dr. Henry Chesbrough, who advises corporations to look outside the company for innovation. (His latest book is Open Business Models.)

Gary even points to another conference site, Confabb, which gives info about almost every upcoming conference you can think of, and lets attendees write their own reviews. Also a good idea, but I still miss the old Conferenza coverage that told you everything important about each conference, acting as your proxy when you can't attend the conference yourself.

Perhaps I'll start contributing to Conferenza again.

No free wi-fi for San Francisco?

It's true; there is no such thing as a free lunch. At least not in San Francisco. If some organization offered to provide everyone living and working in the city with a free noon repast, the bureaucrats would probably respond: "Not unless you also pay the city a couple million dollars for the privilege."

I've seen a lot of dumb city governments in my time, but sometimes San Francisco just takes the lunch. The Board of Supervisor's illogic is astounding.

But then, this is the city that tries to get people to use public transportation--not by improving service, but by *forbidding* developers of condos and office buildings from including parking structures in their plans. Instead of offering incentives to use public transportation, they're trying to punish us into using it by giving us nowhere to park. Parking in San Francisco has become a rich person's luxury, with the cost of one workday matching that of a meal at a four-star restaurant.

In the meantime, the public transportation service, which takes an hour to move passengers seven miles across town, continues to degrade while prices continue to upgrade.

But I digress.

The latest idiocy is the butt-dragging over the offer by Google and Earthlink to provide a FREE citywide wi-fi service. Google and Earthlink have offered to pay for the equipment, installation and service. Everyone in the city gets free access to a 300kB/sec service, or can pay Earthlink $22 a month for access to a  1MB/second service. All San Francisco has to do is allow them to put the antennas on city light poles.

What a no-brainer: No low-income family need be without internet access, as long as they have some kind of computer access. Businesses will have added incentive to locate in the city, thus increasing tax revenues. Under-funded city schools can get their students online. Even the high-speed service will cost half what I pay for my home service. And it doesn't cost the city a dime.  Google will support the system with its famous advertising system. Everybody wins.

Unfortunately, the city government has no brains. After Google made the first offer last year, the city insisted in taking bids from other companies who might want to build such a system. Guess what? The Google/Earthlink bid of zero dollars won!

Or so we thought. Then city officials required that an independent committee be put together to negotiate over the final details. After seven months of negotiations the city has finally signed off on a plan that will cost the companies an additional $1 million for their generosity, in the form of revenue sharing and annual fees for the privilege of climbing light poles to plant their antennas.

Whew! At last a deal has been struck!

Or so we thought. Now the Board of Supervisors has to approve the deal, and the San Francisco Chronicle says the city will likely hold hearings on the plan.

And those Supervisors don't seem to like the deal. Apparently some of them feel we may be better off with a publicly-owned wi-fi system--which would mean city taxpayers would have to fork out about $8 million just to install the system. How soon is that likely to happen?

On the other hand, Supervisor Jake McGoldrick thinks the Google/Earthlink offer isn't free enough! He complains that estimated $1 million is too little for the companies to pay for the privilege of serving San Franciscans. Why? Because Google's profit is over $1 billion a year. Never mind that 99.99999% of Google's profit comes from people outside of San Francisco, a  A million bucks "is not even peanut shells" to Google says McGolddigger in the Chronicle.

I see. If you want to donate something to the city, city officials will check your income to make sure you're donating enough. Sure Google hopes to make a profit, but there is no guarantee--and if Google were not willing to support the system with advertising, the city would be paying someone to offer this service.

I now expect months of further delays. And I wouldn't be surprised if the whole deal falls through or the supervisors fail to sign off on it.

Geez, I'm getting old here, folks. Can't we just take the deal? Stop scrutinizing the gift horse's mouth.

When I first heard about San Francisco's parking-for-the-wealthy-only policy years ago, I said to my wife, "City governments don't come any dumber than this."

Or so I thought.

Steve Jobs and options backdating: I say guilty

The discussion about whether Steve Jobs was complicit in Apple Computer's stock options backdating scandal is in full bloom. The company's internal investigation has assured us that there was no intentional wrongdoing on Jobs' part.

But a couple publications have raised good arguments that Jobs is getting special treatment. The Mercury News quotes people who assert Jobs is being given a free pass. while other executives have been forced to resign because of the scandal. Business Week points out a huge amount of skepticism over the internal reports but asks, "Is Steve Jobs Untouchable?" noting that Jobs is so popular and has been so good for the company that it will be tough to prosecute him.

Bloggers love to defend him, though -- for precisely the reason Business Week states: He is good for the company and good for shareholders. At Venture Chronicles, Jeff Nolan admits that the critics are probably right, but seems to feel it's worth it. "Jobs is the benevolent dictator that we are willing to give a lot of latitude to because we get so much out of him in return," says Nolan.

Cynthia Brumfeld at IP Democracy  writes that Steve Jobs is more special than anybody, and seems to think it's no big deal because backdating options ain't such a serious crime anyway.

Yes it is. It affects a company's stock price, and shareholders lose out. In the case of Apple, of course, Jobs has been great to the company and to shareholders. He's an incredible and brilliant guy. But that does not give him an excuse to break the law.

According to the reports from Apple's own investigation, Jobs is guilty. Despite the fact that they insist otherwise.

They point out that Jobs knew about some of the backdating and even suggested some of the dates. Guilty. They admit that some of Jobs' own options were granted at a board meeting that, they now acknowledge, never even took place. Guilty.  And let's not forget Pixar, where options grants are also being investigated--they happen to be dated at the 52-week low for the company. No admission of guilt there yet, though, so we'll give him a pass on that for now.

Steve Jobs is an incredible guy. I hope and assume he will stay at Apple no matter what happens. But  government regulators need to pursue this. Double standards do not work in a civilized society with sopposedly impartial laws. Based on Apple's own investigation, I can't see how he could possibly be innocent.