Sunday, July 24, 2016

Watch the Stock

Verizon it seems has decided to buy Yahoo for some $5 billion per the BBC. They state:

US internet firm Yahoo announced in February that it was looking at "strategic alternatives" for its core internet business. Verizon declined to comment on the reports. A formal announcement is expected on Monday before US markets open for trading. Over the last few years Yahoo has struggled to keep up with the changing internet advertising landscape, with some analysts arguing that it has failed to remain relevant in many of its core markets.

The key question the shareholders should ask is what is the basis of this valuation. Verizon has value because it owns licenses to spectrum. That is an asset and one can value that. Really.

However what does Yahoo own? Customers? No, they can disappear in a heart beat. Then what is the basis for this valuation? Good question.  Let's see how they spin this one.

Now look at the Balance Sheet.


In Millions of USD (except for per share items)  As of 2016-06-30
Cash & Equivalents  1,325.40
Short Term Investments  5,055.68
Cash and Short Term Investments  6,381.09
Accounts Receivable - Trade, Net  991.18
Receivables - Other  -
Total Receivables, Net  991.18
Total Inventory  -
Prepaid Expenses  224.73
Other Current Assets, Total  -
Total Current Assets  7,597.00
Property/Plant/Equipment, Total - Gross  -
Accumulated Depreciation, Total  -
Goodwill, Net  431.37
 Intangibles, Net  202.12
Long Term Investments  34,412.45
Other Long Term Assets, Total  245.12
Total Assets  44,214.29
Accounts Payable  171.62
Accrued Expenses  982.86
Notes Payable/Short Term Debt  -
Current Port. of LT Debt/Capital Leases  -
Other Current liabilities, Total  122.03
Total Current Liabilities  1,276.51
Long Term Debt  1,266.28
Capital Lease Obligations  -
Total Long Term Debt  1,266.28
Total Debt  1,266.28
Deferred Income Tax  13,115.82
Minority Interest  32.41
Other Liabilities, Total  159.38
Total Liabilities & Shareholders' Equity  15,850.40
Redeemable Preferred Stock, Total  -
Preferred Stock - Non Redeemable, Net  -
Common Stock, Total  -
Additional Paid-In Capital  -
Retained Earnings (Accumulated Deficit)  -
Treasury Stock - Common  -
Other Equity, Total  28,363.89
Total Equity  28,363.89
Total Liabilities & Shareholders' Equity  44,214.29
Shares Outs - Common Stock Primary Issue  -
Total Common Shares Outstanding  948.25























































































Friday, July 22, 2016

Assigning Credit

Back in the early 50s with Watson and Crick, one could argue over perhaps a dozen people at best who were in the fray. The paper had two authors.

Today we have papers with in excess of a thousand authors. The recent CRISPR debate provides focus on this issue.

In the recent Nature article there is an excellent discussion of how best to attribute what to whom.

They note:

The history of CRISPR–Cas9 gene editing has become a subject of fierce debate and a bitter, high-stakes patent battle. Researchers and institutes have been jostling aggressively to make sure that they are credited for their share of the work in everything from academic papers to news stories.

 They continue:

In January, Eric Lander, president of the Broad Institute of MIT and Harvard in Cambridge, Massachusetts, tossed into this minefield a historical portrait called 'The Heroes of CRISPR'2. It was instantly controversial. Some said that it marginalized the contributions of certain researchers, and they questioned the decision to publish the article without a conflict-of-interest statement noting that the Broad Institute is embroiled in a patent dispute that hinges on determining who invented CRISPR–Cas9 gene editing.

Lander may very well have stepped into a hornets nest. One suspects he was just trying to lay out the best understanding of what occurred. That is always useful. But in today's world we have a proliferation if not explosion of post docs and junior faculty. How does one best account for all the conversations, insights, bench work, and the like.

It continues:

Outside that community, however, the accolades continue to be heaped on senior investigators. “We need to invent ways to expand the medals podium,” says Lander. “The idea that scientific discovery involves just one, two or three people is so nineteenth-century.”

Science is no the Oscars. There is no Best Director or Best Film. It is an incremental process of incremental contributions until that one moment that some it comes together. The biological sciences especially is a team effort, and for better or worse the team may be what gets recognition. The recent Silicon Valley attempt to make this Hollywood just intensifies the star issue, a politically correct stardom at that.

Greater Fool Theory

The "greater fool theory" is a basic principle in the financial markets and real estate. If one buys something it is a good deal only if someone else at a later time will pay you more.

Now in business reasonable people examine revenue potential, look at cash flows on a projected basis, consider contingencies.

In the mid 90s I taught a finance course at Columbia Business School and one case was AOL. I saw it as a total zero. My students saw it differently. Warner bought it and it almost destroyed the company.

Now Verizon wants Yahoo. Why? What "value" does it have? Verizon has assets in licenses, exclusive rights to ever increasing assets. Yahoo has nothing. As a shareholder and former executive, I really wonder who came up with this idea.

As the NY Times reports:

The end of Yahoo as an independent company may be near, and Verizon — long considered the leading contender to buy the aging web pioneer — is the most likely acquirer. The two companies are in advanced talks over a takeover of Yahoo that could be worth close to $5 billion, a person briefed on the matter said on Friday. Any transaction would be for Yahoo’s core internet business, although it is unclear whether a deal would also include other assets like real estate or patents. Both companies are hoping to announce a deal as early as next week, this person said. Verizon is scheduled to report earnings on Tuesday. Still, no final deal has been reached and the talks could still falter, the person cautioned. One of the other finalists could also re-emerge with a higher bid. A spokesman for Verizon declined to comment, while a Yahoo spokeswoman said the company would not comment “until we have a definitive agreement to announce” because it wanted to maintain “the integrity of the process.” 

How does one monetize this company. It has not for wont of trying, yet they are still a dead pig. Verizon is in the infrastructure business. It has never, and I mean never, demonstrated its ability in content. Look at AOL. Now egos may drive the deal but from a fiduciary duty perspective it should be cash flow. That is currently elusive.

Thursday, July 21, 2016

July 21, 1969

Some 47 years ago today a couple of men landed on the moon. I had the opportunity having worked at MIT Instrumentation Lab to had done a small part in the on board star tracker used for navigation. But instead of  sitting down in our offices watching the event I was at the hospital with one of my children and a salmonella infection. It was an interesting lesson. We managed to get a man, actually two, on the moon, but deadly infections were still running loose in the world.

So what was more important that day; moon landing or a broad spectrum antibiotic? I will let you determine! Just a thought to put things in perspective.

He Doth Protest too Much

We commented on the recent article indicating the almost 80% increase in metastatic prostate cancer and the correlation, not yet a causation, with the ACA and the Government's attempt to control health care costs. Now a representative of one of the institutions which have focused on cancers comes out stating what seem obvious, correlation is not causation, but if it talks like a duck, looks like a duck and walks like a duck, well you get the idea.

The blog piece states:

“This study makes a dramatic claim about an issue all of us have been watching eagerly: namely, whether less PSA screening might lead to more advanced cancers. But the current analysis is far from adequate to answer that question sufficiently"

Well not quite. The article just reported the fact and made no causal claim.  Why the extreme protest? Political ties, funding? Should we follow the money? The author stated:

“We looked at a trend and we reported an observation, but we do not claim to have a causative link.”

Yep, that's all folks. No claim. The blog continues:

In addition, in this study, the rise they detected began before USPSTF guidelines for screening changed. There may or may not be a rise in the rates of metastatic disease; but because of a flawed analysis, this study does not answer that important question. “So why was this unusual study leading to calls? It’s a safe guess that a press release sent to reporters nationwide with a somewhat alarming headline was the reason.

Causative or correlative? The same question can be asked about the above conjecture.

What are the facts. First the USPSTF came out with a recommendation based upon flawed studies, the American and European,  which indicated that PSA testing did not impact mortality. Second the Task Force then stated that PSA testing had no value and should not be done. Third, many Internists, most of whom do not spend their days reading and understanding the literature here, just went along with the recommendation. After all, many of their patients would have to pay out of pocket. Fourth, multiple other recent studies have indicated the flaws in the prime studies as well as having demonstrated a rise in metastatic PCa.

So what should believe? Our own lying eyes or the government experts?

In today's environment, trust in Government experts has dwindled to near zero. All one has to do is look at the current political campaigns. 

Tuesday, July 19, 2016

What's Old is New Again

I remember playing with lasers in the late 60s, we were using them in a laser scanning gyro, an exceptionally accurate and precise mechanism to be used in navigation systems. Mechanical gyros had significant drift and required resetting. The result was in my first paper, co-authored with some pretty bright folks, I was just a tag along as the engineer. Then in the 70s we considered optical inter-satellite links, the 80s we did point to multi-point links, in the 90s I was Chairman of an Israeli company, JOLT, Jerusalem Optical Light Transmission, where we used IR and visible.

Yet whenever you put this stuff in the air with any form of moisture you suffered significant loss.

PCWorld announces another try:


Facebook says it has developed a laser detector that could open the airwaves to new high-speed data communications systems that don't require dedicated spectrum or licenses. The component, disclosed on Tuesday in a scientific journal, comes from the company's Connectivity Lab, which is involved in developing technology that can help spread high-speed Internet to places it currently doesn't reach. Getting Internet signals to new areas is typically done using wireless, because it's much more cost-efficient than running cables to communities outside of urban areas. But traditional wireless comes with speed limitations and requires radio spectrum that often needs to be purchased from the government. Faced with these limitations, engineers have increasingly eyed sending data from point-to-point over laser beams. They don't need any special spectrum or permission, and multiple systems can work in the same area without interfering with each other.

Yep! No license. Never was required. However watch out for water loss and eye damage. Never want one of those pointers poking in your eye.  Most of the above is well known and obvious. It appears however the "new" part is the nature of a distributed receiver. Optical receivers were always a problem. You needed to track a narrow beam, and that was complex. Often we had pigeons sitting on the receiver, just enough stress and strain to off set the beam.

So, all too often the real world comes slamming down on you. One of our biggest problems was the swaying of the old World Trade Center, just enough to lose connections.