November 25, 2006

Indians Borrow to Buy IPOs

posted by MR WAVETHEORY at 11/25/2006 06:41:00 AM

The Telegraph reports that IPO frenzy has hit India. Indians are borrowing money from banks to buy IPOs.

At present, 50 per cent in an IPO is earmarked for qualified institutional investors (QIBs) and 35 per cent for retail investors while 15 per cent is reserved for HNIs.

Investors in the HNI category are the ones who heavily rely on bank funds to subscribe to IPOs. Capital market circles say though retail investors also resort to bank funding, the scale is limited. “Most of the leveraging is done by investors who fall in the 15 per cent category. Therefore, the impact of the RBI draft norms may be felt only in that category. Overall, they will not hurt new issues,” says Prithvi Haldea of Prime Database.

This sounds alot like the dot com IPO feeding frenzy.

“The people who normally go for bank financing could be executives, traders, doctors, lawyers or even brokers,” an analyst said. He added such IPO finance is usually available at an interest rate of 15 per cent. Haldea says such investors account for 5 to 6 per cent within the HNI section.

15% is quite a high rate. The returns have got to be a lot higher to justify this type of borrowing.

Site Offers Online Counseling for Teens

posted by MR WAVETHEORY at 11/25/2006 06:36:00 AM
Teenagers are going online for counseling. A community service organization in Singapore set up a website and has attracted over 3400 users.

A youth portal that has counsellors keeping a watchful eye on online activities is proving a hit among teenagers.

Since it was started two years ago, the portal eGen ( — short for "electronic generation" — has grown from 1,500 users last year to 3,450 now.

Set up by a youth centre under Fei Yue Community Services, the portal offers users, aged between 13 and 25 years old, an online platform where they can talk, vent and rant.

Said 15-year-old Joanna Soon: "When you get into the family of eGen, you get to know the regular bloggers, and although you don't know them personally, they help you with your problems, not like those on other chat boards, who can be perverts."

She first started using eGen last year after hearing about it in a school assembly session.

Initially she joined in on general topics, such as what she did during the holidays and to ask for shopping tips.

Once the trust is established, she moved on to bigger problems, like boy-girl relationships — a topic she is reluctant to share with her parents or teachers.

"Parents might not really understand you, even though they have gone through all of that," she said, adding that a teacher once told her mother about her problems with a boy after she had confided in her. "I didn't trust her after that."

Within eGen — one of SingTel's Touching Lives Fund beneficiaries this year — she finds a protective environment where moderators can step in if there is abuse.

"You get solutions and you can choose from there what you think will help. On the other blogging sites, a lot of people can spam you. But it's more controlled and safer on eGen," she said.

According to Ms Joyz Tan, social worker and publicity coordinator with eGen, the portal runs about 15 counselling sessions a week on average.

"Online counselling is an alternative resource to face-to-face counselling for Internet-savvy youth and young adults who may be embarrassed to seek counselling face-to-face," she said.

November 24, 2006

Dubai Financial Market Going Public

posted by MR WAVETHEORY at 11/24/2006 10:43:00 AM
After catching lightning in a bottle with Nymex Holdings, Inc. (NYSE NMX), investors around the world are catching IPO fever for financial exchanges. IPOs of stock changes like Nasdaq Stock Market, Inc. (Nasdaq NDAQ) and Chicago Mercantile Exchange Holdings (Nasdaq CME) are not only hot in the US. Even Middle Eastern investors are catching the financial exchange bug. Dubai Financial Market closed its IPO yesterday.

Dubai Financial Market's (DFM) Dh1.6 billion initial public offering (IPO) closed the subcription window for a $435 million IPO which is roughly the same size as the $441 million Nymex Holdings IPO. Latest information available from investment bankers suggest that the issue will be subscribed more than 50 times while the public tranche of the issue is likely to be oversubscribed more than 150 times.

The multiple on DFM is much lower than the multiple on Nymex, At its offer price of Dh1 per share, the DFM IPO is priced at a price-earnings multiple of 6.38 to its 2005 earnings and 9.88 times to its forecast 2007 earnings. The overall market trades at a trailing price-earnings multiple of nearly 14. Nymex trades at 80x trailing twelve months earnings.

China Communications Services Plans 2.5 billion IPO

posted by MR WAVETHEORY at 11/24/2006 10:42:00 AM
Investing in China is the theme these days. China Telecom subsidiary China Communications Services plans to offer 1.29 billion shares at HKD 1.56-1.96 each in an initial public offering (IPO) in Hong Kong, according to the company's preliminary prospectus, cited by newsagency XFN. The integrated provider to telecommunication support services is expected to raise up to HKD 2.53 billlion. Its clients include five mainland telecommunications operators, namely China Telecom, China Mobile, China Unicom, China Netcom and China Railcom.

The company plans to use 50 percentof the IPO's net proceeds for capital expenditure over the next two year, including 20 percent for the purchase of testing and construction equipment for design, construction, project supervision and management businesses, 15 percent for the purchase of simulation and testing systems, 10 percent for 3G technology development and the other 5 percentct on upgrading its existing premises. Some 40 percent of the net proceeds will be used for selective acquisitions from China Telecom Group and other strategic investments, while the remaining 10 percent will be used for general working capital.

The Transparent Refrigerator

posted by MR WAVETHEORY at 11/24/2006 10:40:00 AM

Lisa Katayama who writes for Wired blogs about some interesting transparent refrigerators.

Magazine Ads Grow 1.9% in October 2006

posted by MR WAVETHEORY at 11/24/2006 09:07:00 AM
In a sign that the death of magazines was a death inaccurately foretold, magazine ads grew 1.9% in October 2006 to $2.3 billion. The Magazine Publishers of America noted particularly strong growth in retail ads in a recent report.

According to Publishers Information Bureau (PIB), total magazine rate-card-reported advertising revenue for the month of October increased 1.9% compared to the same month last year, closing at $2,391,918,204, Ad pages totaled 24,313.22, at -1.2% against October 2005. From January through October, PIB revenue closed at $19,336,025,648, an increase of 4.1% over the same period in 2005, with ad pages totaling 197,854.97, gaining 0.4% over the previous year.

Retail showed the biggest increases in 2006 versus last October, posting a 36% increase in PIB revenue and 26.3% in pages.

October 2006 Ad Pages, Dollars and Change From 2005

Class Name

2006 Dollars


2006 Pages






























































Data as of November 6th, 2006

To date in 2006, eight categories saw PIB revenue and page gains versus the comparable period last year. The Drugs & Remedies and Retail categories registered double-digit growth.

January-October 2006 Ad Pages, Dollars and Change From 2005

Class Name

2006 Dollars


2006 Pages






























































Data as of November 6th, 2006

Ellen Oppenheim, EVP/Chief Marketing Officer, Magazine Publishers of America, said "Retail, which rose significantly in October, has been one of the most consistent performers this year, registering PIB revenue and page gains in seven out of ten months..."

Online Black Friday Shoppers Mostly Female Aged 25-34

posted by MR WAVETHEORY at 11/24/2006 06:31:00 AM
Hitwise recently announced that the market share of US Internet visits for the top five Black Friday advertising websites increased 167 percent for the week ending November 11, 2006 versus the same week last year. The websites showing the strongest growth were, up 456 percent and The Black Friday, up 425.

Black Friday is the nick name given to the day after Thanksgiving in the United States and the "official" kickoff to the Christmas shopping season. "Black Friday" was originally an inside term amongst retailers, as that was the day their books went from the red to the black. It consists of a combination of people being in the Holiday mood following Thanksgiving, and stores offering tremendous bargains on a number of items for a couple of hours. This year's sale falls on November 24th, and most "door buster" offers run from 6am-11am, while others run throughout the weekend.

The Black Friday advertising website receiving the largest market share of US Internet visits for the week ending November 11, 2006, was Black Friday Advertisements which received 37.65 percent of US Internet visits to the top five Black Friday sites. Black Friday @ was the second, followed by Black

Hitwise Clickstream data show that each of the five Black Friday sites sent more than 50 percent of downstream traffic to websites in the Hitwise Shopping and Classifieds category, suggesting that users are finding deals on the Black Friday sites and then linking to retailer websites for more information.


Market Share

Percent of Downstream Traffic to Shopping & Classifieds Websites

Black Friday Advertisements



Black Friday @ GottaDeal







Black Friday Ads



Source: Hitwise

Note: Data based on market share of visits for the week ending 11/11/06 from a sample of 10 million US Internet users

LeeAnn Prescott, research director, Hitwise, said "Consumers have clearly caught on to the idea of planning their Black Friday shopping by using the Black Friday websites to find the best deals for holiday gifts..."

Visitors to the Black Friday advertising websites were predominantly females aged 25-34, according to Hitwise. For the four week ending November 11, 2006,

* 67% of visitors to Black Friday @ GottaDeal were female
* 60% to
* 65% to,
* 56% to
* 62% to The Black Friday

Visitors between the ages of 25 and 34 were largest age group for visitors to,, Black Friday @, and, comprising between 36 and 41 percent of visits for the four weeks ending November 11, 2006.

The Black Friday website had 38 percent of its visits coming from those aged 18-24, and only 31 percent of visitors age 24-34.

November 23, 2006

New York Attorney General Eliot Spitzer Sues Hedge Fund

posted by MR WAVETHEORY at 11/23/2006 05:58:00 AM
The financial community's favorite crime fighter, Eliot Spitzer, is at it again. This time Spitzer is going after hedge fund Samaritan Asset Management for market timing.

Spitzer began investigating Samaritan Asset Management in 2003 as part of a wider market timing probe.

Though not illegal, market timing, trading to exploit short-term price difference, is prohibited in a mutual fund because of its detriment to long-term shareholder value.

A high-profile example of market timing occurred when hedge fund Canary Capital traded in and out of the Strong Financial mutual fund complex in an agreement with Strong Financial founder Richard Strong, who was barred from the investment industry in 2003 as a result of his role in market timing his own fund company.

Along with Samaritan Asset Management, Spitzer in his 2003 subpoena named Haidar Capital and Trout Trading Fund for engaging in market timing. The lawsuit alleged Samaritan Asset Management "piggybacked" trading on mutual-fund clientele of retirement plan provider Security Trust Co. The hedge fund and Johnson Capital engaged in "flying under the radar" to skirt monitoring. Johnson Capital and STC, according to the complaint, varied the trading to avoid mutual fund monitoring.

Management at Arizona-based STC has already admitted complicity in the market timing scheme.

As New York Attorney General, Spitzer has become known for prosecuting white-collar crime in the financial industry in particular. He was elected governor of New York Nov. 7.

November 22, 2006

Where to Find OJ Simpons "If I Did It"?

posted by MR WAVETHEORY at 11/22/2006 03:22:00 PM
That is the question for today. Out of curiosity more than any interest in actually reading the book, I spent the morning hunting for OJ Simpson's "If I Did It" at the SFO airport, because it is a well known fact that most airport bookstores don't respect the embargo for book releases. The book was no where to be found at least at SFO. Irregardless of the morality or ethics of the book, I wouldn't be suprised if OJ Simpson's "If I Did It" starts selling for hundreds of dollars on eBay. If you manage to find this collector's item, I'd love to hear about it. Please post a comment.

November 21, 2006

Nymex Should Go Up a Couple Handles Tomorrow

posted by MR WAVETHEORY at 11/21/2006 04:14:00 PM
Nymex Holdings, Inc. (NYSE NMX) just announced the launch of 24 7 Electronic Trading via Chicago Mercantile Exchange (Nasdaq CME). This will add some zest to the stock tomorrow and send it up a few handles before the holidays. As I mentioned in my post "The Nymex IPO - Why Nymex Holdings Is Worth $500", "Chances are I think the story gets better with Nymex because Nymex is not even close to being a fully electronic exchange. With electronic trading, volume will skyrocket and profits with it." Simply observing the oligopolistic behaviour of these exchanges shows you that the profits in the sector will only rise. These exchanges know it's not good to compete and fragment liquidity, because liquidity is the lifeblood of an exchange. Rather than competing with CME, Nymex is partnering with them, and it's very good for shareholders.

Thomas Lee Planning $400M Hedge Fund IPO

posted by MR WAVETHEORY at 11/21/2006 08:56:00 AM
Thomas H. Lee is planning to raise $400 million for an initial public offering of a hedge fund. The planned offering, a fund-of-funds named Lee Diversified, would launch sometime in early 2007.

"We plan on marketing the fund in the new year and we are quite optimistic," Lee told Bloomberg.

Lee said he had planned to float the fund at the end of this year but "the entire process has taken somewhat longer than we had originally foreseen."

His announcement followed word of the $2 billion hedge fund IPO at Marshall Wace. MW on Nov. 13 became the second fund to list on Euronext in November. Boussard & Gavaudan raised a $520 million multi-strategy offering Nov. 1.

Billionaire Lee became a household name in 1992 with his takeover and subsequent $1.7 billion sale of Snapple Beverage Co.

The 62-year-old Lee in March stepped down from Thomas H. Lee Partners, the Boston-based private equity firm he founded in 1974, to expand Thomas H. Lee Capital Management, his hedge fund company. Blue Star I, the Thomas H. Lee Capital flagship, has returned 22.1% annually. The company has $1.9 billion under management.

November 20, 2006

Is There an Indian Equity Bubble? Infosys' Mega Secondary

posted by MR WAVETHEORY at 11/20/2006 09:49:00 PM
Infosys Technologies Limited (ADR) (NYSE INFY) just did a $1.6 billion secondary.

Infosys Technologies Limited (Nasdaq:INFY - News) announced the pricing of its sponsored secondary offering of 30,000,000 American Depositary Shares (ADSs), representing 30,000,000 equity shares (one equity share represents one ADS) at a price of US$53.50 per ADS excluding underwriting discounts and commissions. The aggregate size of the offering exceeds US$1.6 billion.

The most important line in the press release

Infosys will not receive any proceeds of this offering and the net proceeds after the offering expenses will be distributed to the selling shareholders within 30 days of the closing of the offering.

That's alot of selling shareholders.

The Nymex IPO - Why Nymex Holdings Is Worth $500

posted by MR WAVETHEORY at 11/20/2006 08:37:00 AM
Nymex Holdings Inc. goes public on NYSE.

The Nymex Holdings, Inc. IPO (NYSE NMX) is one of the most successful this year. Investors who bought it want to know: Can it go higher? Investors who don't own it want to know: Can I buy it lower? Let's cut to the chase. We all know we have a bubble in financial exchange stocks. The question is: Is this the beginning or the end of a bubble? I think we're at the beginning of a bubble and to settle this question once and for call, I am making a Henry Blodget type call. My price target for Nymex: $500.

A Dotcom B2b Exchange Story
My personal favorite bubble stock was CommerceOne. This little bugger went from next to nothing to $1000 per share based on its B2B exchange technology. CommerceOne had contracts with GM to build a hub for doing something. Something turned out to be nothing - particularly useful that is. It had eyeballs. It had customers, but no profits to speak of. Yet, the stock kept climbing day after day. Soon enough, this miscreant had climbed to $1000 based on what? A B2B exchange story, pure and simple. There were financial models built to support the $1000 stock price, but no actual financials to support it.

The Nymex Exchange Story
I'm happy to report that the story behind Nymex is better than the one behind CommerceOne. In fact, in addition to customers, Nymex has this special thing called revenues. It's even got profits. Nice huh? Yeah. In fact, revenues were $314 million in the 9 months ended September 2006 vs $204 million in the same period in 2005. That's a healthy growth rate of 53% that any company would die for. But get this, profits grew from $50 million to $112 million - more than doubling. So, you ask, why will this $12 billion exchange be potentially worth $60 billion?

Why Nymex is really worth $500 per share
I believe that the profits are way under optimized at the Nymex. If you look at the full year data below, you'll see that profits at Nymex have tripled every year for the last 3 years.

FY Profits
2005 $71.1 million
2004 $27.3 million
2003 $8.8 million

If Nymex doubles earnings for the next three years, it will earn close to $560 million in profits in 2008, $280 million in 2007 vs $140 million in 2006. Given the grow rate of earnings of 100% per year, one could argue that the P/E ratio should be 100. Place a 2008 P/E ratio of 100 on that $560 million profit number, and you arrive at $56 billion valuation. Today, Nymex is worth $12 billion. In the future, Nymex is worth $650 per share.

You may be questioning my logic. If so, then assume that Nymex grows earnings by 100% between 2006 and 2007 and then 50% between 2007 and 2008. Then, earnings will reach $420 million by 2008, $280 million in 2007, and $140 million in 2006. Apply a P/E of 75 on that 2008 number and you get a $31.5 billion market capitalization. That's still 2.6 times the current price of $12 billion. That's $341.25 per share.

Average the two numbers $650 and $341.25 and you get $446.875. Round it up to the nearest whole hundred dollar figure for ease of comprehension and you get $500.

Chances are I think the story gets better with Nymex because Nymex is not even close to being a fully electronic exchange. With electronic trading, volume will skyrocket and profits with it.

Shortage of Nymex Shares
The Nymex IPO was massly oversubscribed for a reason. I just gave you the reason based on a financial analysis of the business. Now, I will give you the speculator's reason based on supply and demand. Understand that only 6.5 million shares of Nymex were issued during the IPO. If you add up all the 10,000 hedge funds out there that want a piece of this story with the tens of thousands of mutual funds that need to own some financial exchange, that makes for quite a bit of demand for a stock like Nymex. In fact, let's take that 10,000 hedge fund number. If each of those hedge funds bought 1000 shares of Nymex, then there would be a massive shortage of shares. In fact, there would be a shortage of 3.5 million shares.

Is 3.5 million shares significant? Sure it is. When a hedge fund buys shares, it's got to do something for the performance of the fund. The reality is that 1000 shares is just $130,000. In order to make any difference, most funds would have to buy closer to 10,000 shares of Nymex or $1.3 million. Now, the story gets interesting doesn't it?

If each hedge fund bought 10,000 shares of stock, we're talking about demand of 100 million shares of stock. We're talking about a supply imbalance of 93.5 million shares of stock. Supply is 6.5 million shares and demand is 100 million.

I think we have a long ways up to go before we hit the top on Nymex.

Why $500?
I chose $500 as the magic number because that is half way between $1000 and $0. I assume there are 50% odds that the stock goes to $1000 and there are 50% odds that the stock goes to $59. Round it to the nearest hundred dollars. $500.

Nymex Holdings is a must own stock. Here's some food for thought.

1) Before you go out buying Nymex, understand that exchange stocks like Nymex are in a bubble. However, this is a different type of bubble. It is a fundamentally driven bubble. Nymex has very strong financials that any company would envy. In this particular way, Nymex is very different from an internet stock.

2) Because there is a bubble, only buy it for non retirement accounts. In fact, I don't think anyone should use retirement money to buy exchange stocks because they could gain or lose 10 or 20% in a single day. In this particular sense, they are very similar to Internet stocks.

3) If you buy Nymex, expect volatility. In fact, I wouldn't be surprised if the market makers decide to bring this stock down so they can load up. After all, it's about buying low and selling high. So, plan appropriately. Buy in small lots and a few shares at a time.

Former KGB Spy Poisoned at Sushi Bar

posted by MR WAVETHEORY at 11/20/2006 07:10:00 AM
Meet the Bond sushi girls at Itsu.
All things Bond, James Bond, that is, are hot. I had to post this when I read it. This one is straight out of a James Bond movie. A former KGB spy and his contact were meeting at a hip sushi bar in London called Itsu when someone slipped into his sushi some thallium, apparently a very toxic metal.

A former Russian spy who is fighting for his life in a London hospital after being poisoned with the toxic metal thallium was targeted because he was an "enemy of Vladimir Putin", friends said yesterday.

Doctors treating Alexander Litvinenko, who defected to Britain six years ago, believe he has a 50/50 chance of survival and faces a critical three weeks, according to the exiled Russian tycoon Boris Berezovsky, who visited Mr Litvinenko in hospital at the weekend.

Scotland Yard has launched an inquiry into the "suspicious poisoning" of the former KGB officer, which allegedly took place at a sushi bar in Piccadilly, west London, at the beginning of the month. Mr Litvinenko had been meeting a contact offering him information about the murder of Anna Politkovskaya, the Russian journalist and critic of the Kremlin who was assassinated in October.

Thallium attacks the central nervous system by displacing potassium, which is vital for nerves to function. A quarter of a teaspoon is a fatal dose for an adult.

The sushi looks delicious. But wait, it might be laced with thallium.

What do the chefs at Itsu have to say about their sushi?

Itsu's operations director, Glenn Edwards, said: "Its James Bond territory, isn't it? It was 3 o'clock in the afternoon three weeks ago, and two individuals sitting in the corner wouldn't have been noticed - our shop at Piccadilly serves 8,000 people a week - we've no idea what could have happened between them." Associates say Mr Litvinenko, 43 and described as a fit man, has been unable to eat for nearly three weeks because his stomach and tongue were affected by the poisoning. Mr Goldfarb, who visited him yesterday, said: "He looks like a cancer patient who has undergone heavy chemotherapy. He's lost his hair, his eyes are bloodshot and he can't speak properly."

It maybe safer to sit at the bar next time - to keep an eye on the sushi chef.

Itsu looks like a very hip bar. Bring your wallt. Lunch for two will set you back 45 pounds.

Yahoo! Inc. : The Peanut Butter Manifesto

posted by MR WAVETHEORY at 11/20/2006 06:49:00 AM
Brad Garlinghouse from Yahoo! Inc. (Nasdaq YHOO) is calling for an overhaul.

Yahoo Memo: The 'Peanut Butter Manifesto'
by Brad Garlinghouse

Three and half years ago, I enthusiastically joined Yahoo! The magnitude of the opportunity was only matched by the magnitude of the assets. And an amazing team has been responsible for rebuilding Yahoo!

It has been a profound experience. I am fortunate to have been a part of dramatic change for the Company. And our successes speak for themselves. More users than ever, more engaging than ever and more profitable than ever!

I proudly bleed purple and, yellow everyday! And like so many people here, I love this company

But all is not well. Last Thursday's NY Times article was a blessing in the disguise of a painful public flogging. While it lacked accurate details, its conclusions rang true, and thus was a much needed wake up call. But also a call to action. A clear statement with which I, and far too many Yahoo's, agreed. And thankfully a reminder. A reminder that the measure of any person is not in how many times he or she falls down - but rather the spirit and resolve used to get back up. The same is now true of our Company.

It's time for us to get back up.

I believe we must embrace our problems and challenges and that we must take decisive action. We have the opportunity - in fact the invitation - to send a strong, clear and powerful message to our shareholders and Wall Street, to our advertisers and our partners, to our employees (both current and future), and to our users. They are all begging for a signal that we recognize and understand our problems, and that we are charting a course for fundamental change, Our current course and speed simply will not get us there. Short-term band-aids will not get us there.

It's time for us to get back up and seize this invitation.

I imagine there's much discussion amongst the Company's senior most leadership around the challenges we face. At the risk of being redundant, I wanted to share my take on our current situation and offer a recommended path forward, an attempt to be part of the solution rather than part of the problem.

Recognizing Our Problems

We lack a focused, cohesive vision for our company. We want to do everything and be everything -- to everyone. We've known this for years, talk about it incessantly, but do nothing to fundamentally address it. We are scared to be left out. We are reactive instead of charting an unwavering course. We are separated into silos that far too frequently don't talk to each other. And when we do talk, it isn't to collaborate on a clearly focused strategy, but rather to argue and fight about ownership, strategies and tactics.

Our inclination and proclivity to repeatedly hire leaders from outside the company results in disparate visions of what winning looks like -- rather than a leadership team rallying around a single cohesive strategy.

I've heard our strategy described as spreading peanut butter across the myriad opportunities that continue to evolve in the online world. The result: a thin layer of investment spread across everything we do and thus we focus on nothing in particular.

I hate peanut butter. We all should.

We lack clarity of ownership and accountability. The most painful manifestation of this is the massive redundancy that exists throughout the organization. We now operate in an organizational structure -- admittedly created with the best of intentions -- that has become overly bureaucratic. For far too many employees, there is another person with dramatically similar and overlapping responsibilities. This slows us down and burdens the company with unnecessary costs.

Equally problematic, at what point in the organization does someone really OWN the success of their product or service or feature? Product, marketing, engineering, corporate strategy, financial operations... there are so many people in charge (or believe that they are in charge) that it's not clear if anyone is in charge. This forces decisions to be pushed up - rather than down. It forces decisions by committee or consensus and discourages the innovators from breaking the mold... thinking outside the box.

There's a reason why a centerfielder and a left fielder have clear areas of ownership. Pursuing die same ball repeatedly results in either collisions or dropped balls. Knowing that someone else is pursuing the ball and hoping to avoid that collision - we have become timid in our pursuit. Again, the ball drops.

We lack decisiveness. Combine a lack of focus with unclear ownership, and the result is that decisions are either not made or are made when it is already too late. Without a clear and focused vision, and without complete clarity of ownership, we lack a macro perspective to guide our decisions and visibility into who should make those decisions. We are repeatedly stymied by challenging and hairy decisions. We are held hostage by our analysis paralysis.

We end up with competing (or redundant) initiatives and synergistic opportunities living in the different silos of our company.
• YME vs. Musicmatch

• Flickr vs. Photos

• YMG video vs. Search video

• vs. myweb

• Messenger and plug-ins vs. Sidebar and widgets

• Social media vs. 360 and Groups

• Front page vs. YMG

• Global strategy from BU'vs. Global strategy from Int'l

We have lost our passion to win. Far too many employees are "phoning" it in, lacking the passion and commitment to be a part of the solution. We sit idly by while -- at all levels -- employees are enabled to "hang around". Where is the accountability? Moreover, our compensation systems don't align to our overall success. Weak performers that have been around for years are rewarded. And many of our top performers aren't adequately recognized for their efforts.

As a result, the employees that we really need to stay (leaders, risk-takers, innovators, passionate) become discouraged and leave. Unfortunately many who opt to stay are not the ones who will lead us through the dramatic change that is needed.

Solving our Problems

We have awesome assets. Nearly every media and communications company is painfully jealous of our position. We have the largest audience, they are highly engaged and our brand is synonymous with the Internet.

If we get back up, embrace dramatic change, we will win.

I don't pretend there is only one path forward available to us. However, at a minimum, I want to be pad of the solution and thus have outlined a plan here that I believe can work. It is my strong belief that we need to act very quickly or risk going further down a slippery slope, The plan here is not perfect; it is, however, FAR better than no action at all.

There are three pillars to my plan:

1. Focus the vision.

2. Restore accountability and clarity of ownership.

3. Execute a radical reorganization.

1. Focus the vision

a) We need to boldly and definitively declare what we are and what we are not.

b) We need to exit (sell?) non core businesses and eliminate duplicative projects and businesses.

My belief is that the smoothly spread peanut butter needs to turn into a deliberately sculpted strategy -- that is narrowly focused.

We can't simply ask each BU to figure out what they should stop doing. The result will continue to be a non-cohesive strategy. The direction needs to come decisively from the top. We need to place our bets and not second guess. If we believe Media will maximize our ROI -- then let's not be bashful about reducing our investment in other areas. We need to make the tough decisions, articulate them and stick with them -- acknowledging that some people (users / partners / employees) will not like it. Change is hard.

2. Restore accountability and clarity of ownership

a) Existing business owners must be held accountable for where we find ourselves today -- heads must roll,

b) We must thoughtfully create senior roles that have holistic accountability for a particular line of business (a variant of a GM structure that will work with Yahoo!'s new focus)

c) We must redesign our performance and incentive systems.

I believe there are too many BU leaders who have gotten away with unacceptable results and worse -- unacceptable leadership. Too often they (we!) are the worst offenders of the problems outlined here. We must signal to both the employees and to our shareholders that we will hold these leaders (ourselves) accountable and implement change.

By building around a strong and unequivocal GM structure, we will not only empower those leaders, we will eliminate significant overhead throughout our multi-headed matrix. It must be very clear to everyone in the organization who is empowered to make a decision and ownership must be transparent. With that empowerment comes increased accountability -- leaders make decisions, the rest of the company supports those decisions, and the leaders ultimately live/die by the results of those decisions.

My view is that far too often our compensation and rewards are just spreading more peanut butter. We need to be much more aggressive about performance based compensation. This will only help accelerate our ability to weed out our lowest performers and better reward our hungry, motivated and productive employees.

3. Execute a radical reorganization

a) The current business unit structure must go away.

b) We must dramatically decentralize and eliminate as much of the matrix as possible.

c) We must reduce our headcount by 15-20%.

I emphatically believe we simply must eliminate the redundancies we have created and the first step in doing this is by restructuring our organization. We can be more efficient with fewer people and we can get more done, more quickly. We need to return more decision making to a new set of business units and their leadership. But we can't achieve this with baby step changes, We need to fundamentally rethink how we organize to win.

Independent of specific proposals of what this reorganization should look like, two key principles must be represented:

Blow up the matrix. Empower a new generation and model of General Managers to be true general managers. Product, marketing, user experience & design, engineering, business development & operations all report into a small number of focused General Managers. Leave no doubt as to where accountability lies.

Kill the redundancies. Align a set of new BU's so that they are not competing against each other. Search focuses on search. Social media aligns with community and communications. No competing owners for Video, Photos, etc. And Front Page becomes Switzerland. This will be a delicate exercise -- decentralization can create inefficiencies, but I believe we can find the right balance.

I love Yahoo! I'm proud to admit that I bleed purple and yellow. I'm proud to admit that I shaved a Y in the back of my head.

My motivation for this memo is the adamant belief that, as before, we have a tremendous opportunity ahead. I don't pretend that I have the only available answers, but we need to get the discussion going; change is needed and it is needed soon. We can be a stronger and faster company - a company with a clearer vision and clearer ownership and clearer accountability.

We may have fallen down, but the race is a marathon and not a sprint. I don't pretend that this will be easy. It will take courage, conviction, insight and tremendous commitment. I very much look forward to the challenge.

So let's get back up.

Catch the balls.

And stop eating peanut butter.

Barron's Weekend Headline Summary - November 20, 2006

posted by MR WAVETHEORY at 11/20/2006 05:47:00 AM

Requiem for Floor Traders
The modernization of the NYSE is good news for investors. But for floor
traders, the writing's on the wall: It won't be long before computers
make them obsolete.
Companies Mentioned: NYSE Group, Inc. (NYSE NYX), Chicago Mercantile Exchange Holdings (Nasdaq CME), CBOT Holdings, Inc. (NYSE BOT), LaBranche & Co., Inc. (NYSE LAB), Van der Moolen N.V. ADR (NYSE VDM), Nasdaq Stock Market Inc. (Nasdaq NDAQ), Knight Capital Group Inc. (Nasdaq NITE)
Losing the Magic?
Leading U.S. mortgage-insurer MGIC is standing on shaky ground.

Companies Mentioned: MGIC Investment Corp. (NYSE MTG)
The Buck Won't Stop Here
The U.S. dollar will strengthen against other currencies in coming

Companies Mentioned: CurrencyShares Euro Trust (NYSE FXE)
World View
David and Lyric Hughes Hale are a power couple with insights on the
global economy -- and the challenges ahead for the U.S.

The End of Hunger
The USDA waves its magic wand. Fair warning: Everything is back to
normal. Too many bulls.

Companies Mentioned: iShares Dow Jones US Financial (ETF) (NYSE IYF)

Buying Bonanza The indexes climb as money managers vie to get in on year-end action.

Companies Mentioned: US Airways, US Steel, Verizon Communications, Idearc, RH Donnelly, Yahoo! Inc., Google Inc., Consumer Discretionary Select SPDR Fund, Clear Channel Communications, Reader's Digest Association.

Singapore Swing
Its market could get knocked if U.S. growth drops. But there are still
positive equity plays.

Companies Mentioned: Singapore Fund (NYSE SGF), iShares MSCI Singapore Index Fund (ETF) (NYSE EWS), Captandum, Kelpie Land, City Developments Limited (SIN:C09), Kelpie Corp, Memory Devices Limited (SIN: M45)