Odd. Microsoft bulldozes Netscape in browsers and produces IE, and its various iterations. MSFT has the muscle to make a good browser, no? I mean, it's got the money, the engineers ... but, no.
But let's see what a non-monopolist does. After doing very nicely against Google (see comments), Apple further boosts its browser to improve Javascript performance 300%. Since Apple is fighting to dominate the high-end of low-power devices (phones, etc.), this performance improvement will do great things for the appearance of horsepower on efficient little hardware.
This summer Apple will have a chance to continue a pattern of annual iPhone hardware updates, and in the process may be able to increase battery life, computing power, and a whole bunch of things -- including use of coprocessors to make wee little hardware look butch, to the benefit of Apple's bottom line.
Meanwhile, Microsoft is fighting to make second-tier computational hardware seem good enough if the screen is big.
While the screen on things like this ...
... are 17", the horsepower isn't up to the standard of the sub-$1000 notebook perky "Lauren" dismissed in front of the Apple Store as not meeting her specs. Sure, the cheap-o machine may be good enough for someone ... but for people who want to do what Apple advertises people should be doing with their computers?
Apple's success in selling to the high end is part of how its margins remain high. I think the "buy a PC" ad campaign illustrates how frightened MSFT has become, and is an effort to prevent PC manufacturers from finding a lower-cost operating system now that the margins on PCs have gotten so thin that pre-installed adware means the difference between per-unit profit and loss at high-volume vendors like Dell. Commodity PCs will certainly remain highly-demanded commodities -- but so long as they remain commodities, they won't be a business worth fighting for.
Apple's doing the right thing in sticking with the high end -- in phones as in computers.
But there are other ways to measure value. Cheap MS-OS laptop with 17" screen? $799. Supplying intel to Communist hackers and account information to Russian mobsters? Priceless.
Monday, March 30, 2009
ACAS Completes ECAS Purchase
ECAS has gone private, into the hands of ACAS. This concludes a management-announced deal initiated last year. With the elimination of the ECAS below-NAV market discounts -- because there is no longer a market for ECAS shares, it being private -- and the retirement of over a million ACAS shares in the foreclosure of security posted for a company loan, ACAS' NAV will get a couple of automatic boosts even before the effect of improving comparables prices impacts ACAS' NAV.
I had been very concerned that the dramatic price action (into the toilet) of ACAS over the last quarter might have done something to the shareholders of ECAS and their willingness to consummate the deal. The fact this is done is good news indeed.
I more-than-doubled my position by adding shares at $1.80. My long term take on ACAS is that it continues to be able to more than service its debt, which means that it is not a candidate for being squashed by the sort of liquidity crisis I'd feared last year. The perspective offered by management on the last-quarter conference call in connection with the debt covenants is helpful in appreciating what the company faces in practice. ACAS' ability to benefit from cash generated by ACAS in Europe probaly improves with the ECAS transaction. (Since ECAS never trade above NAV in europe, it never became the vehicle management must have hopes for raising round after round of capital in Europe; thus, its loss as a public entity changes nothing for ACAS except its valuation methodology for ECAS assets.) The per-share price of AGNC, by contrast, has been volatile and seems to exceed last-published NAVs with a certain frequency; AGNC might be a vehicle through which to raise funds under management, and thus management fees.
On the other hand, the current market upswing is surely transitory; the problems facing the country are more significant than to be curable by media appearances or press conferences. As data continue to show suffering, prices in the markets will again reflect suffering. The future will be ugly and bloody, but ACAS will continue to be part of it -- and will continue for the benefit of shareholders to enter good deals on attractive companies.
Caveat emptor . . . .
I had been very concerned that the dramatic price action (into the toilet) of ACAS over the last quarter might have done something to the shareholders of ECAS and their willingness to consummate the deal. The fact this is done is good news indeed.
I more-than-doubled my position by adding shares at $1.80. My long term take on ACAS is that it continues to be able to more than service its debt, which means that it is not a candidate for being squashed by the sort of liquidity crisis I'd feared last year. The perspective offered by management on the last-quarter conference call in connection with the debt covenants is helpful in appreciating what the company faces in practice. ACAS' ability to benefit from cash generated by ACAS in Europe probaly improves with the ECAS transaction. (Since ECAS never trade above NAV in europe, it never became the vehicle management must have hopes for raising round after round of capital in Europe; thus, its loss as a public entity changes nothing for ACAS except its valuation methodology for ECAS assets.) The per-share price of AGNC, by contrast, has been volatile and seems to exceed last-published NAVs with a certain frequency; AGNC might be a vehicle through which to raise funds under management, and thus management fees.
On the other hand, the current market upswing is surely transitory; the problems facing the country are more significant than to be curable by media appearances or press conferences. As data continue to show suffering, prices in the markets will again reflect suffering. The future will be ugly and bloody, but ACAS will continue to be part of it -- and will continue for the benefit of shareholders to enter good deals on attractive companies.
Caveat emptor . . . .
Tuesday, March 24, 2009
AGNC Says Borrowing Getting Cheaper
AGNC recently declared its fourth consecutive dividend (the first of which was a partial-quarter result), while explaining that its cost of leverage has decreased -- suggesting a good future in its leveraged agency-backed portfolio of mortgage assets. AGNC's ACAS-supplied Chief Investment Officer stated this:
I've heard complaints that AGNC's 1Q2009 85¢ dividend represents a "cut". Maybe, maybe not. First, although as a REIT AGNC must pay over 90% of earnings as dividends, AGNC need do this on an annual basis (and, like ACAS, is not obliged to do it on a quarterly basis). Keeping some retained earnings (we'll know more about whether this is the case when we see the 10-Q) is a much cheaper source of investment capital during the year than is borrowing the money (particularly during a credit crunch), and so long as AGNC is making a good return on its NAV, I'd as soon allow AGNC to retain realized earnings as long as it's allowed. Secondly, AGNC didn't have a 1Q2008 dividend to which to compare the recently-announced 1Q2009 85¢ dividend. The 2Q2009 dividend will be compared to a 31¢ partial-quarter dividend in 2Q2008, making comparison difficult. It's my hope that AGNC retains more of what it's allowed (to the extent it can still do so without paying taxes) so that we get the best return on AGNC-held funds.
I think the 4Q2008 dividend was likely a symptom of everyone wanting cash (you, me, and ACAS) during the panic, and AGNC's management consequently paying everything it was allowed to pay (or near it). Now that the panic is subsiding, I think retaining earnings is the more high-yield course for AGNC's shareholders and I applaud it. The news about improved leverage costs and the suggestion that additional business has longevity are all good data to hear.
I'm unsurprised that AGNC's shares are up 25¢ on the news.
I just wish I'd bought again when AGNC dipped below $15 in January ....
We've been able to take advantage of favorable market conditions to diversify away from 100% fixed rate MBS and construct a portfolio that we believe will better position us for today's dynamic market environment. As part of the portfolio adjustments, we were able to generate modest realized gains in the quarter to date.In other words, the portfolio now includes call options the company has written against its government-backed assets, and whenever AGNC gets called it realizes gains (else, it is not called and realizes the options premium). It's possible this effort to "diversify" means something else, but I haven't heard what that might be, so I conclude it's a signal that the success in the second half of last year to realize options premiums on respected portfolio content is continuing to be successful as the market remains concerned about asset quality and AGNC's government-backed portfolio continues to appear attractive to other investors.
-- Gary Kain
I've heard complaints that AGNC's 1Q2009 85¢ dividend represents a "cut". Maybe, maybe not. First, although as a REIT AGNC must pay over 90% of earnings as dividends, AGNC need do this on an annual basis (and, like ACAS, is not obliged to do it on a quarterly basis). Keeping some retained earnings (we'll know more about whether this is the case when we see the 10-Q) is a much cheaper source of investment capital during the year than is borrowing the money (particularly during a credit crunch), and so long as AGNC is making a good return on its NAV, I'd as soon allow AGNC to retain realized earnings as long as it's allowed. Secondly, AGNC didn't have a 1Q2008 dividend to which to compare the recently-announced 1Q2009 85¢ dividend. The 2Q2009 dividend will be compared to a 31¢ partial-quarter dividend in 2Q2008, making comparison difficult. It's my hope that AGNC retains more of what it's allowed (to the extent it can still do so without paying taxes) so that we get the best return on AGNC-held funds.
I think the 4Q2008 dividend was likely a symptom of everyone wanting cash (you, me, and ACAS) during the panic, and AGNC's management consequently paying everything it was allowed to pay (or near it). Now that the panic is subsiding, I think retaining earnings is the more high-yield course for AGNC's shareholders and I applaud it. The news about improved leverage costs and the suggestion that additional business has longevity are all good data to hear.
I'm unsurprised that AGNC's shares are up 25¢ on the news.
I just wish I'd bought again when AGNC dipped below $15 in January ....
Monday, March 23, 2009
Dell Phone Gets Poor Reception
Dell's effort to become the commodity vendor for smartphone hardware hit a snag as carriers greeted it with a yawn. Although Dell's success in low-overhead production has left it consistently at the top of computer hardware unit sales volume, its commodity competition has left it trailing competitors in profit per unit. This setback in expansion beyond general-purpose computing hardware isn't Dell's first. Previously, Dell sought to expand from computer hardware to computer peripherals (like printers) and music players. Dell is a commodity vendor.
The fact that Acer has already beaten Dell to announce commodity smartphone hardware doesn't help Dell in the quest for differentiation or for freedom to price for profit.
This smartphone announcement suggests that Dell is unable to develop available concepts non-commodity hardware business.
The fact that Acer has already beaten Dell to announce commodity smartphone hardware doesn't help Dell in the quest for differentiation or for freedom to price for profit.
This smartphone announcement suggests that Dell is unable to develop available concepts non-commodity hardware business.
A Cop's Cop Car
After hearing about hospitals designed without the input of those who actually take care of hospital patients, and seeing homes built by people who clearly never planned to live in them, The Jaded Consumer is happy to see someone buck the trend. Carbon Motors Corp. has designed a police cruiser with the input of thousands of police officers, to solve the myriad problems associated with the existing converted-from-family-car fleet of police vehicles.
Although they don't confess a particular price, this isn't too surprising: they don't yet have a manufacturing location, either. Presumably the police cars, which are designed to last a quarter of a million miles of police service use, will have a price tag that is designed to be appealing on a per-mile basis even if the per-unit price invites sticker shock. If the cars are safer (resisting collisions and gunfire), they may also improve non-vehicle expense profiles, not to mention morale.
Clean-burning 300HP Diesels with sub-7-sec 0-60 would be a relative novelty in a fully-equipped police car, and the ability to get in and out without adjusting a weapon belt will make it hard to work in anything else after.
Coming to a department near you in 2012, maybe.
Although they don't confess a particular price, this isn't too surprising: they don't yet have a manufacturing location, either. Presumably the police cars, which are designed to last a quarter of a million miles of police service use, will have a price tag that is designed to be appealing on a per-mile basis even if the per-unit price invites sticker shock. If the cars are safer (resisting collisions and gunfire), they may also improve non-vehicle expense profiles, not to mention morale.
Clean-burning 300HP Diesels with sub-7-sec 0-60 would be a relative novelty in a fully-equipped police car, and the ability to get in and out without adjusting a weapon belt will make it hard to work in anything else after.
Coming to a department near you in 2012, maybe.
Oversight Within Federal Offices
With President Obama's prospective Chief Performance Officer out of consideration following concerns about her own performance in making required tax payments, we're left with the question what will be done to cut the fat out of programs that the campaign trail rhetoric suggested would be eliminated as the government increased in transparency and accountability. Apparently, NASA is one place this is needed: its Inspector General reportedly acted to protect reported-on programs rather than to investigate their performance or efficiency.
But is NASA really where it's most needed? NASA's Inspector General Robert Cobb, if he's the oaf he's alleged to be, might be a source of inefficiency and prevent reduction of waste, but he's hardly in a position to save the government most of its lost money. For example, contractors who dutifully perform under cost-plus contracts may have no inefficiency in their performance, but their pre-bid decision to use traditional (costly) methods to achieve objectives may cost NASA millions a year when they decide not to implement novel but proven improvements. (One example here: after each launch, NASA used to have a contractor clean -- for re-coating -- the metal framework from which the Shuttle launches. They long used men with chisels to remove the baked-on insulating mud. When a vendor approached the contractor and demonstrated he could do the job in about a tenth of the time -- and with less damage to the structure, so reducing the need for subsequent repair costs -- using abrasives in a water jet scrubber for an order of magnitude less cost, the NASA contractor sent him packing: on a cost-plus contract, the contractor lost money by finding efficiencies. As long as they kept winning bids, they were best served by gold-plating every possible expense. I have no idea what NASA currently does to prepare these frameworks for re-use, but if they're interested I can tell them who to contact about quick, damage-free water-jet scrubbing for less than a tenth of the cost.)
On the campaign trail, McCain singled out cost-plus contracts as the bane of the Defense Department budget. There may be other problems, but the conflict of interest created by these contracts is so against the interest of the public fisc that effort should be made to contract on some other basis. Not just in DoD or NASA but government-wide.
Perhaps what we need to motivate innovation toward effective use of tax money is an increased private incentive to identify to Congress or an appropriately-empowered official office any ongoing inefficiencies costing the government unecessary funds, or routinely obtaining a substandard result -- and a more visible avenue of expression for this information. At present, individuals can bring a False Claims Act suit to restore fraudulently-taken funds to the federal piggy-bank, but there is much that is waste that isn't within the False Claims Act. Improvement in the ability of citizens to spot and stop waste may be the cheap way to bring the most eyes to the problem, and one way to do it without risking the new watchdogs will simply fall asleep at the kennel door.
But is NASA really where it's most needed? NASA's Inspector General Robert Cobb, if he's the oaf he's alleged to be, might be a source of inefficiency and prevent reduction of waste, but he's hardly in a position to save the government most of its lost money. For example, contractors who dutifully perform under cost-plus contracts may have no inefficiency in their performance, but their pre-bid decision to use traditional (costly) methods to achieve objectives may cost NASA millions a year when they decide not to implement novel but proven improvements. (One example here: after each launch, NASA used to have a contractor clean -- for re-coating -- the metal framework from which the Shuttle launches. They long used men with chisels to remove the baked-on insulating mud. When a vendor approached the contractor and demonstrated he could do the job in about a tenth of the time -- and with less damage to the structure, so reducing the need for subsequent repair costs -- using abrasives in a water jet scrubber for an order of magnitude less cost, the NASA contractor sent him packing: on a cost-plus contract, the contractor lost money by finding efficiencies. As long as they kept winning bids, they were best served by gold-plating every possible expense. I have no idea what NASA currently does to prepare these frameworks for re-use, but if they're interested I can tell them who to contact about quick, damage-free water-jet scrubbing for less than a tenth of the cost.)
On the campaign trail, McCain singled out cost-plus contracts as the bane of the Defense Department budget. There may be other problems, but the conflict of interest created by these contracts is so against the interest of the public fisc that effort should be made to contract on some other basis. Not just in DoD or NASA but government-wide.
Perhaps what we need to motivate innovation toward effective use of tax money is an increased private incentive to identify to Congress or an appropriately-empowered official office any ongoing inefficiencies costing the government unecessary funds, or routinely obtaining a substandard result -- and a more visible avenue of expression for this information. At present, individuals can bring a False Claims Act suit to restore fraudulently-taken funds to the federal piggy-bank, but there is much that is waste that isn't within the False Claims Act. Improvement in the ability of citizens to spot and stop waste may be the cheap way to bring the most eyes to the problem, and one way to do it without risking the new watchdogs will simply fall asleep at the kennel door.
Apple's iPhone Moat
This article argues that Apple is working to broaden the moat around iPhone and to ensure continuation of the rich profits deriving from that platform (the platform including all the iPhones, and also the iPod Touch, which runs the same applications and games but which doesn't make calls). The article has it right: Having taken the lead in (the unsurprisingly connected) mobile development environment and mobile application sales, Apple is working to advance its gains.
Acquisitions that enhance Apple's ability to deliver mobile tech should be paying dividends in the form of improved hardware (and perhaps software compilers), which Apple's developing platform will leverage better than rivals. Rivals aren't apparently prepared to re-allocate on the fly computation instructions from a general computing processor to a graphics-specialized processor or some other onboard coprocessor (DSP?) that might allow Apple's product to achieve user-friendly performance in the face of developing demand (either on lower-powered hardware than competitors, or under greater demand loads than competitors. The ability of Cocoa to offer this to developers, without developers needing to know low-level information about the presence or capabilities of any of the processors that will be present in a particular user's configuration, makes Apple's platform particularly attractive to developers -- they will be safe from future platform hardware development even as Apple is free to migrate hardware in the direction dictated by performance and price.
Apple's developing freedom in hardware will offer a lasting advantage over rivals whose software is tweaked for specific hardware and whose applications cannot run without the specific computation instructions supported by the particular hardware for which the application was written. Rivals will have terrible migration pains as platforms attain obsolescence (or will suffer in bake-offs as rival hardware becomes distinctly superior), whereas Apple will be largely able to sail smoothly -- with its developers' applications intact -- into whatever hardware makes the best business case for release.
Although this is hypothetically a performance advantage, it opens choices that ensure a profit advantage. If Apple doesn't get a handle on security, it'll need it!
Acquisitions that enhance Apple's ability to deliver mobile tech should be paying dividends in the form of improved hardware (and perhaps software compilers), which Apple's developing platform will leverage better than rivals. Rivals aren't apparently prepared to re-allocate on the fly computation instructions from a general computing processor to a graphics-specialized processor or some other onboard coprocessor (DSP?) that might allow Apple's product to achieve user-friendly performance in the face of developing demand (either on lower-powered hardware than competitors, or under greater demand loads than competitors. The ability of Cocoa to offer this to developers, without developers needing to know low-level information about the presence or capabilities of any of the processors that will be present in a particular user's configuration, makes Apple's platform particularly attractive to developers -- they will be safe from future platform hardware development even as Apple is free to migrate hardware in the direction dictated by performance and price.
Apple's developing freedom in hardware will offer a lasting advantage over rivals whose software is tweaked for specific hardware and whose applications cannot run without the specific computation instructions supported by the particular hardware for which the application was written. Rivals will have terrible migration pains as platforms attain obsolescence (or will suffer in bake-offs as rival hardware becomes distinctly superior), whereas Apple will be largely able to sail smoothly -- with its developers' applications intact -- into whatever hardware makes the best business case for release.
Although this is hypothetically a performance advantage, it opens choices that ensure a profit advantage. If Apple doesn't get a handle on security, it'll need it!
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