Skip to main content

Opening Bell: 6.15.06

Macquarie,Goldman in bid battle for AB Ports (Reuters)
Told ya. Yesterday, when news of the Goldman - AB Ports bid came out, we said two things (go back and check): a) that we could see another bid, and b) that the move was along a similar investment theme as what we've been seeing from Australia's Macquarie Bank. Well, now a consortium led by Macquarie has bid $2.58 bln, slightly higher than the pre-existing Goldman bid. Shareholders seem to have anticipated a bidding war, since they pushed AP Ports shares higher than what Goldman was offering, upon the news. If Goldman fails to win this one, it will be the latest in a string of failures. It's recently lost battles BAA, broadcaster ITV and pub chain Mitchells and Butler. Though the losses may be an embarrassment for the firm, they're probably lucky in that they're avoiding the dreaded Winner's Curse. Put simply, in any bidding war, there are bound to be various estimates for the value of the acquired company. Obviously, the highest estimate (the one most likely to be an over-payment) will win out.
Netscape reborn again as blog-era news site (Reuters)
It doesn't appear to be there yet, but sometime today, is about to get a major web 2.0 makeover. The ageing portal, which has declined along with the eponymous browser, has been redesigned by Weblogsinc head Jason Calacanis, who became part of AOL (Netscape's parent company) last year, upon selling his blog empire. Instead of simply generic news, the new site will employ one of the more irritating practices of the day -- asking users to vote for their favorite articles, etc. For a comparison, check out, which supposedly relies on the so-called wisdom of crowds as opposed to one, centralized editor. However, a quick trip to the site will make you swear off this overused phrase for the last time. That being said, blogmedianewmediavisionaryguru Jeff Jarvis calls Digg the future of newspapers -- lord help us all.
The Most Efficient Policeman (TCS Daily)
This probably won't help any executives who received the "Perfect Payday" (in the words of the Wall St. Journal), but it's worth wondering if there's really anything bad about options backdating. Those people unfortunate enough not to get paid an executive's salary go into violent wrenching when they hear about a CEO being given options at a strike price from the day before a positive approvable letter from the FDA. "That's not fair", they shout, "that's greed". But such an activity makes perfect sense. If you want to reward the CEO for a specific achievement, post factum, it makes sense to backdate -- in fact it's legal if disclosure is done properly. But all the whiners aren't jumping up and down about the lack of disclosure, they're upset that someone who is richer than them appears to have gotten free money. So, what could be a useful incentive tool is likely to be legislated away, only to morph into something less transparent and more fraud like. Can't wait to see what it is.
Falling Short of A+ (NYT)
In the annals of corporate excuse making there have been several classics. Our favorite was when a popular retailer reported soft sales because Shrek 2 opened on the last weekend of the quarter. Weather is always a good one. Dell CEO Kevin Rollins busted out another great one to the Times, explaining why his company had faltered, "We got a little too far ahead on profit, and that allowed competitors to sneak in". Aah, the too-much profit problem, one of the worse curses imaginable. It's clear what he's saying, that their failure to reduce prices gave competitors an entry point, but it still sounds and seems absurd. The company has resisted any semblance of design in their laptops at a time when the computer is becoming a fashion symbol as much as anything else. They've squandered what was once a great reputation for customer support, and they've failed to embrace the hottest chipmaker on the planet, AMD. All off this contributed to their woes at least as much as getting "too far ahead on profit".

How to build your own basement biotech (Business2.0)
With any luck, irrepressible amateur scientists will take to their basements and garages looking for cures the way techies did 30 years ago when they designed microchips and the first PCs. As Paul Kedrosky notes, the equipment for doing biotech research is becoming affordable for the masses, and while most individuals couldn't afford to do long-term trials, or go through an FDA approval process, they may be able to license a patent to a major company. But, if anything, it may not be the costs that will stymie this research, but instead a government that's become afraid of its own citizens who like science. More and more, it's become impossible to buy and simple chemistry set, because little Johnny might burn his hand, or even be a closeted Jihadist. It's just too risky, these days, to let kids explore their interest in science.
Two Big Bets Against the Buck (BusinessWeek)
Among the dollar bears, none are more eminent and respected than Warren Buffett and PIMCO's Bill Gross. You probably didn't need anyone to tell you though that they're not too positive on the Greenback. They're been pessimists for years, and with the market finally showing some real weakness, it's time to revisit their stances. Both of them are concerned about the underlying health of the US economy, and negative trends resulting from the housing bubble, and from the trade deficit. Recall that Buffett had had a significant short position in the dollar, which he closed out at a major loss last year. He hasn't changed his stance though, just his strategy. Instead of attacking the dollar directly, he's taken up position in a variety of non-dollar denominated equities, whose values should rise if their underlying currencies behave well against the dollar. With investors in flight mode all across the globe, it will be interesting to see if they stay in the traditionally safe dollar, or if it really has lost its role as the world's reserve.
A Funny Story Out of Japan (Crossing Wall Street)
If you just read the reports out of Japan about the various scandals that are causing their market to tank, you might not get the full picture. But Eddy Elfenbein offers an analogy that Americans could understand-- Imagine if Jim Cramer had been arrested live on Mad Money for engaging in insider trades while managing Ben Bernanke's money. Let it sink in.
NYSE's Coup Stirs Political Opposition in Europe (NYT)
The Europeans must fear that terrorists lurk within the ranks of the NYSE, for several seem intent on blocking the deal to buy Euronext. Instead, they'd prefer a local company to take it over. One worry among politicians, and companies listed on the Euronext exchange is that the long tentacles of Sarbanes-Oxley might reach across the Atlantic. At least one SEC member has said that wouldn't be an issue. Whether it legally would come up or not, if this deal falls through, or if any other deals to acquire European companies fall through on this account, just chalk it up to the investor-protectin' SarbOx.
At Fannie, Year End Likely Target For Restatement; Director to Quit (WSJ)
Just thought you'd like to know, Fannie Mae promises (for real this time) that they'll restate earnings by the end of this year. That's good, it seemed about time.