Filed under: Deals, Rumors, Management, Rants and raves, Competitive strategy, JPMorgan Chase (JPM), Washington Mutual (WM), Wells Fargo (WFC)

Yesterday, wearing my investor hat, developer hat, architect’s hat, business owner’s hat and strategic thinking cap, I wrote about the various scenarios that might make sense for either J. P. Morgan Chase & Co. (NYSE: JPM) or Wells Fargo & Company (NYSE: WFC) to acquire Washington Mutual, Inc. (NYSE: WM).

Giving this further thought and drawing on some of how this could play out from yesterday’s post I am wondering why this possible deal is not turning to frenzy. Perhaps all the parties are just playing hard to get. Maybe JPM and WFC have proved to be superior navigators than most other big financial companies and that they fear being shipwrecked on the rocks of a Washington Mutual.

If I’m Chase management, this deal makes too much sense to let pass. Adding WaMu’s west coast footprint advances Chase goals in a fraction of the time it would take to build out a comparable branch network and at great savings. Add in the customers base and service operations minus all the overlapping departments and this is a winner. All that needs to be done is get to the bottom line and do the deal. Bankers should understand the time value of money and get on with it.

The opportunity for Chase is very clear. Wells on the other hand might feel that more organic growth and more methodical steps is the prudent path to continued success. That is perfectly understandable, but might be overly cautious in a very competitive environment. You either move forward or backward, you cannot stay in the same place.

Wells Fargo would benefit greatly from the increased scale and WaMu would benefit tremendously from better management, something that seems to have been degraded at WaMu over time. I think the institutional culture is a much better fit than JPM/WM would be so the transition would be smoother.

While JPM would benefit from not having the costs of new construction (mostly signage initially) WFC would actually be able to sell off some valuable real estate and recoup much of its up front costs. In many cases the WaMu branches might be superior situated than the WFC, so that the WFC branch might be the one to sell off.

I also think if Wells Fargo fails to act, they’ll have taken a major action just the same. Joining forces with WaMu would make a very formidable competitor for Chase or anyone else. Chase ($148 billion cap) is currently bigger than Wells ($107 billion cap), but adding WaMu’s $15 billion scales them up nicely. I think the Wells-WaMu combination is much better and offers greater rewards and opportunity.

Washington Mutual is probably worth much more then the current Wall Street appraisal but as long as it is floundering it won’t be appreciated. Washington Mutual should be stoking the M&A fire at full blast.

Sheldon Liber is the CEO of a small private investment company and the principal for design and research at an architecture & planning firm. He writes the columns Chasing Value and Serious Money. Disclosure: I own shares of WM.

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Filed under: SEC filings, Deals, Management, Electronic Arts (ERTS)

It appears that just after Electronic Arts Inc. (NASDAQ: ERTS) made a bid for Take-Two (NASDAQ: TTWO) that the board of the smaller company allowed management an extraordinary pay package. A number of media are now “going negative” on that deal.

According to The New York Times, “Just days after Take Two Interactive, the troubled video game maker, received a buyout offer from a rival, Electronic Arts, the board of Take-Two approved a measure that significantly increased the compensation that management would receive in a merger or takeover, according to regulatory filings.” The Wall Street Journal and MarketWatch have raised similar concerns.

Among other things the monthly management fees paid to ZelnickMedia, which employs the Take-Two CEO and Chairman, went from $208,333 a month up from $62,500. In the case of a takeover the management company would receive 780,000 shares.

The deal not only looks bad, it is bad. The board of the company should have known that the data would come out in SEC filings and that it would look like a sweet-heart deal for the most senior management at Take-Two. The matter highlights that boards and executives are still willing to cut arrangements that favor bosses over employees and shareholders.

In this case, shareholders should ask for a change or file a class-action suit.

Douglas A. McIntyre is an editor at 247wallst.com.

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Filed under: Business, Web services, Google

The end is nigh.

Days after the Windows Live Mail CAPTCHA system was cracked by spammers, reports say that the Gmail CAPTCHA system has fallen as well.

CAPTCHA stands for Absolutely Automated Public Turing test to tell Personal and Humans Apart. Ever signed up for an email or forum account, and been required to enter in a group of characters? That’s a CAPTCHA system.

Folks are calling this hack the most sophisticated they’ve seen to date. Whereas cracking Windows Live Mail CAPTCHA required one compromised host, cracking Gmail took the combined efforts of two hosts. And because of Gmail’s more sophisticated CAPTCHA system, only one in five breaking requests succeed.

While one in five doesn’t sound like much, keep in mind that Spambots are constantly working at registering hundreds of email addresses at a time, 24/7. These Spambots can’t be bargained with. They can’t be reasoned with. They don’t feel pity, or remorse, or fear. And they completely will not stop, ever, until you are dead.

Oh, wait, that’s another bot we’re thinking of…

So for all the spammer’s effort, what are they getting in return?

• They gain access to Google’s wide portfolio of services
• They gain an address whose domain is highly unlikely to be blacklisted, helping them defeat one aspect of anti-spam defenses.
• Gmail also has the benefit of being free to use.
• Because Gmail has millions of users, it makes the spammers harder to track.

It might be time to invest in that underground bunker you’ve had your eye on.

[via ars technica]

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Filed under: Deals, Competitive strategy, Google (GOOG), Microsoft (MSFT), Yahoo! (YHOO), China, Japan

Yahoo! (NASDAQ: YHOO) may have a superior foothold in Asia than any other big internet company. This is driven by its holdings in Yahoo! Japan and Chinese e-commerce company Alibaba. According to The Wall Street Journal, “Depending on how their value is calculated, the stakes account for $9 billion to $14 billion of Yahoo’s value.”

The valuations are old news. What is not so old is that it is dawning on Microsoft (NASDAQ: MSFT) that having Asian allies might help the company fight off Google (NASDAQ: GOOG) in the fast-growing markets of the Far East. It is something that the world’s largest software company does not have now.

The Yahoo! board has a one-of-a-kind chance to speak the strategic value of these holding up with shareholders in public and with Microsoft in private. The prevailing wisdom is that Yahoo! has no alternate other than to sell to Redmond, and that the price is the issue. Yahoo! management should be saying that the Microsoft bid does not take into account the value of having powerful partners in Japan and China and that these are worth several more dollars a share.

It is an argument that has the benefit of being true.

Douglas A. McIntyre is an editor at 27wallst.com.

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Filed under: Deals, Microsoft (MSFT), Yahoo! (YHOO)

Even though we’re all still waiting for the outcome of Microsoft Corp. (NASDAQ: MSFT)’s acquisition of Yahoo, Inc. (NASDAQ: YHOO), the question remains: can a merged Micro-Hoo even catch Google, Inc. (NASDAQ: GOOG) in the web search engine advertising revenue race? Is that even Microsoft’s strategy here?

Most of the media world believes Microsoft needs a new arsenal to catch up to Google so that it can start reaping the rewards of search engine and text advertising. Microsoft already has an ad platform for this (adCenter), as does Yahoo! (Project Panama). Both have failed to make even a dent in Google’s search advertising dominance, so why would a combined Micro-Hoo think it can do any superior? Is a combined search advertising market share really the meat of this merger, or would a combined company just be the blind leading the blind against first-mover Google?

Yahoo! has already rebuffed Microsoft’s offer, which already sets the stage for nastiness should a merger occur. Microsoft would empty its entire cash pile to buy Yahoo!, and would be betting the farm that it can at least compete with Google in the lucrative advertising arena while it replenishes its cash pile from its software business. So, what could Yahoo! mean to Microsoft? It would bring hundreds of millions of customers to Microsoft — that’s a given. But if you can’t properly monetize that large swath of customers (which Yahoo! has severely struggled with), what’s the point? Microsoft may fear that Google could become as massive as it is some day in terms of revenue and power — and that could be the driving force: heading it off at the pass. Or, trying to at least.

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Filed under: Business, Utilities, Adobe, Freeware

What a time for 1.0. Hot on the heels of Adobe’s official release of AIR version 1.0 comes the 1.0 version of eBay Desktop. The two releases are so close you would think the makers of eBay Desktop planned it (which of course they did).

eBay Desktop 1.0 provides a desktop alternative to the eBay website - you can use it to search, browse, bid, keep track of your auctions, and more. And because it uses Adobe AIR, it runs on both Windows (XP and Vista) and Max OS X (10.4 and 10.5).

The eBay Desktop installer weighs in around 7 MB (the AIR installer is included if you don’t have it installed on your system already). Install was quick and simple, though getting the program to run was a tiny more work: on our test Mac, the program kept crashing until we went to the Applications folder and opened the program manually.

When you first begin the program, you’ll be met with a nifty little video introduction to the eBay desktop. The eBay desktop home page allows you to track all your bidding and watching activity, and there are separate tabs for finding items, tracking and paying for your winning bids, and a feeds tab.

eBay has put a lot of work into this desktop application, and it shows. The interface is clean and very intuitive. The one major drawback is the lack of features for sellers. You can’t track the items you’re selling or your past sales. At this time, eBay desktop is definitely a buyer’s tool.

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Filed under: Business, Internet, Blogging, Google, Open Source, AOL

Does your small business listen to customers’ complaints? Do you have a way for customers to get in touch with kudos or complaints? According to Jeff Jarvis, learn how to love the customers who complain by learning how to listen to them. The first way small business should listen now is through online feedback.

Most on the internet enthusiasts know the on the internet suggest Jeff Jarvis’s Dell Hell story. Powerful blogger has hellish customer service experience and tells his story on the web. The world commiserates and the term Dell Hell becomes a metaphor for bad customer service. Cable companies and AOL have had their brands besmirched by bloggers telling their dramas in text, in pics and worse, by viral video. Your product may be the next one reviewed on the web.

If you think this is a challenge only for super-sized businesses, think again. Word-of-mouth is your friend for getting new customers and it’s your worst enemy for losing them. Are you prepared to welcome and respond to on the web complaints from customers? If not, get on the train or be left behind.

There are free different online tools to help you listen to your customers.

1. Blog - there are so many free blog platforms that rehashing them seems antiquated. Get a free one and practice. Just don’t forget the small business blogging guidelines.
2. Be Social - Hang out where your customers do, on MySpace, Facebook and Twitter (to name a few). Get a space and name it and then spend time there interacting with your customers.
3. Feedback - at the least, add a contact form to your Web site. If you don’t have one, get a free one (free might include advertising).
4. Virtual Helpdesk - add a virtual helpdesk to your site. If your product requires support, use a system built to do that (not free but good) or take the step to open source helpdesk software here, here and here.
5. Talk - get a free chat applet to let you converse online with customers. The easiest way is to use one hosted on another server. See a list of free chat applets here or here. Think about posting a time you’ll be online and send email invitations to your customers for a customer chat.

Follow a successful model. Google’s customer policy is one we use ourselves: Give people what they want, not what you think they want. In most cases, we know more than our customers do about Web technology but if we don’t listen to them and meet their on the web goals, then our Web site will, well, suck, no matter how pretty it is. (Sure, we go beyond what they ask for but always point out exactly where “what they asked for” resides. They want site stats? We give them stats for free but add Google Analytics and send the link to those reports repeatedly and have a handy list of “how to interpret” links to attach.)

Deal with customer complaints by making them part of your growth strategy. You can listen to and then resolve a complaint, but unless you fix the problem that caused it in the first place, you’ve no strategy except a mop and bucket.

When we first instituted our on the web help desk which was designed to track work, billing and ensure that customer problems were resolved (plus keep track of quote requests, the new business we wanted), our less-techie customers couldn’t figure out how to register for free and open a support ticket. After internal incredulity (it seemed so simple to us!), we put a one-page step-by-step guide together to get even the least-geeky client using the system, which was our goal all along. We also provided everyone with a easy script to help customers over the phone. Their real, unvoiced complaint? We over-estimated our customers’ ability to use the “easy” system. We could have trashed it and gone back to the old way - email. Instead, we used their complaints to solve the underlying problem and now 80% of our clients, and all new clients, are using the on the web tracking system.

It is a far better business strategy that your customers complain to you (and you fix the problem) than if they start their own “your-product-sucks.com” site or tell well-read bloggers so they have the ability to tell the entire on the web world just how bad your customer service is. There’s plenty of room in the comments for you to tell your worst - and your ideal - customer service experience. Admission is free.

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Filed under: Deals, Law, Citigroup Inc. (C), Politics

The US is getting serious about asking sovereign funds to disclose their intentions when they invest in American companies. The Treasury wants to make sure that these overseas entities are not pushing political agendas.

The most recent target of talks are the Abu Dhabi government fund and the investment arm of Singapore. Now that these funds are putting money into huge US institutions such as Ciitgroup (NSYE: C), the Feds want to make sure that their investments are strictly financial. According to The Wall Street Journal, “investments have raised concerns in Washington and in European capitals that the funds might be gaining political clout.”

Indeed the government is bluffing where it has no cards to play. Troubled US financial companies have needed multi-billion dollar cash infusions to keep their reserves in reasonable shape after subprime losses. It is telling that no US investment firms put money into rescue packages. US funds either were too short of money themselves or did not want to take the risk of putting money into companies that might struggle for two or three years.

The sovereign funds have stepped into situations were no other money was available. Government regulation will simply drive them out of that very valuable role.

Douglas A. McIntyre is an editor at 247wallst.com.

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