Filed under: Deals, Industry

A number of corporations purchased auction rate securities with their excess cash. They believed that since the instruments offered better yield than many market funds, they would be good for balance sheet management. They also thought that since auction-rate paper had been liquid and widely traded since 1985 that moving in and out of the market would be easy.

It was simple until it wasn’t.

The investment banks and money center banks which made the market in these instruments pulled out at the beginning of the credit crisis. They didn’t want to keep risking their own capital to purchase the paper and hold it to keep the market trading. Traditionally what wasn’t purchased at one auction was picked up by banks and held until the next round of trading. In essence, big financial firms kept the market trading by underwriting the system in exchange for large commissions.

A new study shows that financial executives at companies which bought the securities would make sure they kept their value even if the market broke down. According to the FT, “More than 85 per cent of companies that invested in the collapsed market for auction-rate securities thought Wall Street banks would provide support during crises.” The results are from a survey by the Association for Financial Professionals.

What companies which bought into the market did not do was read the fine print in their sales agreements. The guarantees which they thought the banks provided simply weren’t there.

It is hard to believe that sophisticated CFOs and treasurers at large companies could be taken in. But as they say, a sucker and his money are soon parted.

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

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Filed under: Deals, Sprint Nextel Corp (S)

I’ve seen it many times: a cool product that finds few customers. That seems to be the case with Helio’s mobile phones. Basically, customers didn’t want to pay premium prices for such things as access to MySpace and other new-fangled features.

It’s a tough lesson (and expensive). SK Telecom and EarthLink (NASDAQ: ELNK) formed Helio as a joint venture in 2005 with start-up capital of $440 million. SK Telecom invested an additional $270 million in the venture last year.

Yet, in the end, Helio turned out to be a huge dud. That is, the company sold out for a measly $39 million to Virgin Mobile USA (NYSE: VM). In fact, the space is full of dead companies, such as Disney Mobile and Amp’d Mobile.

I had a opportunity to interview Frank Dickson, the co-founder and chief research officer of MultiMedia Intelligence. According to him:

Honestly, the merger is a desperate move. Overall, the MVNO (Mobile Virtual Network Operator) model makes sense in a limited number of situations. For example, if a cable MSO wants to leverage its customer base and offer triple or quadruple play offering, there is a clear distinctive competency and the MVNO route makes sense.

For MVNOs such as Virgin Mobile and Helio, where is the competitive advantage? What can be offered that the “big boys” can’t? In the current environment of price competition, with Sprint (NYSE: S) firing the latest $99 dollar all-you-can-eat salvo, MVNOs are hard pressed to maintain an advantage. Their positions are tenuous at best.

In the end, one has to view this as two weaker competitors trying to combine to create a critical mass. When one has competitors like Verizon (NYSE: VZ) Wireless, AT&T (NYSE: T), Sprint and T-Mobile, the merger will just not create enough scale.

Tom Taulli is the author of various books, including The Complete M&A Handbook and The Edgar On the web Guide to Decoding Financial Statements. He also operates MergerBook.com.

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Filed under: Forecasts, Deals, Consumer experience, Competitive strategy, Google (GOOG), Microsoft (MSFT), Entrepreneurs

This post is part of my series featuring established companies and the smaller, more aggressive or innovative rivals that might eventually succeed them.

I remember way, way back to November 2006 when Wall Street was stunned that Google (NASDAQ:GOOG) was paying the ungodly sum of $1.65 billion for privately held YouTube. How were they to monetize this goofy, home video web site? Since November 2006, it appears that Google got a bargain when compared to other social networking web sites.

Facebook has over 80 million users including a new Facebook profile for Democratic presidential nominee Barack Obama. Facebook attained Wall Street relevancy last year when Microsoft (NASDAQ: MSFT) agreed to pay the unheard of $246 million for a 1.6% ownership stake. That October 24, 2007, Microsoft investment valued Facebook at nearly $10 billion in the private equity world. As of yet, there is no filed Facebook IPO, but investors bet the company will file an IPO before the end of 2009.

The new player capturing headlines in the social networking world is LinkedIn. The company is designed for the business and professional world. The more than 23 million registered users represent over 150 different industries. It’s a place to swap ideas, ideal practices and other opportunities.

LinkedIn was founded in 2002 specifically for the business community. LinkedIn just received a $53 million venture capital investment led by Sequoia Partners. The $53 million represents a 5% stake in the company, therefore valuing LinkedIn at $1.06 billion.

The simple business model of social networking web sites grants for an instant global presence, thus enhancing the underlying values of these companies. In the case of Google, the monetizing of YouTube will begin shortly as Google strategically places swift 15 second ads on the bottom of the requested video. Google will be watched closely by other industry insiders as no one wants to cheapen the freedom and ease of use of the social networks by cluttering them with countless ads.

With fresh growth capital, LinkedIn will expand its marketing efforts globally and grow its user list. The user list is the most valuable asset and Sequoia Partners valued each member at over $50.

The next couple of Google-type IPOs might come from this sector of the Internet … stay tuned.

Georges Yared is the editor of YaredsGameChangers.com and the author of the new report “How to Spot the Next Google.”

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Filed under: Deals, Management, Anheuser-Busch Cos (BUD)

Funny how companies get religion when there is a takeover threat. It states a great deal about how poorly many big firms are run and how lax their boards are when it comes to supervision.

Anheuser-Busch (NYSE: BUD) now plans to cut 1,000 people and raise prices. It is trying to hold off a bid from InBev. Now that its independence is at stake, it is taking decisive actions. It might not work because the plan probably comes too late. According to The Wall Street Journal (subscription required), “The St. Louis brewer’s strategy, laid out in a conference call with investors, included $500 million in new cost savings, and higher earnings targets.”

Yes, and what took them so long? Shares of BUD have hung around the $50 range for a number of quarters. Operating profit growth at the brewer has been modest. The InBev offer has driven the shares as high as $62.77. It is not a bad bet that they will go back to $55 if InBev is not successful.

BUD wants investors to think it can simply raise prices in a tough economy and bring in more revenue. That probably won’t work. It if would, the company should have done it a long time ago.

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

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Filed under: Forecasts, Deals, Consumer experience, Competitive strategy, Google (GOOG), Microsoft (MSFT), Entrepreneurs

This post is part of my series featuring established companies and the smaller, more aggressive or innovative rivals that may eventually succeed them.

I remember way, way back to November 2006 when Wall Street was stunned that Google (NASDAQ:GOOG) was paying the ungodly sum of $1.65 billion for privately held YouTube. How were they to monetize this goofy, home video web site? Since November 2006, it appears that Google got a bargain when compared to other social networking web sites.

Facebook has over 80 million users including a new Facebook profile for Democratic presidential nominee Barack Obama. Facebook attained Wall Street relevancy last year when Microsoft (NASDAQ: MSFT) agreed to pay the unheard of $246 million for a 1.6% ownership stake. That October 24, 2007, Microsoft investment valued Facebook at almost $10 billion in the private equity world. As of yet, there is no filed Facebook IPO, but investors bet the company will file an IPO before the end of 2009.

The new player capturing headlines in the social networking world is LinkedIn. The company is designed for the business and professional world. The more than 23 million registered users represent over 150 different industries. It’s a place to swap ideas, best practices and other opportunities.

LinkedIn was founded in 2002 specifically for the business community. LinkedIn just received a $53 million venture capital investment led by Sequoia Partners. The $53 million represents a 5% stake in the company, therefore valuing LinkedIn at $1.06 billion.

The simple business model of social networking web sites allows for an instant global presence, thus enhancing the underlying values of these companies. In the case of Google, the monetizing of YouTube will start shortly as Google strategically places quick 15 second ads on the bottom of the requested video. Google will be watched closely by other industry insiders as no one wants to cheapen the freedom and ease of use of the social networks by cluttering them with countless ads.

With fresh growth capital, LinkedIn will expand its marketing efforts globally and grow its user list. The user list is the most valuable asset and Sequoia Partners valued each member at over $50.

The next couple of Google-type IPOs might come from this sector of the Internet … stay tuned.

Georges Yared is the editor of YaredsGameChangers.com and the author of the new report “How to Spot the Next Google.”

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Filed under: Deals, Management, Anheuser-Busch Cos (BUD)

Funny how companies get religion when there is a takeover threat. It says a great deal about how poorly many large firms are run and how lax their boards are when it comes to supervision.

Anheuser-Busch (NYSE: BUD) now plans to cut 1,000 people and raise prices. It is trying to hold off a bid from InBev. Now that its independence is at stake, it is taking decisive actions. It may not work because the plan probably comes too late. According to The Wall Street Journal (subscription required), “The St. Louis brewer’s strategy, laid out in a conference call with investors, included $500 million in new cost savings, and higher earnings targets.”

Yes, and what took them so long? Shares of BUD have hung around the $50 range for a number of quarters. Operating profit growth at the brewer has been modest. The InBev offer has driven the shares as high as $62.77. It is not a bad bet that they will go back to $55 if InBev isn’t successful.

BUD wants investors to think it can simply raise prices in a tough economy and bring in more revenue. That probably won’t work. It if would, the company should have done it a long time ago.

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

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Filed under: Forecasts, Deals, Industry, AT and T (T), Verizon Communications (VZ)

Verizon (NYSE: VZ) is making a fairly concerted effort to get Vodafone (NYSE: VOD) out of its equity position in Verizon Wireless. The question is, why would Vodafone get out? Verizon Wireless makes a lot of money.

According to the FT, the head of Verizon, Ivan Seidenberg said, “Would I like to have 100 per cent of the earnings given we’re doing 100 per cent of the work? Yeah, I would.”

Verizon Wireless does not pay dividends to Vodafone, so it does not get much of a cash benefit from its piece of the pie, but the FT points out that the British company’s stake is worth about $60 billion.

Reflecting on the debate, it would probably be in the ideal interests of Vodafone shareholders to sell out to Verizon. Their benefits of ownership are limited. Vodafone could use the cash for expansion in Europe, Asia, and the Middle East.

Perhaps the greatest reason for Vodafone to make a graceful exit is the US market itself. Growth of wireless subscribers is slowing as the market reaches a point of saturation. Competition is tough, especially with AT&T (NYSE: T) having about the same number of subscribers as Verizon Wireless. A price war could take down margins at both companies.

Vodafone’s stake may never be worth more than it is now.

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

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Filed under: Deals

In a way, Africa is a new frontier for mobile services. The continent is seeing growth from the commodities boom. Plus, there’s certainly a need to build up the infrastructure.

No doubt, Vodafone Group plc (NYSE: VOD) sees the opportunity. In fact, this week the company plunked down $900 million for a 70% stake in Ghana Telecom (the remaining 30% will be held by the government).

Actually, Ghana Telecom is the main player in the market, with 99% of the fixed-line segment. There is also a 90% control of the broadband category.

However, as for its mobile, Ghana Telecom is ranked #3 (behind MTN Group Ltd. and Millicom International Cellular SA). There are roughly 1.4 million customers.

But, with the help of Vodafone — which plans to invest $500 million in Ghana Telecom — there should be a ramp in growth in mobile (the goal is to reach a 25% marketshare). Keep in mind that only about 35% of Ghana’s citizens have mobile phones (the population is 24 million).

Yet, this isn’t a done deal. That’s, Vodafone needs to get the approval of Ghana’s parliament. Obviously, this will be a hot topic for debate - and may result in an even higher price for the transaction.

Tom Taulli is the author of various books, including The Complete M&A Handbook and The Edgar On the internet Guide to Decoding Financial Statements. He also operates MergerBook.com.

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Filed under: Deals, Products and services, Launches, Consumer experience, Apple Inc (AAPL), Amazon.com (AMZN), Marketing and advertising, MasterCard Inc’A’ (MA)

Billboard reported Thursday that MasterCard Inc. (NYSE: MA) has launched a new campaign titled “Roots of Rock” that offers free downloads for cardholders from Universal Music Group. Apparently the free aspect of the campaign is limited and after 100,000 songs have been downloaded, MasterCard will start to charge $0.80 per track. Even after the credit card company begins charging for downloads, pricing for tracks is still lower than Amazon.com Inc. (NASDAQ: AMZN)’s MP3 Store ($0.89) or Apple Inc. (NASDAQ: AAPL)’s iTunes Store ($0.99).

Cardholders who also make a purchase by August 31 will be “entered into a sweepstakes with a grand prize of having a meet and greet with Jon Bon Jovi, Eric Clapton or Kenny Chesney.” MasterCard executive Amy Fuller told Billboard with the new campaign, the company has “created unparalleled music experiences with three of the world’s most popular artists, providing consumers with an intimate perspective on these icons that few fans will ever have.” But those fans will have to win the sweepstakes.

MasterCard’s campaign to offer free downloads is like numerous other programs that are linked with music companies, but it offers to take the digital market to a more massive consumer base. Lowered prices (eventually) for the campaign mean that Universal Music Group will continue to hold on to the lead in music sales, if only because the music company is the only one on board with MasterCard. Consumers that might not have ever downloaded a track might be enticed to try out the campaign and the sweepstakes. This type of growth is what the music industry will need if digital sales are ever going to replace physical sales successfully and totally.

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Filed under: International markets, Deals, General Electric (GE), United Technologies (UTX), Eastern Europe

While some companies might be consolidating, others are reconfiguring and expanding. General Electric Company (NYSE: GE) has acquired a small airplane engine company in the Czech Republic. Selling it’s appliance business and adding more to it’s portfolio of aircraft and engine ability should be a good move. The Wall Street Journal (subscription required) reported this day that GE hopes to improve its competitive position against Pratt & Whitney.

A response from a Pratt & Whitney spokesman played down the increased competition and stated that even though the company takes this GE move seriously it has a 45-year history producing small engines and holds a solid position in the market place. This type of comment is to be expected and has some validity, but that does not make it good news for P&W.

P&W is a division of another major giant industrial conglomerate United Technologies (NYSE: UTX). Both GE and UTX stocks were up in early morning trading this day.

UPDATE: GE closed at $26.91 up $0.40 (1.51%). UTX shut at $61.05 up $1.35 ( 2.26%).

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 GE.

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