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“Vince, It Looks Like Jim and Larry are Going All In! Incredible!”


Mr. Tobin suggested a dramatic new offer at $78 a share — then headed out to a Rolling Stones concert… —Wall Street Journal

Thus the CEO of Boston Scientific raises the price of his company’s bid for Guidant by $1.5 billion, and then goes out to see Mick and Keith play “Satisfaction” for the zillionth time.

But wait—Boston Scientific’s CFO had an even better idea! Read on!

Over the weekend, Chief Financial Officer Larry Best suggested an even bolder bid of $80 a share…

And so it was that Boston Scientific, which had just weeks before, metaphorically speaking, emerged from the crowd, bellied up to the poker table opposite J&J, and audaciously starting bidding for the Guidant pot, went “all-in” with an $80 a share bid for Guidant, as described in today’s Wall Street Journal.

That kind of mano-a-mano bid-hiking might make great ratings for Mike and Vince covering a match at the Mohegan Sun casino, but it is not necessarily the way to spend $27 billion on a company that needs serious attention to recover its leadership in a notoriously complex business.

I have no idea who’s going to “win” the bidding war for Guidant, and I have no idea if in the long run the “winner’s” shareholders will come to celebrate or regret this kind of testosterone-charged deal-making.

But the last headline-splashing, high-stakes takeover-poker-match I recall was RJR. And after the initial thrill of walking away from the table with all the chips, KKR spent years living it down.

Jeff Matthews
I Am Not Making This Up

© 2005 Jeff Matthews

The content contained in this blog represents the opinions of Mr. Matthews. Mr. Matthews also acts as an advisor and clients advised by Mr. Matthews may hold either long or short positions in securities of various companies discussed in the blog based upon Mr. Matthews’ recommendations.

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What Else is He Hiding?


Bob Ney is a Congressman, described in today’s New York Times as “until recently…an obscure, sometimes eccentric, lawmaker from Ohio.”

He also—judging by the color headshot of the Congressman in the paper just below the fold—wears a wig.

I point this out not to make fun of the Congressman in question, who has enough troubles as it is, being identified as “Representative No. 1” in court documents filed as part of the Jack Abramoff bribery scandal.

Indeed, the Congressman, whose contribution to toppling Saddam and supporting American troops around the world was—I am not making this up—enforcing use of the term “Freedom Fries” in place of “French Fries” at the House cafeteria, may be a very decent guy. Or, he might be as bad as they come. I don’t have any idea.

But why would a Congressman—a guy who gets photographed every day of his life, shaking hands at breakfast, speachifying at lunch, walking across the wind-whipped steps of the Capital building to some immediately forgettable news conference about, well, calling them “Freedom Fries” instead of “French Fries”—wear a toupee?

Especially a toupee that, in the old expression of comedian Robert Klein, looks pretty much like a giant piece of lettuce, even in the not-exactly-high-resolution photo on the front page of the New York Times?

Perhaps it’s the self-deluding nature of politicians in general and Congresspeople in particular, who think—like that ex-Vietnam Vet from California who resigned last year—they can take bribes in return for votes, and nobody will ever find out.

And maybe they’re right.

Perhaps the average American voter does not share the common feeling among friends of mine on Wall Street that you “Never trust a CEO who wears a toupee.”

This may sound heartless, trite, or absurdly simplistic, but, at the core of the matter is Warren Buffett’s old dictum that “a CEO who misleads others in public may eventually mislead himself in private.”

For example, I always suspected Tyco CFO Mark Swartz of wearing an unusually good rug of very curly fake hair. I thought that the first time I saw him face to face at the ballroom of the Plaza Hotel when he and Dennis announced the breakup plan that led to their downfall, and I thought it every time I saw his picture in the papers heading into or out of the court room over the next couple of years.

Sure enough, when Swartz showed up for his sentencing in September, the curls were no longer visible, having been replaced by a baseball cap. Now, I may still be wrong about him wearing a rug, but after his conviction, one of the jurors who voted to convict said many of the jurors had concluded Mark Swartz was “an extremely good liar”—quote/unquote.

I could be wrong about Congressman Ney, both rug-wise and what-else-is-he-hiding-wise. Only his wife, and his hairdresser, knows for sure.

Jeff Matthews
I Am Not Making This Up

© 2005 Jeff Matthews

The content contained in this blog represents the opinions of Mr. Matthews. Mr. Matthews also acts as an advisor and clients advised by Mr. Matthews may hold either long or short positions in securities of various companies discussed in the blog based upon Mr. Matthews’ recommendations.

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Weekend Edition: “Friends of Animals” Have an Appetite for Destruction


Long-time readers may have gathered that I’m a bird-watcher, a serious one.

But I’ve only half-followed a controversy between our local utility, United Illuminating, which wants to get rid of stray monk parakeets and their large nests for the sake of maintaining the power lines, and the so-called “Friends of Animals,” a Darien, Connecticut-based group trying to protect the squawking, bright green birds, for the sake of the birds.

Then last week Friends of Animals announced a lawsuit against UI in a press release containing the following language, which I am not making up:

The suit claims that numerous other birds, including song sparrows, house finches and great horned owls, also use the parrot nests for shelter.

“The presence of the Monk Parakeet, a strict herbivore, is a benign effect on other local species and may actually increase numbers and variety of wildlife in an otherwise ecologically barren urban environment,” the suit says.

Now, I live in this “otherwise ecologically barren urban environment” described in the press release.

And in the past year I have witnessed—in the midst of this burned out holocaust of a region—the following wildlife in my yard: sparrows, finches, Goldfinches (both summer coats and winter coats), a Rose-breasted Grosbeak, Carolina Wrens, Winter Wrens, a Black-throated Blue Warbler, Black and White Warblers, Yellow Warblers, Yellowthroats, Northern Flickers, Hairy Woodpeckers, Downy Woodpeckers, Cedar Waxwings, doves, chickadees, and—just last week—a Red-Tailed Hawk perched eight feet away from me.

Quite a “barren urban environment”!

But that’s not the only bit of disinformation contained in the “Friends of Animals” press release.

Let’s examine the nests themselves—described as “shelter” for native bird species—since the nests started the whole conflict with United Illuminating, which wants to kill the birds and eliminate the nests.

Monk parakeets build their nests on utility poles or high up in oak trees. The nests look like giant mutant squirrel condominiums. The parakeets build them stick-by-stick with small branches they find on the ground and carry to the nest in their large beaks.

Being made of sticks and being very big, a monk parakeet nest can weigh more than 400 pounds. I am not making that up.

Since native New England oak trees were not designed to carry 400 pound monk-parakeet nests on the ends of their branches, the nests routinely break off the oak trees and fall in a huge clump to the sidewalk or the road. (The birds favor utility poles as well as trees along roads, rather than deep in woods, for reasons that likely relate to their eating habits.)

I have hauled more than one broken nest off the road beneath a parakeet-inhabited tree a few blocks from our house during early-morning walks, and they are an engineering marvel: more than a yard wide and two or three feet high, they look like an ant-hill made of sticks. Tunnels run deep inside them, protecting the birds from harsh New England winters—which is why there is such a thing as a monk parakeet population 5,000 miles from their native sub-tropical habitat in South America.

As for the “Friends of Animals” claim that the nests are used by other birds, such as “song sparrows, house finches and great horned owls,” I’m guessing that “Friends of Animals” just made that up.

Anybody who knows anything about birds knows that no two types of birds build the same type of nests. The really obsessive birder can identify not just birds, but bird nests. I know about this unfortunate obsession, because I own a book about bird nests.

The finches and sparrows identified as users of parakeet nests do not shelter in giant stick tunnels. They build loose, spherical nests from grass and twigs, with a soft inner lining. They reuse the nests, rebuild them, and refit them season after season—like an old New England couple in a salt box colonial. And old New England couples don’t up and move into a McMansion just because one happens to become available.

Now, it is true that some birds occupy other bird nests. European Starlings, for example, (an aggressive, intrusive and destructive species brought here by a “Friends of Animals” type group dedicated to—and I am not making this up—introducing to America all the birds mentioned in the works of Shakespeare) evict native woodpeckers from their nests.

Great Horned Owls—mentioned in the press release as possible parakeet nest-renters—sometimes occupy nests of herons and other birds. Therefore it would be possible that a Great Horned Owl might be interested in a monk parakeet nest, except for the fact that horned owls do not climb through tunnels.

Owls perch on branches because they eat living things: they do not sleep in caves and emerge to feast on seeds, like parakeets.

Besides, the notion that other birds might make use of a parakeet nest ignores the central fact of the issue: monk parakeets are highly aggressive and they flock together, like crows and starlings.

Anybody who has watched the parakeets drive away flickers, sparrows, chickadees, goldfinches and cardinals from a bird feeder knows that monk parakeets—colorful though they may be—are not “benign” as the press release claims.

They are, in fact, destructive—potentially with catastrophic effect.

How, you might wonder, can a bunch of cute green parakeets be so destructive?

As the members of “Friends of Animals” appear not to realize, we have a beautiful native North American bird species that nests every summer in the very same type of oak trees the monk parakeets now monopolize.

These birds arrive from their winter feeding grounds in mid-April, roost high up in oak trees and build beautiful, simple nests out of the same sized oak-branches used by the monk parakeets. These birds are the size of hawks, only with elongated bodies and stick-legs. They nest so high, and keep so to themselves, that most people fail to notice them.

These birds mate, lay eggs and raise hatchlings which they feed regurgitated crabs picked out of Long Island Sound and the marshes nearby. The hatchlings grow over the summer into large, beautiful, birds. Late in the summer they all fly south, leaving behind a bowl-shaped nest of sticks high on an oak branch.

They are Yellow-crowned Night Herons. And Yellow-crowned Night Herons are infinitely more “colorful” and more “benign” and more integral to the Southern New England ecosystem than a bunch of squawking, intrusive parrots.

But because the monk parakeets favor the same oak trees used by the herons year after year, these herons may well, over time, be crowded out by a bunch of South American parrots released from home bird cages.

Back in the 1890’s, a bunch of well-meaning but badly informed Shakespeare admirers set loose 100 European Starlings in Central Park. There are now over 200 million starlings in North America—displacing hundreds of millions Blue Birds, Flickers and other native birds over the last century.

As a Friend of Birds, I’ll side with United Illuminating over “Friends of Animals” on this one. Get rid of the monk parakeets now, while we still can.

Jeff Matthews
I Am Not Making This Up

© 2005 Jeff Matthews

The content contained in this blog represents the opinions of Mr. Matthews. Mr. Matthews also acts as an advisor and clients advised by Mr. Matthews may hold either long or short positions in securities of various companies discussed in the blog based upon Mr. Matthews’ recommendations.

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Fighting Joe and the SEC Get Tough


During the call, IBM Chief Financial Officer Mark Loughridge told analysts to “update” their models to reflect the new expense for the just-elapsed first quarter. A chart distributed with the call suggested that analysts lower their earnings-per-share estimates to 90 cents from $1.04, a drop of 14 cents. They did just that.


Thus today’s Wall Street Journal describes how IBM guided the barking seals I otherwise refer to as Wall Street’s Finest to lower their expectations for IBM’s first quarter 2005 earnings in a “hastily arranged conference call” last April, shortly before IBM actually reported those earnings.

When the earnings came out nine days later, however, IBM reported only $0.84 of earnings, net of $0.10 worth of options and stock-based compensation that IBM had successfully trained the barking seals to consider “non-recurring”—as though compensation for the human beings who run the company isn’t an actual expense and won’t recur.

Hence, $1.04 of expected earnings had mutated into $0.84 of actual earnings: a big miss.

Somewhat surprisingly, even the best-trained among Wall Street’s Finest recognized a failure to score, despite IBM’s last-minute attempt to move the goal-posts without anyone noticing.

“A Material Miss…and Acknowledgement of Weaker Revenue Growth,” one post-earnings headline read. “Not Great, but not Terrible Either,” ran another, while “IBM: Pass the Alka-Seltzer, Please,” was perhaps the most artistic way to express disappointment with IBM while demonstrating empathy with clients who don’t like to hear bad things about the stocks they own.

IBM’s share price dropped more than ten bucks in the days following the Alka-Seltzer episode, which, I gather, is the subject of the SEC Wells Notice to IBM. Quotes the Journal article:

Securities lawyers unconnected with the case have said that IBM may have been obligated during the options conference call to give investors more detail about the shortfall in the quarter, which had ended days before. Under securities law, they say, companies have some latitude to determine whether to announce known shortfalls early — but if they don’t, they generally can’t put out other earnings-related news.

I’m no expert on SEC-related disclosure issues. At the time it happened, however, it seemed obvious to me and most everybody else who follows the company that IBM had thrown some dust in the air to obscure a basic earnings miss. After all, $0.84 looks a lot worse to analysts expecting $1.04 than it does to analysts expecting $0.90.

That’s my opinion based purely on an admittedly cynical view of the earnings-management practices of public companies developed in 25 years of quarterly-earnings reports. It is not based on any particular knowledge of what was going on or not going on inside IBM.

But why is the SEC doing this Wells-Notice stuff now? Looking at the calendar, I see that it is mid-January 2006, almost a year since IBM tried to finesse numbers lower under the screen of “non-recurring” type compensation expenses. To its credit, the SEC’s recent action was in fact preceded by an “informal” investigation begun last June—but that was seven months ago.

Which means the poor shlubs who owned IBM stock prior to that first quarter earnings report and held onto it in the wake of management’s pre-earnings conference call in which numbers were taken down without really being taken down, but then sold their stock at a loss in the days following the actual earnings miss, are long gone.

Which means all this Wells-Notice stuff is, in my opinion, irrelevant, and once again the SEC, having noticed a draft coming from the direction of a barn door through which a horse has vanished and made its way across the country-side to the other side of the mountain, has decided to investigate just how the heck that door was left open and what can be done to secure the door.

Surely there are companies that have mishandled their public disclosure obligations more recently than last April.

But, then again, if Joe Biden—remember, the Senator who ran for President with a plagiarized speech?—can get outraged about what a guy might or might not have done twenty years ago in college, I guess whatever it was IBM might or might not have done nine months ago probably seems like it’s worth wasting time on.

“I didn’t even like Princeton,” Biden told Alito on Tuesday. “I mean, I really didn’t like Princeton. I was an Irish Catholic kid who thought it had not changed like you concluded it had.”—Associated Press.

Tough stuff, Senator! You and the SEC go boy!

Jeff Matthews
I Am Not Making This Up

© 2005 Jeff Matthews

The content contained in this blog represents the opinions of Mr. Matthews. Mr. Matthews also acts as an advisor and clients advised by Mr. Matthews may hold either long or short positions in securities of various companies discussed in the blog based upon Mr. Matthews’ recommendations.

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Pandora’s Box Evaporates


I once shared a ski lift with a lawyer. I will spare the obvious lawyer-joke, since I am married to an attorney, and go straight to the point: he worked for Nickelodeon, the kid’s TV network, and he was working on protecting Nick’s content from being poached by the emerging digital downloading pirates.

This was at least three years ago, just as the thing that started it all—Napster—was being shut down by lawsuits and an anti-piracy campaign led by none other than Lars Ulrich, drummer and co-founder of death/thrash/hair-metal band Metallica.

Ulrich, who is a terrific drummer even if you don’t happen to like his music (sample lyric: “Taste me you will see/More is all you need/You’re dedicated to/How I’m killing you”), ultimately succeeded in helping shut down Napster.

But he did not succeed in stopping digital downloading. It went, as the Godfather liked to tell his wife the Corleone family was also doing, “legitimate.”

Now, back to my lawyer on the ski lift.

I asked him, very innocently, about what kind of lessons the TV industry had learned from its music counterparts, who had at first ignored Napster and then brought out the lawyers—while dismissing the fact that the digital downloading of music made enormous sense, being both far easier for the customer and far cheaper for the music companies.

He went, to use the technical term, “off.”

How could I say customers wanted digital downloading? Didn’t I know it took too long to download? Didn’t I know there wasn’t enough bandwidth? Didn’t I know the music quality suffered with digitization? Didn’t I know customers like to browse?

And where, he wanted to know, did I get off with the idea that downloading music was cheaper than printing a CD and a CD case, wrapping them in plastic that is harder to open than the President’s nuclear briefcase, shipping them to distribution centers and then to stores, losing some off the back of the truck and others to the sticky fingers of the store clerks, and selling the rest at whatever mark-up was necessary to cover store rents and utilities???

(He didn’t actually say all that—but he did, and I am not making this up, scoff at the notion that downloading music was a cheaper way to go than the brick-and-mortar approach.)

All I can say is, it’s a good thing he was wearing thick ski gloves, or he might have tried to strangle me.

I did not bother explaining to him about my daughters, who loved Napster for its speed, variety, and ease-of-use. Nor about my self, who loved it for the fact that you could find anything you wanted, no matter how obscure—even some stuff never-before-available to anybody, like outtakes from old Beatles recordings.

Nor did I try to tell him that he and Nick-at-Nite and the rest of the video world ought to get ready for the digital shift, in whatever form it would take. He didn’t want to hear about it.

So I thought about that lawyer as I looked at Google Video, the new Beta from the folks who brought you Google Maps and Google Mail and just plain old Google.

Announced last Friday at CES, I expected very little from Google Video, owing to the fact that I had been studying it a couple of weeks ago when doing “The Business Story of the Year”—about the digital downloading phenomenon.

At the time, I was disappointed in the breadth of the Google offerings compared to, say, YouTube.

But now that the site is available, and content from CBS is being offered for downloading at an Apple-like rate, the shift has really begun: legitimate video content is available on the biggest search engine in the world.

Pandora’s box didn’t just open—it evaporated. I wonder what that lawyer is doing these days?

Jeff Matthews
I Am Not Making This Up

© 2005 Jeff Matthews

The content contained in this blog represents the opinions of Mr. Matthews. Mr. Matthews also acts as an advisor and clients advised by Mr. Matthews may hold either long or short positions in securities of various companies discussed in the blog based upon Mr. Matthews’ recommendations.

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“Plastics”


Mr. McGuire: I want to say one word to you. Just one word.
Benjamin: Yes, sir.
Mr. McGuire: Are you listening?
Benjamin: Yes, I am.
Mr. McGuire: Plastics


Most anyone over forty can identify that those lines come from The Graduate.

Over the years, the word “Plastics” by itself, said with a sarcastic, I-am-a-heartless-money-grubbing-adult-who-does-not-know-the-true-meaning-of-life intonation has become a tag line, used in the media every time some new money-making trend comes along that captures the imagination of a new generation.

In fact somewhere, I’ll bet, right now, “Plastics” is being invoked by some headline writer to describe the Google phenomenon, as a way of encapsulating that search engine’s hold on both popular culture and on Wall Street’s fertile, trees-grow-to-the-sky imagination.

Just last week we had the complete breaking of the “price-target” barrier for Google—the first unabashedly Bubble-Era price target for the stock, a whopping $2,000 a share, by Mark Stahlman, who is receiving Henry Blodget-style attention for his call, and not all of it scornful.

Almost unnoticed in the Google-phoria, however, has been the recent revival of a company that was left for dead in the wake of the Internet bust. To whit: Sun Microsystems.

Sun is the last of the “Four Horsemen of the Internet” (Cisco, Oracle, EMC and Sun) to recover its bearings from the post-Bubble crash, and probably the least-admired of the bunch among Wall Street’s Finest. It was also, last I watched, getting one of those eye-rolling, sudden-onset-of-migraine faces and an emphatic “Sell-Sell-Sell” from Jim Cramer on Mad Money.

But a funny thing happened on the way to Chapter 11. Sun Micro’s stock has been showing up on the new high list. And, get this: it’s actually outperformed Google this year.

That’s right: both stocks opened the year around $420 (multiplying SUNW by 100). And on Friday, GOOG closed at $466 while SUNW closed at $471.

No, I’m not a big fan of Sun, nor do I own the stock. Yes, I know that four days’ worth of so-called “out-performance” means nothing at all.

But after considering Sun’s appearance on the new high list and pondering the apparent recovery in one of the most poorly managed of the major IT equipment makers—measured by almost any metric you want to throw out there—I am beginning to wonder if it has to do with a single word, like plastics.

In this case, however, the word is: “Storage.”

Yes, we all know storage needs are increasing a lot. But to understand what that actually means, I have looked at my own storage needs, as measured by the capacity utilization at two email accounts—a ten-year old Microsoft Hotmail account, and an 18-month old Google Mail account—and I can confidently say that storage needs are increasing A LOT.

Thanks to Google’s “never-delete-anything” email structure and easy search techniques, I’ve archived over 400 emails in the last few weeks, half of which I would have deleted out of my MSN account.

With Google Mail’s search capability, you get comfortable actually keeping pretty whatever email comes in—except for the Thank You Please Congratulations I Have Ten Million Necessary Nigerian Bank Account emails that get through the spam-filter—without fear you won’t be able to find the email when you actually need it.

Once your mindset becomes comfortable with this shift away from the delete-everything-not-necessary mode, you start to run up some pretty serious megabits at the Google storage farm.

To put a number on it, in my MSN hotmail account, which, as I said, has been around for more than ten years, I am currently using 120 megabytes out of the 2,000 available for storage.

On Google Mail, which I have had since July 2004 but only began using for the last two months (following the last and final disruption by Microsoft Hotmail, which started automatically moving new emails into the Trash Can without asking), I am currently using 134 megabytes out of 2,682 available—and that capacity is increasing daily.

Hmmm…120 megabits in 10 years versus 134 megabytes in 2 months. That’s some acceleration in storage demand.

Combine changing email habits with video and photography sites such as Flikr and YouTube that are collecting massive amounts of digital content—and you’re talking about mega-megabits.

Which makes me think the word from the cuckolded Mr. McGuire to poor, confused Benjamin, would today be “Storage.”

How an investor can make money from the trend is a question for the house. Whether Sun Microsystems becomes more than a temporary resident of the 52-Week High list and makes Cramer’s “Buy-Buy-Buy” or Hallelujah Chorus buttons is something else.

Jeff Matthews
I Am Not Making This Up

© 2005 Jeff Matthews

The content contained in this blog represents the opinions of Mr. Matthews. Mr. Matthews also acts as an advisor and clients advised by Mr. Matthews may hold either long or short positions in securities of various companies discussed in the blog based upon Mr. Matthews’ recommendations.

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The Most Interesting Press Release You Didn’t See


“During the Christmas season, certain online search engine costs increased significantly over the prior year, and as such we made the decision not to pursue the resulting high cost order volume.”

That comment was contained in the long first paragraph of a press release from FTD Group, the flower delivery people, that was issued at 5:54 E.S.T. last Thursday night, when almost nobody was around to care.

Now, I don’t follow FTD closely, but its business model depends more than you might guess on internet searches—after all, somebody searching for “flowers” on Google is probably not doing deep scientific research into botany. They are very likely a guy, running late, kicking himself for putting it off until the last minute.

Indeed, Google the word “flowers” and you will find an FTD ad, third from the top:

Get it There Today. Fresh Flowers
Satisfaction Guaranteed-Order Now!

What is also interesting about the FTD release is that the company states that despite a pull-back in online ad spend and the resulting revenue shortfall, the company will still hit its EBITDA and earnings targets:

“As a result, despite this slight decline in order volume for the Christmas season, we are reiterating our EBITDA and EPS targets for the year.”

This suggests that at least in the floral delivery category of online search, and assuming FTD is not just blaming an innocent bystander like some companies we could imagine, the marginal cost of a new customer has reached parity with the marginal profit from that customer. Which is not something anybody expected happening any time soon.

So what is FTD doing about this turn of events?

“…we have begun making additional investments in our marketing staff to help build a more diversified marketing portfolio. We believe these initiatives will enable us to regain our competitive position in the marketplace and continue to deliver long term bottom line results for our shareholders.”

I’m not sure what it means to build “a more diversified marketing portfolio.” 30 second spots on Howard Stern? Sandwich boards in Times Square?

Whatever it means, the fact that FTD says the cost of using “certain online search engine(s)” has increased so significantly that the company cut back its online marketing is worth investigating.

Therefore, the question before the house is this: is there any indication from anybody else who uses online search that online search is no longer economic in any field outside the flower delivery business at FTD?

Informed responses are welcome.

Jeff Matthews
I Am Not Making This Up

© 2005 Jeff Matthews

The content contained in this blog represents the opinions of Mr. Matthews. Mr. Matthews also acts as an advisor and clients advised by Mr. Matthews may hold either long or short positions in securities of various companies discussed in the blog based upon Mr. Matthews’ recommendations.

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Don’t Blame Me, I’m Only the Windows User


Windows PCs face ‘huge’ virus threat
By Kevin Allison in San Francisco

Computer security experts were grappling with the threat of a new weakness in Microsoft’s
Windows operating system that could put hundreds of millions of PCs at risk of infection by spyware or viruses.

That’s from today’s FT.com—the web site of the Financial Times of London.

I know some readers will accuse me of grinding my ax on poor old Microsoft again, just a few days after my final 2005 post stating that the undermining of the Microsoft desktop software monopoly was the biggest news story of the year—but believe me, I didn’t intend to start the new year attacking the Evil Empire.

It’s just that stuff, as they say, happens. And it happened over the weekend, when my Microsoft Hotmail inbox started automatically moving emails from my inbox to my trash can.

I am not making that up.

For about half a day I thought the unusually small number—i.e. zero—of emails in my Hotmail inbox merely reflected the fact that not a lot of people were cranking out emails over the weekend.

But then in the course of finishing up year-end business I sent myself an email from a Google Mail account established last year as a back-up to Hotmail.

The email never arrived.

Actually, what I discovered was that it had arrived but was immediately transferred to my trash can—without me doing a thing.

This morning I found 6 emails in my Microsoft inbox, and 26 unread, unseen emails in my Microsoft trash can.

I suppose I should thank Bill Gates for deciding what is really important and what can be discarded without viewing.

I also suppose I should contact Microsoft’s so-called Help Desk and tell them about my new Hotmail problem. But if they are as useless as they were the last time I had a major Hotmail problem (it took me 4 weeks to receive a response to my email requesting help), I would rather spend the time simply moving the rest of my email business to the Google Mail account I established during the last major Hotmail problem.

And if readers still think I am being too tough on Microsoft here, well, check out the following from today’s FT.com article:

Unlike most attacks, which require victims to download or execute a suspect file, the new vulnerability makes it possible for users to infect their computers with spyware or a virus simply by viewing a web page, e-mail or instant message that contains a contaminated image.

Jeff Matthews
I Am Not Making This Up

© 2005 Jeff Matthews

The content contained in this blog represents the opinions of Mr. Matthews. Mr. Matthews also acts as an advisor and clients advised by Mr. Matthews may hold either long or short positions in securities of various companies discussed in the blog based upon Mr. Matthews’ recommendations.

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The Business Story of the Year.


Parnell: Yo where’s the movie playin’?
Samberg: Upper West Side, dude.
Parnell: Well let’s hit up Yahoo Maps to find the dopest route.
Samberg: I prefer Mapquest—
Parnell: That’s a good one too.
Samberg: Google Maps is the best!
Parnell: True dat!
Both: Double true!
Samberg: 68th and Broadway—
Parnell: Step on it, sucka…
—“Lazy Sunday” video from Saturday Night Live


The business story of 2005—if I may be so presumptuous as to declare it myself (and, since this is my blog, I will)—can, I think, be summed up quite neatly in the following URL:

http://www.youtube.com/watch.php?v=oZOsgQC8qqM&search=SNL%20

That URL takes you to a web site called YouTube (“Broadcast yourself. Watch and share your videos worldwide!”).

YouTube contains almost any kind of video you want to see—from Ashlee Simpson’s lip synch unmasking on Saturday Night Live to OJ Simpson’s car chase and the Beatles’ final gig on a rooftop in London—and many you don’t, particularly the bizarre and highly personal videos posted by individuals you’d rather not have your daughter bring home for dinner, if you catch my drift.

The video you will see at the above URL is a Saturday Night Live-sponsored “digital short,” called “Lazy Sunday,” and it shows two earnest young white Manhattan-ites rapping earnestly about going to see “The Chronicles of Narnia.”

And for those of us who have failed to find anything funny coming out of Saturday Night Live since, oh, Eddie Murphy or Martin Short left, the video is hilarious.

What does a YouBet video have to do with the Business Story of the Year?

Well, it was created, produced, filmed, edited and uploaded digitally, very likely without the use of a single product from Microsoft. Furthermore, it was searched for and downloaded by hundreds of thousands of individuals likewise without the expenditure of a single dollar going to Microsoft.

Finally, and not surprisingly, not one of the products shown or rapped-about in “Lazy Sunday” mentions a Microsoft product.

Which is why, in the category of “Most significant business story of the year 2005,” I nominate the undermining of Microsoft’s monopoly by a band of mostly anonymous individuals who did it with nothing much more than ideas in their head and lines of code in their computers.

Which is, I think, pretty cool.

Jeff Matthews
I Am Not Making This Up

© 2005 Jeff Matthews

The content contained in this blog represents the opinions of Mr. Matthews. Mr. Matthews also acts as an advisor and clients advised by Mr. Matthews may hold either long or short positions in securities of various companies discussed in the blog based upon Mr. Matthews’ recommendations.

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Upbeat or Upside Surprise?


In the “no surprise to anybody” category, Sirius Satellite Radio yesterday announced it will have added more than one million net new subscribers in the fourth quarter of 2005.

The recent new-subscriber momentum at Sirius is, as we have discussed here, is a result of the “Howard Effect”: the legions of primarily young, primarily white, primarily male listeners now signing up to receive Howard Stern’s radio program when it begins digitally beaming from space on January 9th.

Most analysts expect similar upbeat news from XM Satellite—the Hertz to Sirius’ Avis—shortly, even given the fact that the “Howard Effect” has provided Sirius with a meaningful advantage in the near term. (The historic 3:1 XM-to-Sirius sales ratio at retail locations which I monitor has been reversed in favor of Sirius in recent months.)

But I wonder how “upbeat”—to use one of Wall Street’s Finest’s most hackneyed expressions—XM will really be when they report their Q4 subs.

My rhetorical question is based less on in-store observation of shoppers picking one versus the other and more on an XM email that recently bombarded friends who had purchased a car with the XM radio or just a plain old XM radio, but had not activated it:

If you received or purchased another XM Radio during the holiday season and haven’t yet activated the radio with service, what are you waiting for? Activate your new XM Radio online by December 31, 2005 and we’ll waive all activation fees (up to a $14.99 value.) Get started with XM today by activating online. Happy holidays from your friends at XM, and happy listening!

Translation: “We want to hit our subscriber numbers really, really badly.”

Now, perhaps I am over-thinking this one. Perhaps XM has its new sub growth in the bag, and the activation-free incentive is merely a way of ensuring what, to Wall Street’s Finest, is even better news than being merely “upbeat.”

Which is to say, “an upside surprise.”

Any first-hand observations of the efforts by Sirius and XM in the market place are welcome.

Jeff Matthews
I Am Not Making This Up


© 2005 Jeff Matthews

The content contained in this blog represents the opinions of Mr. Matthews. Mr. Matthews also acts as an advisor and clients advised by Mr. Matthews may hold either long or short positions in securities of various companies discussed in the blog based upon Mr. Matthews’ recommendations.