Tech wrap: Kodak files for bankruptcy protection
Eastman Kodak, the photography icon that invented the hand-held camera, filed for bankruptcy protection and planned to shrink significantly after a prolonged plunge for one of America’s best-known companies. The Chapter 11 filing may give Kodak the ability to find buyers for some of its 1,100 digital patents, a major portion of its value. According to papers filed with the U.S. bankruptcy court in Manhattan, Kodak had about $5.1 billion of assets and $6.75 billion of liabilities at the end of September. Kodak now employs 17,000 people, down from 63,900 just nine years ago.
Kodak’s long decline can be traced back to one source: the former king of photography’s failure to reinvent itself in the digital age, writes Ernest Scheyder. Kodak’s film dominated the industry but the company failed to adopt modern technologies quickly enough, such as the digital camera — ironically, a product it invented. ”Kodak was very Rochester-centric and never really developed a presence in centers of the world that were developing new technologies,” said Rosabeth Kanter, a professor at Harvard Business School. “It’s like they’re living in a museum.”
Apple unveiled a new digital textbook service called iBooks 2, aiming to revitalize the U.S. education market and quicken the adoption of its market-leading iPad in that sector. The move pits Apple against Amazon.com and other content and device makers that have made inroads into the estimated $8 billion market with their electronic textbook offerings. Apple has been working on digital textbooks with publishers Pearson, McGraw-Hill and Houghton Mifflin Harcourt, a trio responsible for 90 percent of textbooks sold in the United States.
Google’s net revenue jumped more than 27 percent in the fourth quarter but fell short of Wall Street targets, sending shares down sharply in after hours trading. The No.1 Internet search engine said that it earned $2.71 billion, or $8.22 per share in the fourth quarter, compared to $2.54 billion, or $7.81 per share in the year-ago period.
Microsoft said fiscal second-quarter profit fell slightly, as lower computer sales hurt its core Windows business. The company reported net profit of $6.624 billion, or 78 cents per share, compared with $6.634 billion, or 77 cents per share, in the year-ago quarter.
Some members of Congress switched sides to oppose anti-piracy legislation as protests blanketed the Internet on Wednesday, turning Wikipedia dark and putting black slashes on Google and other sites as if they had been censored. Several sponsors of the legislation, including Senators Roy Blunt, Chuck Grassley, Orrin Hatch and John Boozman and Marco Rubio, said they were withdrawing their support. Some blamed Senate Majority Leader Harry Reid for rushing the Senate version of the bill.
Rovio, the Finnish creator of the global smash-hit Angry Birds video game will not join the stock market this year but still aims to eventually seek a listing, its marketing chief said. ”We are not in a rush. This year is way too early for an IPO, there are too many open things, and we are in a very early stage of the Angry Birds lifecycle,” marketing chief Peter Vesterbacka told Reuters.
Why are cheap startups so expensive?
Starting up a Web company is never easy, but at least it’s not as expensive as it used to be. Instead of buying and maintaining an IT infrastructure, as they had to do in the dotcom boom, startups now turn to cloud server services like Amazon’s. Instead of costly proprietary software, OpenOffice and Google offer cheaper (or free) options. Instead of paying office rent, employees can work from home. And the viral power of social media can bring new customers with little marketing. Open-source projects and the durability of Moore’s Law promise to lower costs even further.
But if it’s cheaper than ever to fund a startup’s growth, why are some Web companies receiving hundreds of millions of dollars in financing? And why are valuations rising quarter after quarter, to the point where some venture capitalists are complaining that certain startups have simply gotten too expensive to invest in? How is it that Web companies are becoming both cheaper and more expensive? Are VCs valuing companies on fundamentals, or following the market’s momentum?
Such questions might seem academic, except that the gap between startup costs and valuations keeps widening. The last six months alone have seen a surprising number of nine-digit venture rounds. In July, Airbnb, a home-sharing startup that had 130 employees, raised $112 million in a round that valued the company at $1.3 billion. A week later, Twitter, which had 600 employees, raised $800 million (half going to cash out early investors), valuing it at $8.4 billion. In October, online-storage company Dropbox, another small company of 70 employees, said it raised $250 million in a round valuing the company at $4 billion. And just last month, group-buying company LivingSocial closed a $176 million round, vowing to raise an even larger amount in the coming months.
There are two key reasons for such outsize venture investments – one strategic and one emotional. The strategic is that startups that have built a loyal customer base and strong word of mouth often solicit big investments to scale up in a nascent or highly competitive market. So, for example, Airbnb is building on its early success to expand internationally and bring in more users. And LivingSocial is looking for a bigger share of a group-buying market that once belonged to Groupon.
“There’s not a lot of value in second place,” Ryan Moore, a partner at Atlas Venture in Cambridge, Massachusetts, told Reuters. “If you have an interesting model, you spend aggressively and build aggressively to win in your category. There are a lot of situations out there where people are betting big.” In accepting a large investment round, a small startup may be banking on ambitious growth, or even preparing against the risk that the capital markets may slow down.
The second, more emotional reason is that these companies are raising all that money simply because people are willing to give it to them. This is especially common in early rounds, where valuing a startup relies less on metrics. As a result, the correlation between what it costs a company to grow successfully and what investors decide it’s worth has become looser, especially in Internet startups.
“You have companies raising far more money than they know what to do with, simply because valuations are high,” says Josh Goldman, a partner at Norwest Venture Partners. “They can raise money now – and put it away for a war chest or for future needs that they can’t even anticipate now – because investors are tripping over themselves to give it to them.”
I believe that crowdfunding will be a part of the solution to give a new meaning and bring more transparency to investment!
Many new players are showing up in the 4 main crowdfunging categories but unfortunately blogs only speak about very few one.
Just to let you know that we will launch http://www.mymicroinvest.com by March 2012, A european based platform
concentrating on equity investments for innovative start-ups.
Hope you will like it.
Regards,
Kids will be kids, even those of vid game executives
Bobby Kotick — CEO of Activision, “Moneyball” actor -- stopped by the Reuters Global Media Summit on Monday to give us his take on Black Friday (Anecdotally: a success, though Saturday not so much) and to throw some cold water on rival EA’s upcoming release of “Star Wars.”
But it was what his 9-year-old daughter dressed up as for Halloween that really caught our attention. (Hint: Not Brad Pitt)
If you are betting person, you would likely throw some dough that she donned a costume involving one of Activision’s popular games. Perhaps a character from Skylanders? The game aimed at 6-to-10 year olds involving toy monsters.
Nope. Kotick let slip that she dressed up as an Angry Bird. A Rovio executive must be smiling somewhere.
Tech wrap: Is Groupon’s IPO window closing?
As the Nasdaq Composite index continued its week-long tailspin, tech investors and analysts are wondering what the stock plunge could mean for the pending IPOs of companies like Groupon and Zynga.
The coming week, which has about a dozen IPOs scheduled to price, will be a good test of the severity of the selloff, according to Nick Einhorn, an analyst at Connecticut-based IPO research house Renaissance Capital. “Less mature, less profitable companies could have a tougher time going public,” Einhorn told Reuters.
If there was to be another recession, writes Investor Place’s Tom Taulli, “the IPO market will freeze up. It will mostly be only standout companies – such as Zynga and Facebook – that will get traction. A company like Groupon, which has substantial losses, may have to delay its offering or cut the valuation.”
Groupon, which more than doubled subscribers this year to 115 million, plans to abandon the use of a controversial financial measure it once touted as a good indicator of performance, two sources with knowledge of the situation said.
Hackers competing at the world’s largest hacking convention in Las Vegas found it ridiculously easy in some cases to trick employees at some of the largest U.S. companies to reveal information that can be used in planning cyber attacks against them.
Will it be more bad news for Cisco Systems? The IT giant reports its quarterly results on Wednesday and investors expect a weak outlook after Juniper Networks and Brocade Communications Systems slashed their forecasts.
Almost half the workers in Verizon Communications’ wireline telecommunications business went on strike on Sunday as negotiations for a new labor contract failed.
The more I read about Groupon’s shady accounting practices, the bleaker their future seems. I mean, their numbers (which are NOT taking in account the percentage Groupon is to pay merchants) don’t add up. How can I trust a business that relies so much on long financial float times?
On the other end of the spectrum is BigTip, whose business model is a great deal sturdier. Plus, they don’t — pardon my French — screw over small merchants the way Groupon does. They have powerful merchant tools that allow business owners to fully customize the deals. When merchants win, consumers win, too. Whether you are a business or just someone who loves to save with coupons, BigTip is the way to go.
Tech wrap: Sony’s new security setback
Mere days after Sony began restoring access to its PlayStation Network, the company said it had discovered a security flaw on one of the websites set up to help the millions of users affected by April’s massive data breach reset their passwords.
The “security hole“, as Sony spokesman Dan Race termed it, could allow the hackers who perpetrated the April breach to access the accounts using the data they had stolen. Sony shut the webpage down in response. No hacking had taken place prior to taking down the page, Race noted.
Hacking occupied the minds of executives at the Reuters Global Technology Summit as well. Mobile hacking in particular was a hot topic of discussion, with executives at software giants and startups alike expressing their desire to cash in on ways to help smartphone users protect themselves as hackers increasingly target mobile devices.
“The mobile security market will one day be bigger than that of computers,” said Neil Rimer, co-founder of Geneva-based fund Index Ventures.
In other summit news, a senior Intel executive told Reuters that the popularity of the iPad and other Apple devices often helps shape how the chipmaker thinks about future devices and the chips that will power them. An executive at Rovio, creator of the popular mobile game Angry Birds, told Reuters it is aiming for a stock market listing in New York within two or three years.
Microsoft co-founder Bill Gates seems pleased with his company’s acquisition of Skype. Combining Microsoft and Skype will vastly improve the state of video conferencing, Gates told the BBC in an interview.
