Facebook Briefly Trades Above I.P.O. Price

On Wednesday morning, shares of the world’s leading social network traded above $38 a share, the price at which the company first sold shares to the public more than a year ago.

The immediate catalyst for the rise was the company’s surprisingly strong second-quarter earnings report last Wednesday, which quelled many investors’ doubts about the company’s ability to make money from its legions of mobile users, and suggested that the company’s profit stream was growing.

Since last week’s report, shares have risen more than 40 percent. Early Wednesday, they touched $38.31 a share, although at midday, they were slightly below $37.

The company’s shares hit a low of $17.55 last fall, but since then investors have warmed to the company. Facebook has shown signs that it can significantly grow its advertising base and keep its 1.2 billion users engaged, despite competition from rival social networks like Twitter and other social sharing sites like Pinterest.

“Facebook was caught flat-footed by the shift to mobile,” said Mark Mahaney, an analyst with RBC Capital Markets. “It took them four or five quarters to catch up.”

Now, he said, “they appear to be set up as a sustainable high-growth business.”

Mr. Mahaney, whose firm has a $40 price target on the stock, said that across Wall Street, analysts had increased their projections of the company’s financial performance. Analysts now expect Facebook to grow its profits 30 to 35 percent a year through 2015.

Since stocks tend to trade as a multiple of a company’s future profits, those upgrades last week sent Facebook’s stock soaring.

Still, there are reasons to be concerned. Mobile messaging platforms like Snapchat and Whatsapp are grabbing the attention of many of Facebook’s younger users. Twitter is mounting a major effort to go after marketers, especially brands that typically advertise on television, as it prepares for its own likely public offering.

And Facebook risks turning off users with too many ads. Currently about 1 in 20 items in the news feed, the main flow of items that a Facebook user sees, are ads. During the company’s quarterly conference call with analysts, Mark Zuckerberg, the company’s chief executive, said that users were beginning to notice the number of ads, suggesting that the company cannot greatly increase their frequency without losing some users.

Although the company raised $16 billion from the initial public offering in May 2012, problems immediately followed.

The Nasdaq stock exchange botched the handling of buy and sell orders on the first day of trading. (A few months ago, regulators fined Nasdaq $10 million fine for the fiasco.) And in ensuing weeks, shares continued to fall. Many Wall Street investors questioned whether Facebook’s stock was truly worth $38 a share at the time of the offering.

Particularly worrisome was Facebook’s seemingly nonexistent mobile strategy at a time when Internet users were abandoning PCs for their smartphones. The company’s smartphone and iPad applications were clunky, and it was generating no revenue from mobile ads.

Facebook’s management, including Mr. Zuckerberg, recognized the problem and embarked on a crash course to revamp the company’s approach to mobile and better position the company for fast-growing emerging markets.

The company overhauled its apps, introduced ads into its users’ news feeds, and created a lucrative new category of revenue called app install ads. With the app install ads, a game maker, for example, can promote its new game in Facebook’s mobile software and give users an easy way to install the app with just a couple of clicks.

At the same time, Facebook introduced new advertising products meant to give marketers ways to more directly target specific groups of customers, which allowed the service to command higher advertising rates.

While mobile advertising continues to grow, and was about 41 percent of Facebook’s ad revenue in the second quarter, investors are also looking to new areas of potential profit growth. Those include video advertising in the news feed, which is expected to begin later this year, and the possible sale of ads in Instagram, the fast-growing photo and video sharing app that Facebook bought in 2012.

“All of those seem like relatively large low-hanging fruit, and they are starting to go after them,” Mr. Mahaney said. 

Panasonic pleads guilty to laptop battery pack price fixing

Panasonic and its subsidiary Sanyo have agreed to plead guilty to price fixing conspiracies involving laptop battery cells and automotive parts. They will pay a total of $56.5 million in criminal fines, the U.S. Department of Justice (DoJ) said.

Sanyo agreed to pay $10.7 million for the battery cells conspiracy and Panasonic will pay $45.8 million for its role in the automotive parts conspiracy, the DoJ said in a news release on Thursday.
LG Chem, a manufacturer of rechargeable batteries, has also agreed to plead guilty and to pay a $1.056 million criminal fine for price fixing involving battery cells, the DoJ said. Sanyo and LG Chem were involved in a battery cell conspiracy from about April 2007 until about September 2008, it said.

"The guilty pleas against Sanyo and LG Chem are the first in the department's ongoing investigation into anticompetitive conduct in the cylindrical lithium-ion battery cell industry," it said. Both companies conspired to fix the prices of battery cells sold worldwide for use in notebook computer battery packs, it added.
Lithium ion batteries are rechargeable and are often used in groups in more powerful battery packs for electronic devices. While flat, or prismatic, cells are more common in cellphones or thin-and-light laptops, cylindrical cells are used to make up most removable laptop battery packs.

Sanyo, LG Chem and their co-conspirators agreed during meetings and conversations to price the battery packs to customers at predetermined levels and to issue price quotations to customers in accordance with those agreements, according to the charges. "Sanyo, LG Chem and their co-conspirators collected and exchanged information for the purpose of monitoring and enforcing adherence to the agreed-upon prices and took steps to conceal the conspiracy," the DoJ said.

"Pleading guilty and cooperating with the division's ongoing investigations is a necessary step in changing a corporate culture that turned customers into price-fixing victims," the DoJ added.

Bits Blog: SoftBank Chief Hints at More Price Cuts for Sprint

Franck Robichon/European Pressphoto Agency Masayoshi Son, SoftBank’s chief executive, has been behind a sharp decline in prices for broadband and cellphone services in Japan.

  Sprint’s new unlimited wireless plan, announced last week after its $21.6 billion acquisition by Japan’s SoftBank, did not deliver the aggressive price cuts that some analysts had expected.
But cheaper plans could be coming.

In a phone interview, Masayoshi Son, SoftBank’s chief executive, hinted that further price cuts could be in the works as the company invests to upgrade Sprint, America’s No. 3 wireless carrier.

“We will be aggressive in technology, price packages, services on every front,” Mr. Son said from California on Wednesday. “At the same time, we will improve the network to be the world’s best,” he said.
SoftBank, the Tokyo-based Internet and mobile communications giant, has a reputation in Japan for undercutting rivals on price to gain market share. Mr. Son has been behind a sharp decline in prices for broadband and cellphone services in Japan.

Expectations are high that Mr. Son will bring that strategy to Sprint, which has struggled with subscriber defections for years and that Mr. Son will inject healthy dose of competition to America’s mobile industry.
But Sprint’s price cuts have not been particularly groundbreaking, and executives have said the cuts were in the works before the SoftBank acquisition.

Under Sprint’s new wireless plan, customers pay $80 a month for unlimited data, texting and calling, down from the $110 Sprint had charged for a similar pricing.

“This is not the ‘magic behind the black curtain’ moment that many were waiting for with SoftBank,” Jennifer M. Fritzsche, senior analyst at Wells Fargo Securities, wrote in a research note on July 12.
Sprint remains under pressure from T-Mobile USA, the No. 4 wireless network, which has been offering a $70 package for unlimited talk, text and data from earlier this year.

Verizon, the industry leader, offers a shared data plan with unlimited talk and text messages for $90 a month, while AT&T, the No. 2 network, has a similar plan for $85.

Mr. Son has said that he planned to invest $16 billion in Sprint over the next two years to shake off competition from T-Mobile while also closing the gap with Verizon and AT&T.

Most of that investment will be spent on base stations for Sprint’s advanced LTE network, he told the Nikkei newspaper earlier this month.

And if SoftBank’s past antics in Japan are a clue, Mr. Son could also start driving down prices.

Microsoft slashes the price of its Surface tablet

Microsoft has cut the price of its flagship Surface tablet. The 32GB Surface RT has dropped from £400 to £279, while the 64GB RT’s price was also cut by 30% to £359.
But the Microsoft’s Surface Pro has not seen any changes to its price. The full Windows 8 tablet starting price remains at £719 for 64GB.

The devices were launched at the end of last year to challenge Apple and Android tablets, which dominated the market.
Tablet shipments have grown 142% year-on-year in the first quarter of 2013. According to IDC, 49.2 million tablets were shipped in Q1 and 900,000 of those units were Surface RT and Surface Pro devices.
The change in pricing comes days after CEO Steve Ballmer announced plans to reinvent Microsoft with a big push to develop hardware.
Expanding beyond the Xbox and the Surface tablet, Ballmer plans to grow consumer hardware and enterprise services. “We will design, create and deliver, through us and through third parties, a complete family of Windows-powered devices,” he said.

Part of this push with devices in the consumer sector will also occur in the enterprise market.

Microsoft drops Surface RT price by as much as 30%

Microsoft slashed prices on its Surface RT tablets by as much as 30 percent, with the entry-level 32GB model selling for $349 starting July 14.

The 64GB Surface RT was also discounted by $150, and now sells for $449, or 25 percent off its former price.

When Microsoft launched the tablet, it sold the 32GB device for $499 and the 64GB configuration for $599.

Microsoft started selling the Surface RT at the lower prices July 14, as did some of its U.S. retail partners, including Best Buy and Staples. On its website, Staples noted that the discounted prices are valid until July 20, and only while supplies last.

Microsoft's website, however, listed no caveats, hinting that the lower prices might be permanent or at least will be honored for longer than one week.

The prices are another attempt by Microsoft to clear its existing inventory in preparation for a second-generation line of Windows RT devices. Previously, Microsoft had launched multiple deals to rid itself of the poor-selling tablet, most recently in June when it slashed prices by 60% in a bid to get universities and K-12 schools to buy the device.

Earlier, it kicked off a buy-a-Surface-RT-get-a-free-cover deal that ran until June 30. And at several conferences, including June's TechEd North America and this month's Microsoft Partner Conference, the company sold attendees a 64GB Surface RT for $100, 83 percent off list price.

The sale prices are nearly at Microsoft's cost, which according to estimates of the tablet's component prices, runs the company at least $284 for the 32GB Surface RT.

Microsoft has not abandoned Windows RT, the pared-down operating system that powers the Surface RT, but virtually every third-party OEM has either pointedly ignored the OS or publicly announced that they would not support it with devices of their own. Instead, the OEMs have flocked to Windows 8 Pro, even though some analysts question the value of touch devices on a platform whose biggest selling point is legacy software that doesn't support touch.

It was the lack of OEM support that made it possible for Microsoft to drop the price of the Surface RT so dramatically. Microsoft essentially had promised hardware partners that it would not undercut their pricing—unlike Microsoft, the third-party OEMs must pay for the Windows RT license—but with no competition, and thus no OEMs to antagonize, Microsoft was able to push the Surface RT into the bargain basement.

Long-time supporters of Microsoft have turned their back on Surface RT, even at the heavily-discounted price. Today, blogger Paul Thurrott, generally bullish on Microsoft, excoriated the tablet, calling it a "piece of junk" that is "simply too underpowered to provide a satisfactory experience."

Microsoft has made no noise about when, or truth be told, even if, it will debut new Surface RT devices. But it seems clear, after last week's corporate reorganization and its emphasis on a "complete spectrum" of devices—a "family of devices," as CEO Steve Ballmer put it—that the company must at some point unveil new tablets, if only to put its money where Ballmer's mouth is.

Analysts and pundits alike have held up the newest processors from Intel and ARM licensees such as Nvidia as Microsoft's best hope for gaining more ground in tablets. Those processors, battery misers and more powerful, respectively, are expected to appear in new devices this fall—in time for the holiday selling season but likely not for the almost-as-important back-to-school sales, into which Best Buy lumped the discounted Surface RT.

Microsoft has not revealed sales figures for the Surface line—which also includes the Surface Pro, powered by Windows 8 Pro—but estimates by research firms like IDC have been lackluster.

The discounted Surface RT can be purchased at Microsoft's retail and online stores, as well as retailers like Best Buy and Staples.

Staples preps Surface RT sale, as rumors of wider price slash surface

Anyone looking to snag a Windows RT tablet should hold off until Sunday, when at least one retailer will be lopping $150 off the base price of Microsoft’s Surface RT. Staples will be selling the 32GB Surface RT for $350 starting Sunday, July 14 until Saturday, July 20, as part of the retailer’s weekly promotional sales. But whether the Surface RT’s cheaper pricing is part of a larger, more permanent price cut or just a temporary drop for one model appears to be up for debate.

The Staples price drop appears to confirm an earlier report by The Verge which said Microsoft plans to cut the prices for the 32GB and 64GB Surface RT. Except it doesn’t, really.

Based on The Verge report, you will reportedly be able to pick-up the 32GB Surface RT for $350 or $450 for the 64GB model. If you want a Touch Cover accessory to go with either slate, add another $100 as you do now. But the Staples weekly ad makes no mention of a price cut for the 64GB model, even though the retailer sells that version of the Microsoft slate.

When approached by PCWorld, Microsoft said it doesn’t comment on rumors or speculation.

Wait until Sunday.
A price cut for the aging version of the Surface RT certainly wouldn’t be a surprise.

If, as Microsoft claims, the Surface RT is truly a PC then a drop in price is long overdue. The company’s RT slate first appeared in October at the same $500 price you can buy it for right now. Nine months without a price cut is an eternity for a Windows PC, where slashed costs typically come mere months after a product launches.

There are also expectations that new Surface models are on their way including rumors of 7- and 9-inch models. A next-generation Surface RT is also expected to come packed with Qualcomm’s new Snapdragon 800 chip, a veritable speed demon in the world of ARM-based chips.

From Staples' website.
So a long term price drop to move inventory would certainly make sense, especially with reports about Surface RT sales being so dismal. In May, market research firm IDC said just 200,000 Windows RT tablets shipped worldwidebetween January and March—a figure that includes Surface RT sales. (IDC and PCWorld are both owned by International Data Group.)

Then again, the Staples price cut looks like just another temporary sale in a long line of recent Surface deals. In late May, attendees of Microsoft’s TechEd conference were able to pick up a 64GB Surface RT for just $100 . Around the same time, Microsoft offered the rest of the world a free Touch or Type Cover with the purchase of a Surface RT tablet. In mid-June, Microsoft said it would offer its RT slate for just $200 for a limited time to universities and K-12 schools.

So many fire sales in such a short time span do make you think a new model is barreling down the pipeline, though.

We’ll keep our eye out for more Surface RT deals from other retailers in the coming days. In the meantime, however, the only confirmed price cut we’ve seen is the Staples deal on a 32GB Surface RT for $350.

Apple guilty of e-book price fixing

Apple has been found guilty of conspiring with five publishers to raise the prices of e-books to compete against Amazon and challenge its dominance of the market.

The three-week non-jury trial began in New York in June in which the US Department of Justice (DoJ) charged Apple with conspiring with publishers to adopt the so-called agency model.

Switching to the model meant that publishers set the price of e-books directly, effectively ending Amazon’s ability to set its own prices.

The five publishers were originally named as defendants alongside Apple, but have already reached settlements.

Penguin settled its case for $75m and Macmillan settled for $26m, while Hachette, HarperCollins and Simon & Schuster created a $69m fund for refunds to consumers.

New York judge Denise Cote found that Apple had played a central role in facilitating and executing the conspiracy and ordered a new hearing to set damages to be imposed on Apple, according to the BBC.

US Assistant Attorney General Bill Baer called the ruling "a victory for millions of consumers who choose to read books electronically".

But Apple maintains that it brought innovation and competition to the market without restricting it and said it plans to appeal against the rule and continue its fight against “false allegations”.

If Apple fails to get the ruling overturned, the company could face a separate trial by state attorney generals and consumers pursuing class actions and seeking monetary damages.

Apple last year settled an e-book price-fixing antitrust case with the European Commission.

Bits Blog: The Price of Amazon

Jeff Swensen for The New York Times Jim Hollock’s first book, “Born to Lose,” has been losing momentum, yet Amazon has increased the price by nearly a third.
The Amazon.com story is remarkable. Within living memory, bookselling was a local activity. A major city would have two or three large independent stores selling new books and other large, scruffier stores selling secondhand books. Paperbacks would receive wide if uneven circulation on bus station and drugstore racks. It was not a perfect system, but it had the advantage of being diffuse and thus hard to control. The hippie, black and women’s movements of the 1960s would not have been so successful in challenging authority without the bookstores, which made their ideas widely available and sympathetic in a way that television, for instance, did not.

That transmission system has now been largely dismantled, killed by high rents and new technology. With little discussion, Amazon has skillfully absorbed a large part of the book trade. It sells about one in four new books, and the vast number of independent sellers on its site increases its market share even more. It owns as a separate entity the largest secondhand book network, Abebooks. And of course it has a majority of the e-book market.

The company is a marvel in many ways. You can get almost any print book you want, by the end of the week! And Amazon will pay the postage! For book lovers, it was a dream come true. Amazon presents itself as less a company and more a public utility. One of its greatest accomplishments is the way it has made the future of bookselling seem as if it will inevitably be owned by Amazon.

One consequence of this shift is that soon no one will know what a book’s “real” price is. Price will be determined by demand and perhaps by whim. The first seeds of this can be seen in the Justice Department’s suit against the leading publishers, who felt that Amazon was pricing their e-books so low that it threatened their viability. The government accused the publishers of colluding to raise prices in an anti-consumer move. Amazon was not a party to the case, but it emerged the big winner.

Perhaps as a result, the question of how Amazon prices books is now a radioactive topic with some publishers. While reporting my article in Friday’s New York Times, I tried to ask the University of Chicago Press why Amazon seemed to be cutting discounts on its books, effectively making them more expensive and thus possibly less salable. Laura Avey, promotions manager, replied: “This just isn’t something that anyone here is going to be able to comment on. Pricing questions involve proprietary information, and we just aren’t able to share that.”

One of the few publishers willing to speak his mind about Amazon is Dennis Loy Johnson, proprietor of the Melville House, one of the most interesting new presses since its founding in 2001. Melville had an immediate hit last month with a rediscovered article by James Agee, “Cotton Tenants.” But as sales slow in the days since publication, Amazon is charging more for it.

The price-tracking site camelcamelcamel shows “Cotton Tenants,” which lists for $24.95, moving from $16 on Amazon shortly after publication to $19.79 last week before falling back slightly to the current $19.23. If you were a few weeks late getting the news about “Cotton Tenants,” you paid 20 percent more.

But it is still cheaper than the neighborhood bookstore, assuming of course there is one left. Right?

“I don’t like the fact that there’s one retailer able to so massively underprice other retailers, especially in a business that so desperately needs more retailers,” Mr. Johnson said. “And I don’t like the inconsistency of the pricing, either — the raising, the lowering — because it sends a confusing message that good books are worth less, and because it encourages buying based on something other than the quality of the book. It’s just an unhealthy business if people are buying a thing mostly because of its price, not its quality. That’s how you sell widgets, not books.”

“Discounting, and especially inconsistent or shifting discounting, really messes with a publisher’s ability to price a book fairly and accurately to its cost,” he added. “You have to consider the fact that whatever price you put on the cover, Amazon is going to reduce it by as much as half — unless they don’t — or they may, but only for a while. But in short they’re going to make your book look like a thing with a cost lower than the one you placed on it.

“So do you raise the price, knowing they’re going to lower it, so that the price will then appear closer to what you need it to be? But if you do that then you’re screwing the more honest retailers who can’t discount. And we’ve gotten a long way from recognition of the fact that publishers have costs in making books, and that should have something to do with the price.”

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High price of personal protection for top tech CEOs

Some tech boardrooms go to expensive lengths to protect the top brass, authorising company funds for cars, drivers, bodyguards, and home security systems to keep the CEO safe.

 

The cost is high, but proponents view safeguarding the CEO as a necessary business expense. The CEO is among a company's most valuable assets, and protecting that asset can minimise corporate risk and align with shareholder interests.

 

Network World analysed pay packages at 49 tech companies and found seven that itemised security-related perks received by the CEO. One of the most expensive programs is at Oracle, which paid $1.5 million to secure CEO Larry Ellison's primary residence.

 

"We require these security measures for Oracle's benefit because of Mr. Ellison's importance to Oracle, and we believe these security costs and expenses are appropriate and necessary," Oracle wrote in its proxy statement. Ellison paid for the procurement and installation of the security equipment, and he's responsible for maintaining the system. Oracle pays for the annual costs of security personnel.

 

At a time when executive perks in general are on the decline, CEO security is one that has staying power.

 

"We're definitely seeing a removal of perks, particularly the perks that would be considered shareholder irritants, like excise tax gross-ups," says Joe Sorrentino, managing director at Steven Hall & Partners, an executive compensation consulting firm in New York. "One perk that still has some staying power is corporate aircraft usage," Sorrentino says.

 

Companies often justify letting the CEO use corporate aircraft for personal travel because of security concerns -- the same reason they fund personal and residential security programs.

 

The security perk "is still pretty common for the very large, high-profile companies -- defense companies, major consumer goods companies ... financial services firms," Sorrentino says. "We're not seeing any increases in [security-related] perks. However for the big-name companies, it's not surprising to see it. I don't think it's a majority, but it's a healthy minority."

 

Salesforce.com worked with a security consulting firm to design CEO Marc Benioff's security program, which it deems "necessary and appropriate for the protection of our CEO given the history of direct security threats against the senior executives of major U.S. corporations and the likelihood of additional threats against these individuals in the future."

 

Salesforce.com established its security program in 2012 "in response to bona fide business-related security concerns for our CEO," the company stated. Last year's security costs for Benioff came to $648,456, which included physical and personal security services, including on-site residential security.

 

"As our founder who has led the Company for more than 13 years, our CEO has overall responsibility for our business strategy, operations, and corporate vision. The Compensation Committee not only believes that ensuring his personal safety is vital to our success as an organisation going forward, but that establishing such a program would be a prudent action in light of its overall risk management responsibilities," Salesforce.com asserted.

 

As part of Marissa Mayer's employment agreement, Yahoo agreed to reimburse her for up to $50,000 of security expenses per year. In 2012, the company paid $39,467 for personal security services for CEO Mayer, who joined the company in July of last year.

 

NCR paid $55,636 in security-related costs for its CEO, William Nuti. The payments are for "the Company-provided car and driver Mr. Nuti is required to use for security purposes in and around the New York City area, to the extent that such trips were for commuting purposes," NCR explained in its proxy statement.

 

In the same pricing league is Intel, which paid $58,600 for home security expenses for former CEO Paul Otellini, who retired this spring.

 

AT&T picked up the tab for CEO Randall Stephenson's home security, which amounted to $101,923 in 2012.

 

The tab at Amazon.com is much higher: $1.6 million on security for CEO Jeff Bezos. The Internet retailer justifies the security expenses in part because of Bezos' low compensation (besides the $1.6 million security perk, Bezos' only pay is his $81,840 salary).

 

"We provide security for Mr. Bezos, including security in addition to that provided at business facilities and during business-related travel," Amazon wrote in its proxy statement. "We believe that all Company-incurred security costs are reasonable and necessary and for the Company's benefit, and we believe that the amount of the reported security expenses is especially reasonable in light of Mr. Bezos' low salary and the fact that he has never received any stock-based compensation."

 

There are likely other tech CEOs who receive security perks in addition to these seven tech leaders, but not all of those perks are itemised in financial reporting documents. For example, Time Warner Cable paid for CEO Glenn Britt's "personal use of a Company-provided car and specially trained driver provided for security reasons," but didn't disclose the cost.

 

The U.S. Securities and Exchange Commission doesn't require companies to report the exact cost of a perk if the benefits are valued at less than $10,000 -- but it does view CEO security as a perk. While a company might consider the CEO's security to be a corporate expense, the SEC sees it differently because there's a personal benefit associated with company-paid security and because it's not a benefit that's offered to all employees.

 

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