Slashdot Mirror

INKOU, Taiwan -- As Barry Lam shows a visitor around the art gallery on the top floor of his corporate headquarters, his gaze keeps coming back to a blue-and-green landscape by the legendary Chinese painter, Zhang Daqian.

The painting is called "Dawning Light in Autumn Gorges," and Mr. Lam loves its deep hues and moody, impressionistic style. And with its depiction of morning sun piercing the gloom of a mountain valley, the painting could stand as a metaphor for Taiwan, Mr. Lam's adoptive home and the birthplace of his 14-year-old company, Quanta Computer.

After weathering a crash in the global technology industry that shrouded its economy, Taiwan is creeping cautiously out of the darkness. Analysts say the island's economy hit bottom late last year and will recover gradually along with the industry.

Through it all, though, Quanta maintained its glow, managing to grow briskly during Taiwan's recession by winning lucrative orders from Apple Computer (news/quote) and Dell Computer (news/quote) to overtake Japan's Toshiba (news/quote) as the world's No. 1 maker of notebook PC's.

But that raises a question: if bad news ended up being good news for Quanta, then what will good news mean for the company? Mr. Lam, not surprisingly, thinks it will mean even more torrid growth. He predicts that Quanta will rack up $5 billion in sales this year, a 51 percent increase over 2001. By 2004, he says, Quanta will be a $10 billion company.

"Once companies begin to outsource, they never go back," Mr. Lam, 53, said in an interview at his office here, in a suburb of Taipei. "When companies minimize their costs, they can spend more on R & D and marketing. It's just very logical."

That logic has turned Quanta into perhaps the most important, least well-known computer maker in the world. Buy a notebook PC from Dell, Gateway, Compaq Computer (news/quote), or Hewlett-Packard (news/quote), and the odds are that some or all of it was assembled by Quanta, which is now using its strength in laptops to move into the desktop market, too, by putting together Apple's stylish new iMac.

The company already produces PC's for seven of the top 10 notebook companies. It manufactures close to half the notebooks sold by Dell, making it by far Dell's largest supplier. It will turn out more than five million notebooks this year, 30 percent of all those made in Taiwan. Taiwan, in turn, makes 55 percent of the world's notebook computers.

"Quanta is to Dell what Dell is to the American consumer," said Peter Kurz, the chief executive of Insight Pacific, an investment advisory firm based in Taipei. "It is an industrial brand name, and that is not easy to replicate."

Taiwan has a handful of these anonymous giants -- outfits with names like Compal, Asustek, Arima and Taiwan Semiconductor -- and they have turned Taiwan into the subcontractor of choice for the global technology industry.

That is why when spending on information technology dried up last year, it plunged Taiwan into the deepest recession in its history. It is also why executives here are watching the fledgling recovery in the United States with hope and trepidation.

Quanta's sales rose 32 percent in February over the previous year, to $294 million, as American companies began placing orders for notebook computers, liquid-crystal displays and other equipment. But the rebound is not across the board: United Microelectronics, the second-largest contract manufacturer of semiconductors, said its sales declined 52 percent in February from a year ago.

"So far, the recovery has been primarily in the area of consumer PC's," said Matt Cleary, the head of Asian technology research at Lehman Brothers (news/quote) in Taipei. "Telecom equipment and general corporate purchases have yet to come back."

Beyond that, executives here recognize that the boom in notebook computers cannot last forever. For now, laptops continue to flourish as consumers and companies move away from cumbersome desktop PC's. But Mr. Lam said there was no "killer application" on the horizon that would fuel demand once sales of notebooks reached a plateau.

This means that the pressure to cut production costs will intensify. If the much-debated merger of Compaq and Hewlett-Packard goes through, the combined company has said it would look for savings in its notebook PC business.

In the short-term, Mr. Lam said, such trends favor Quanta.

"The I.T. market is not growing as it used to," Mr. Lam said. "That means competition between the brands is growing. The market is squeezed, so they have to do more outsourcing. If we're the best company for outsourcing, then very logically, our market share will grow."

Quanta laid claim to its No. 1 ranking in Taiwan much as Dell has in the overall PC market: by assembling the most powerful, and supple, supply chain in the island's computer industry. Using the Internet, customers like Dell can send Quanta orders for notebooks with a wide variety of specifications.

By carefully managing its own suppliers, Quanta is able to assemble each order within 48 hours. Mr. Lam hopes to cut that to 24 hours, since he notes ruefully that it takes 24 hours to ship a finished machine to the United States.

By delivering PC's so quickly, Quanta allows customers like Dell to keep inventories tiny, which fattens their margins. Dell popularized the concept of just-in-time manufacturing, but its success in notebooks depends in large measure on the efficiency of Quanta.

"A marketer like Dell has to have complete confidence in its supplier," said Mr. Kurz of Insight Pacific. "I call it a chain of trust."

Mr. Lam runs more than just a crack assembly line. Quanta employs a sophisticated design team, with some of the most talented and best-paid engineers in Taiwan, who regularly suggest ways to improve the products of their customers.

The focus on design flows from Mr. Lam, a slim, soft-spoken man whose fashionable eye glasses and suits would look at home in Silicon Valley.

"Barry is different than anyone I know," said Max Fang, the former chief of Asian procurement for Dell. "He is a combination of an engineer and an artist."

Mr. Lam demurs when asked to name specific features dreamed up by his designers; the downside of being a subcontractor is having to dwell in the shadow of one's customers. Apple in particular has ordered Quanta not to discuss its work on the updated iMac, a stylish desktop PC with a white domed base and a flat panel monitor attached by a telescopic arm.

Tony Tseng, a technology analyst at Merrill Lynch (news/quote) in Taipei, estimates that the iMac contract will generate 20 percent of Quanta's revenues this year.

"The reason Barry is so bullish is because he got the iMac contract," Mr. Tseng said. "Quanta was hitting the ceiling with its existing clients."

One of those clients, Dell, has prodded Quanta to move more of its production to mainland China, where labor and other costs are much lower.

Joining the exodus to China raised ticklish issues for Mr. Lam. He is a strong supporter of Taiwan's president, Chen Shui-bian, whose party has expressed misgivings about the migration of technology and jobs from Taiwan to the mainland. Until recently, Taiwan restricted the production of notebook computers by local companies in China.

Mr. Lam's solution was to say little about Quanta's ambitions in China, while quietly laying the groundwork for an expansion. The company built a sprawling factory near Shanghai, with room for 20,000 workers. By the time Taiwan lifted the restrictions on manufacturing in China last fall, Quanta already had 2,000 people in place there.

By the end of 2003, Mr. Lam said, two-thirds of Quanta's notebook PC's will be assembled in the Shanghai factory. By 2004, the company will have an estimated 4,800 employees in the Chinese mainland, almost as many as in Taiwan.

Mr. Lam, however, hastens to add that Quanta will remain committed to Taiwan. He plans to build an architecturally splashy research and development center across the street from his headquarters. In addition to a hotel for Quanta's guests, it will house a museum devoted to science and technology.

"I love my country so much," Mr. Lam exclaimed suddenly, after the conversation drifted back to China. "I'm O.K. with our president."

Mr. Lam speaks with the patriotic fervor of an immigrant. He was born in Shanghai and raised in Hong Kong, where his father worked as an accountant at the Hong Kong Club, a watering hole for the city's British colonial elite.

When Mr. Lam failed his entrance examination for the University of Hong Kong, his father sent him to Taiwan to enroll at National Taiwan University. He graduated with a degree in electrical engineering and soon founded his first company, a pocket calculator maker that became the world's largest manufacturer. In 1988, he started Quanta.

Mr. Lam owns one-third of the company's shares, making him one of the richest men in Asia, with a fortune of about $1.7 billion. He says Taiwan's tradition of entrepreneurship will keep it ahead of China for the foreseeable future.

"You cannot build another Acer without Stan Shih," he said, referring to one of Taiwan's business leaders. "You cannot build another Quanta without Barry Lam."

Mr. Lam's art collection is the most obvious sign of his wealth, but he is no mere dabbler. He is regarded as the leading private collector of Zhang Daqian, and speaks fluently about the artist's work. Mr. Lam said that when he turns 59 -- which will coincide with Quanta's 20th anniversary -- he would retire to open a new art museum in Taiwan.

"Taiwan has been so well developed economically," Mr. Lam said. "But we are underdeveloped culturally."

according to this lovely chart. Thats respectable, I suppose. Although if this company had IPO's 3 years ago they'd have been at $400 by now, and $1000 by tuesday :P

Just looking over the 'investor relations' page. Looks like they recently changed their stock symbol.

this story yesterday on CBS Market Watch states that HP is looking to close a plant in France, outsource their PC manufacturing and all of this is independent of the CPQ merger.

the story above may be a move to put pressure on approving the merger.

This CBS Marketwatch article gives some insight into how these decisions get made. Welcome to the Corporate States of America.

It is all over comedy central too. I watch that channel more than any other (by far) and Impostor is being promoed to death on that channel as well.

I would have thought comedy central, sci-fi, and dimension (film distributor) was all owned by the same company, but that is not the case, so actual money did change in promoting this movie.

Sci-Fi is owned by USA Networks (which was just bought by Universal/Vivendi, the same company that owns mp3.com)

Comedy Central is owned by Viacom, says this site.

Dimension is owned by Miramax, which is owned by Disney -- says this site and this site.

I don't watch too much tv, but you would think that Disney would plug the movie on ABC and ESPN, which it also owns, especially since they are hurting for cash right now. Why not promote in house?

How is this related to Impostor? Only tangentially. But be aware of the Big Six media companies. Three are involved in this film. It's more than six, but the other companies are AOL/TimeWarner, Sony, NewsCorp, and Bertelsmann (of Napster fame).

Others would add GE to the list, because they own NBC.

In any case, the entirety of our information and entertainment world comes nearly exclusively through those 8 companies.

Looks like the folks at CBS MarketWatch are so quick to get the news out that they issued a press released based almost entirely on spymac.com's faked photos and 'sources'.

This
article really makes me want to follow CBS's investment advice.

...Marriott Marquis Theatre, NYC for October 25th. Ye know, the theatre badly needs some Huffman compression for that day...

I think this was posted in the last story, but I've found it to be an OK up-to-the-minute source..

http://cbs.marketwatch.com/news/newsfinder/default .asp?siteid=mktw

Just watching that go by every minute, and seeing the events go on is just disgusting..I've been nauseous all morning just seeing everything happen little by little..yuck.

They have video of the planes hitting and the towers falling.

marketwatch.com

I think this might be a more logical explanation..

Not that I don't appreciate a good conspiracy theory (-:

More detailed info here. There is an article here that more or less says the same thing you do but doesn't reach the same conclusion.

According to this MarketWatch article, October 15 will be the date when the application will be re-granted (and thus the information will be made public again).

I doubt econoboxes are driving insurance rates up. The insurance industry has gone back and forth over this (for higher rates: safety, theft, higher liability, cause more deaths, etc.; against: safety for occupants). Allstate and Progressive charge more for SUVs while State Farm gives them a discount. Given that they waste about $250 a month on ego. For people to claim that SUVs are safer, they are only looking at from the aspect of being an SUV occupant in a crash. They are actually dangerous if you are in a car and are hit by one. Given that SUVs are less maneuverable and take longer to stop due to their mass, you probably have a better chance of avoiding an accident in a car. Since 85% of them aren't being used for what they are designed for, it is a waste. For most people, having a SUV in a metro area is just plain DUMB (let's have one person commute ina 10-15mpg vehicle, take up two parking spaces, or can't fit in some parking garages [a guy at work can't park his Excursion in the garage because it's too tall]). I can think of better things to spend my money on.

According to this article, an SUV owner spends an extra $100-$250 per month compared to a regular car in just operating costs on top of the extra cost of the vehicle. It would be better to put this in a retirement fund. Considering that 85% of these vehicles are never used for the conditions they are designed for, that really is a waste. All for ego.

On Thursday, the U.S. District Court for the Eastern District of Virginia cleared Rambus of fraud charges related to DDR. However, it maintained that Rambus had committed fraud with respect to SDRAM, Wiseman said.

"The court affirmed Infineon's broad theory, and found that Rambus did intentionally defraud JEDEC in respect to SDRAM standardization," said attorney John Desmarais of Kirkland & Ellis, the New York law firm representing Infineon.

Rambus plans to file an appeal on the SDRAM decision in the U.S. Circuit Court of Appeals for the District of Columbia.

• AP on yahoo daily news
• C-Net News.com
• CBS Marketwatch

then to me it's time to cash out my options and jump ship.

maybe not.

From an analyst by way of CBS Market Watch

Brian Alger, an analyst at Pacific Growth Equities, said the licensing deals will attract attention, but may not amount to much. "People are going to see Transmeta and AMD working together against Intel (INTC: news, msgs, alerts) ," he said. "That's a nice perception, but it's not real. They're not going in side-by-side with their sales force saying 'Don't buy Intel, buy one of our two."'

This makes it sound like Slashdot "took the bait". The market opens in 10 minutes. Let's see how many traders react the same way.

the new Treasury Secretary advocates the abolition of corporate taxes and capital gains taxes on corporations, giving the American Corporation all the privileges and benefits of personhood under the law, while requiring none of the sacrifices or responsibilities. Oh, yeah, he also kept 100 million US dollars in stock options from his former job as CEO of Alcoa Aluminum, one of the US's biggest energy hogs, polluters, and abusers of the current system, after his confirmation.

He also favors the abolition of Social Security, MediCare and the tax advantages of deferred retirement plans.

Another example of where the Korporate Kompassionate Konservatives want to take us as a country. Oh, and for those of you who live outside the US, this is where YOUR governments wish to go, as they move to the KKK's dependence on Korporate bribes^H^H^H^H^H^H....errr...Kompassionate Kontributors' Kontrol of the various governments.

Any doubt anymore about who REALLY owns this government?

The clip is just a few minutes long.

> Somebody nuke NBCi and this other group for me

It's already happened :) NBCi have been aquired by NBC (think "stop the bleeding"), who are shutting it down.

Not this quarter. They are expected to loose 1 cent a share.

--

this article says it's server issues. i was trying last night to download some random files off of their download site and was getting the "This server was unable to complete your request." then something about hitting too many web threads or something. that would be a DOS attack. i think they took down the dns to isolate the problem, repair it, and then get on with life.

i could be wrong. *shrug*

My question was, and still is, will access be limited to MSN only? (Thursdays CBS Marketwatch article) Note: Customers will be able to access Microsoft's MSN...

Personally, I think Austin Powers 2 was more factual than we were lead to believe. Obviously this is Dr. Evil and Mr. Bill getting ready for world domination. What next, wireless broadband in the mall, at McDonald's, on the jet? The possibilities are endless. I suggest dubbing this 'eKudzu'.

--
+++ Out Of Cheese Error +++
+++ MELON MELON MELON +++

yes, please make the al gore crack
no

point
8 11/16 points.

nice =)
thank you.

yes, please make the al gore crack
no

point
8 11/16 points.

nice =)
thank you.

Speaking of gaming crashes, apparently WOTC has gotten screwed over by corporate money grubbers, because their stock prices aren't doing so well. Check this out. Hasbro's won at least one gamer's emnity now.

Right. Apple sued Microsoft for the Windows look a few years ago, and lost.
Even though I think Apple's wrong here, I can see why they're doing it; it appears their default risk is very high, and they are scratching for every penny.

for those of you who haven't seen it, here's a link:

link

In other news, a link was posted in a slashdot comment today that wasn't to goatse.cx...

--

• CBS MarketWatch
• C|Net
• The Register
• The BBC
• Wall Street Journal
• Basically
• Microsoft suspect the access was granted to St Petersburg (Russia) computer systems by use of the QAZ Trojan. The FBI is investigating.
  

How is LNUX doing these days???
--

An excerpt:

• Courts in Hawaii, Iowa, Kentucky, Nevada, Oregon, Rhode Island and Texas have dismissed similar class-action lawsuits on grounds that laws in those states don't allow them.

... that parents routinely drug their children to achieve desirable behavior, then turn around and drug themselves with prozac, caffein[e], or alcohol to fill the emptiness of their own sorry existence.

No kidding. Am I the only one who finds it a little disturbing that the FDA recently ga ve approval to a prozac derivative for the treatment of PMS? And don't get me started on alcohol....

I have heard RedHat partner with AMD, Motorolla, IBM and the GNOME Foundation in the last week. While I am sure that stragetic partnerships are good for RedHat and Linux, I begin to wonder how much resources RedHat has to offer.

Do they have the manpower to effectively contribute to these relationships?

I _hate_ to be a karma whore, but I saw this post just as I was checking out Ericssons stock (ERICY) on yahoo quotes.

CBS MarketWatch
C|net News.com

This doesnt make me a karma whore, does it? :(
After all, there are _no_ links to media coverage in the article. o well..
Enjoy the links...
/nutt

Here are a couple of quotes:

Napster went too far. A wildly popular software application and Web community for its millions of users, the company took already-existing Internet protocols (FTP, gopher and HTTP), added a nice Web interface and marketed itself as the best place to "share" music.

...

The judge was fast to point out that if these uses were so substantial, then it should not harm the company's bottom line to prohibit the infringing uses, but save the noninfringing uses. And, if the company cannot find a technological solution that allows it to separate its legal uses from its illegal uses, then maybe "the 19-year-old who was clever enough to invent the program" is not so clever after all.

That is the moral of the latest chapter in the Napster story. A company that is smart enough to write an application that is used by 20 million people should be smart enough to find a way for that application to conform to the law. And if the company does not think that conforming to the law is important, then maybe it is not smart enough to succeed.

Fine, your post is all well and good if the people who lost their money were only day traders and MSFT shareholders but this unfortunately is not the case. The biggest losers in the stock market have been Linux pure plays. I know this because I have virtual portfolios and track the shares of Corel, VA linux, Red Hat and Caldera several times a day. It is clear from reading their charts that Linux companies have been dropping like rocks since mid-January while the entire Tech industry has been soaring up until the beginning of this month.

Several of these companies sent out the letter to several hackers who borrowed money or said they did here and here. Now how does it feel laughing in the face of poor students and hackers because they decided to invest in Linux based companies (which you obviously didn't because you'd be b*tching if you had shares in a company that was trading lower than it's IPO value like Andover and VA Linux instead of saying crap about doing research). I personally believe that gloating over the misfortune of others is evil especially since it affects us all. Firstly this will probably result in more mergers and aquisitions thereby consolidating power in fewer companies, also the fact that $2 trillion dollars was lost last week in the market correction thereby erasing the last year's $1.7 trillion gain in household income from stocks is not something to gloat over.

The fact that the post I am responding to has been moderated to a 5 makes me wonder about the character of the typical slashdot reader(i.e. moderator).

--

Crackers broke into the external server and used that to get past a firewall to the server with their customer credit card database.

According to Netcraft, www.realnames.com runs Microsoft IIS/4.0 on Windows NT or Windows 98.

My favorite quote: "I'd run naked on Market Street before I'd want this", [CEO] Teare said.

Let me begin by pointing you to the Fundam entals page for Sony on CBS Marketwatch. Sony is currently valued by the market at around $110 billion -- this is the market capitalization. There are, according to this page, 411 million shares outstanding. Over the last 200 trading days, an average of 205,100 shares have been traded each day, or 4/100ths of 1 percent of the shares.

I compared this stock to General Electric, which is another extremely large, established company. In spite of the fact that General Electric is worth about 4 times as much as Sony (comparing market caps), 3 times as many shares in GE as a percentage of its total number of shares outstanding trade each day.

This means that GE is much more liquid (easy to trade) than Sony. That is potentially a good reason to split Sony stock, because the easier it is to buy or sell a stock, the less wildly the price tends to swing. Liquidity is considered a good thing by institutional investors and people who trade stocks for a living. By contrast, lack of liquidity is the reason that Internet companies move up and down fairly violently on a daily basis.

The reason that some stock market newcomers think stock splits are indicators that the company is moving boldly is that recently, many companies that have announced splits have seen their stock prices soar immediately afterward. This initially happened with Internet-related companies like Amazo n.com, but it has gotten really out of hand lately, with companies like Qualc omm.

Stock splits are really market neutral events. If a stock is at 100 the day before the split, and it splits 2-for-1, it's value at the open should be 50. I say "should be" because a stock often does not open at exactly the same price as it closes, so if there is a 2-for-1 split, the stock should open at around half the price of the close the previous day.

This brings us to another fallacy in the article. It says that a stock split is a "financial maneuver that is a risky move". The stock that traded for 100 per share yesterday was not issued by the company yesterday -- it was issued at some time in the past. The trade at 100 that took place yesterday was between two participants in the stock market who (probably) had no relationship to the company.

So, when the stock opens at 50 on the next day, after splitting two for one, not only did the people who traded the stock not lose anything (since they automatically have 2x the number of shares), but the company did not lose anything since they did not own the stock that was traded yesterday. Of course, any stock that the company is holding on its balance sheet (generally called treasury shares) did not increase or decrease in value, since the number of shares doubled while the price was cut in half.

I could go on with this analysis all night, but let me jump to the end of the Daily Radar article. The author makes the statement:

The company is building its entire product line around the PlayStation2. If the console fails, Sony's entire market plan will be lost.

All I can say about this is that he must mean that the company is building its entire video game console product line around PlayStation2. Sony does a lot more than produce game consoles. In addition to its video game console business, it owns 11 different recording labels, a TV and movie production business which produces such insignificant products as the TV series Dawson's Creek, and Sony Electronics which makes everything from chips to Jumbotrons.

That's why the company is worth over $110 billion, and that's just a few reasons why this article is so humorous to people who enjoy analyzing businesses and buying small pieces of them.

--

Dave Aiello

Let me begin by pointing you to the Fundam entals page for Sony on CBS Marketwatch. Sony is currently valued by the market at around $110 billion -- this is the market capitalization. There are, according to this page, 411 million shares outstanding. Over the last 200 trading days, an average of 205,100 shares have been traded each day, or 4/100ths of 1 percent of the shares.

I compared this stock to General Electric, which is another extremely large, established company. In spite of the fact that General Electric is worth about 4 times as much as Sony (comparing market caps), 3 times as many shares in GE as a percentage of its total number of shares outstanding trade each day.

This means that GE is much more liquid (easy to trade) than Sony. That is potentially a good reason to split Sony stock, because the easier it is to buy or sell a stock, the less wildly the price tends to swing. Liquidity is considered a good thing by institutional investors and people who trade stocks for a living. By contrast, lack of liquidity is the reason that Internet companies move up and down fairly violently on a daily basis.

The reason that some stock market newcomers think stock splits are indicators that the company is moving boldly is that recently, many companies that have announced splits have seen their stock prices soar immediately afterward. This initially happened with Internet-related companies like Amazo n.com, but it has gotten really out of hand lately, with companies like Qualc omm.

Stock splits are really market neutral events. If a stock is at 100 the day before the split, and it splits 2-for-1, it's value at the open should be 50. I say "should be" because a stock often does not open at exactly the same price as it closes, so if there is a 2-for-1 split, the stock should open at around half the price of the close the previous day.

This brings us to another fallacy in the article. It says that a stock split is a "financial maneuver that is a risky move". The stock that traded for 100 per share yesterday was not issued by the company yesterday -- it was issued at some time in the past. The trade at 100 that took place yesterday was between two participants in the stock market who (probably) had no relationship to the company.

So, when the stock opens at 50 on the next day, after splitting two for one, not only did the people who traded the stock not lose anything (since they automatically have 2x the number of shares), but the company did not lose anything since they did not own the stock that was traded yesterday. Of course, any stock that the company is holding on its balance sheet (generally called treasury shares) did not increase or decrease in value, since the number of shares doubled while the price was cut in half.

I could go on with this analysis all night, but let me jump to the end of the Daily Radar article. The author makes the statement:

The company is building its entire product line around the PlayStation2. If the console fails, Sony's entire market plan will be lost.

All I can say about this is that he must mean that the company is building its entire video game console product line around PlayStation2. Sony does a lot more than produce game consoles. In addition to its video game console business, it owns 11 different recording labels, a TV and movie production business which produces such insignificant products as the TV series Dawson's Creek, and Sony Electronics which makes everything from chips to Jumbotrons.

That's why the company is worth over $110 billion, and that's just a few reasons why this article is so humorous to people who enjoy analyzing businesses and buying small pieces of them.

--

Dave Aiello

Let me begin by pointing you to the Fundam entals page for Sony on CBS Marketwatch. Sony is currently valued by the market at around $110 billion -- this is the market capitalization. There are, according to this page, 411 million shares outstanding. Over the last 200 trading days, an average of 205,100 shares have been traded each day, or 4/100ths of 1 percent of the shares.

I compared this stock to General Electric, which is another extremely large, established company. In spite of the fact that General Electric is worth about 4 times as much as Sony (comparing market caps), 3 times as many shares in GE as a percentage of its total number of shares outstanding trade each day.

This means that GE is much more liquid (easy to trade) than Sony. That is potentially a good reason to split Sony stock, because the easier it is to buy or sell a stock, the less wildly the price tends to swing. Liquidity is considered a good thing by institutional investors and people who trade stocks for a living. By contrast, lack of liquidity is the reason that Internet companies move up and down fairly violently on a daily basis.

The reason that some stock market newcomers think stock splits are indicators that the company is moving boldly is that recently, many companies that have announced splits have seen their stock prices soar immediately afterward. This initially happened with Internet-related companies like Amazo n.com, but it has gotten really out of hand lately, with companies like Qualc omm.

Stock splits are really market neutral events. If a stock is at 100 the day before the split, and it splits 2-for-1, it's value at the open should be 50. I say "should be" because a stock often does not open at exactly the same price as it closes, so if there is a 2-for-1 split, the stock should open at around half the price of the close the previous day.

This brings us to another fallacy in the article. It says that a stock split is a "financial maneuver that is a risky move". The stock that traded for 100 per share yesterday was not issued by the company yesterday -- it was issued at some time in the past. The trade at 100 that took place yesterday was between two participants in the stock market who (probably) had no relationship to the company.

So, when the stock opens at 50 on the next day, after splitting two for one, not only did the people who traded the stock not lose anything (since they automatically have 2x the number of shares), but the company did not lose anything since they did not own the stock that was traded yesterday. Of course, any stock that the company is holding on its balance sheet (generally called treasury shares) did not increase or decrease in value, since the number of shares doubled while the price was cut in half.

I could go on with this analysis all night, but let me jump to the end of the Daily Radar article. The author makes the statement:

The company is building its entire product line around the PlayStation2. If the console fails, Sony's entire market plan will be lost.

All I can say about this is that he must mean that the company is building its entire video game console product line around PlayStation2. Sony does a lot more than produce game consoles. In addition to its video game console business, it owns 11 different recording labels, a TV and movie production business which produces such insignificant products as the TV series Dawson's Creek, and Sony Electronics which makes everything from chips to Jumbotrons.

That's why the company is worth over $110 billion, and that's just a few reasons why this article is so humorous to people who enjoy analyzing businesses and buying small pieces of them.

--

Dave Aiello

Let me begin by pointing you to the Fundam entals page for Sony on CBS Marketwatch. Sony is currently valued by the market at around $110 billion -- this is the market capitalization. There are, according to this page, 411 million shares outstanding. Over the last 200 trading days, an average of 205,100 shares have been traded each day, or 4/100ths of 1 percent of the shares.

I compared this stock to General Electric, which is another extremely large, established company. In spite of the fact that General Electric is worth about 4 times as much as Sony (comparing market caps), 3 times as many shares in GE as a percentage of its total number of shares outstanding trade each day.

This means that GE is much more liquid (easy to trade) than Sony. That is potentially a good reason to split Sony stock, because the easier it is to buy or sell a stock, the less wildly the price tends to swing. Liquidity is considered a good thing by institutional investors and people who trade stocks for a living. By contrast, lack of liquidity is the reason that Internet companies move up and down fairly violently on a daily basis.

The reason that some stock market newcomers think stock splits are indicators that the company is moving boldly is that recently, many companies that have announced splits have seen their stock prices soar immediately afterward. This initially happened with Internet-related companies like Amazo n.com, but it has gotten really out of hand lately, with companies like Qualc omm.

Stock splits are really market neutral events. If a stock is at 100 the day before the split, and it splits 2-for-1, it's value at the open should be 50. I say "should be" because a stock often does not open at exactly the same price as it closes, so if there is a 2-for-1 split, the stock should open at around half the price of the close the previous day.

This brings us to another fallacy in the article. It says that a stock split is a "financial maneuver that is a risky move". The stock that traded for 100 per share yesterday was not issued by the company yesterday -- it was issued at some time in the past. The trade at 100 that took place yesterday was between two participants in the stock market who (probably) had no relationship to the company.

So, when the stock opens at 50 on the next day, after splitting two for one, not only did the people who traded the stock not lose anything (since they automatically have 2x the number of shares), but the company did not lose anything since they did not own the stock that was traded yesterday. Of course, any stock that the company is holding on its balance sheet (generally called treasury shares) did not increase or decrease in value, since the number of shares doubled while the price was cut in half.

I could go on with this analysis all night, but let me jump to the end of the Daily Radar article. The author makes the statement:

The company is building its entire product line around the PlayStation2. If the console fails, Sony's entire market plan will be lost.

All I can say about this is that he must mean that the company is building its entire video game console product line around PlayStation2. Sony does a lot more than produce game consoles. In addition to its video game console business, it owns 11 different recording labels, a TV and movie production business which produces such insignificant products as the TV series Dawson's Creek, and Sony Electronics which makes everything from chips to Jumbotrons.

That's why the company is worth over $110 billion, and that's just a few reasons why this article is so humorous to people who enjoy analyzing businesses and buying small pieces of them.

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Dave Aiello

If your statement that Sony gets a $7 license fee per PlayStation cartridge is true, that's a huge royalty when measured against the retail price of each cartridge. It's even more astounding when measured against the wholesale price of the units, which is the only money that the cartridge developer ever sees.

One question I have about the assertion that Nintendo was a $5 billion company before Pokemon: $5 billion in what, sales or market capitalization? Perhaps they had $5 billion in annual sales. But, according to Marketwatch, Nint endo's market capitalization (another name for the total market value of the company) is only $2.9 billion.

I'd like to own a company that's worth that much, but it's tiny compared to Sony's market cap of over $110 billion.

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Dave Aiello

If your statement that Sony gets a $7 license fee per PlayStation cartridge is true, that's a huge royalty when measured against the retail price of each cartridge. It's even more astounding when measured against the wholesale price of the units, which is the only money that the cartridge developer ever sees.

One question I have about the assertion that Nintendo was a $5 billion company before Pokemon: $5 billion in what, sales or market capitalization? Perhaps they had $5 billion in annual sales. But, according to Marketwatch, Nint endo's market capitalization (another name for the total market value of the company) is only $2.9 billion.

I'd like to own a company that's worth that much, but it's tiny compared to Sony's market cap of over $110 billion.

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Dave Aiello

In case anyone's interested, here's the low-graphics, printer-friendly link.

Here is a better article

I really like the part about Linux being faster than NT ;)