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Liquid Audio: Better off dead?
mgeneral writes "It seems so for the shareholders.
Liquid Audio, had only $150,000 in revenue but managed to lose $5.6 million last quarter. Its main asset: A pile of cash. In fact, so much cash, that if they close the doors, they could pay back the shareholders more per share than the current stockprice...and thats exactly what some investors want them to do." We've run stories on Liquid Audio before...
Seems to me time for Liquid Audio to die. There is no point throwing good money after bad and the shareholders can then invest in something new (if they aren't too scared off the Stockmarket ;-)
But then turkeys don't vote for Christmas and I'm sure that managers won't vote to sack themselves...
www.locarecords.com
---- The Open Source Record Label : : LOCARECORDS.COM
It would be refreshing to see the directors of a company admit that they have no idea how they can make any money and return whatever their investors ponied up. The shareholders own the company, and if there's not even a glimmer of hope of the company ever being profitable (with Liquid I'm not sure that there ever was, but that's a separate issue) then the best thing is to admit defeat, cut your losses while there's still anything to cut, and close your doors.
Now there's a dotcom the other way around!
Now, if they decide to stop and give back the money, will they release the code as GPL?
This is by no means a rare situation for publicly traded companies to be in when they have a nasty burn rate.
If the company stays in business, they will soon be worth less, so having a cheap stock price is completely reasonable.
The problem is the people that paid more for the stock refuse to admit the company has a stupid business model and won't give up till the cash is completely gone - which is also very common (the entire dot-com industry for example).
- Adam L. Beberg - The Cosm Project - http://www.mithral.com/
So, umm... Why did they invest in the company in the first place?
Slashdot gets worse every day... Pipedot: News for nerds, without the corporate slant
a company that has the chance to close its doors and distribute a profit, or try to merge with another company and become yet another hybrid company that will be quickly forgotten. I would think that the obvious choice would be to just dissolve the company and take the profit. They really don't offer anything unique to the market that is worth building a business on.
There are two extremes to shareholders. Some want to play fair and simply have a stable investment that pays some dividends regularly.
:) another type of investor needs to prevail. One that realises they are a Fucked Company, and that the shareholders are better off getting their money back. (Even if it means they need to then start the investment procedure over again with their regained capital.) Unfortunatly, investors in general arent the best at educating themselves about the tech stocks they own, as history has shown.
Then there are the buy-sell-buy-sell-buy-sell idiots who just want to Make Money Fast and try to get rich quick.
For real sense to prevail (LA's assets are, uh, liquefied
Anyone who considers arithmetical methods of producing random numbers is, of course, in a state of sin.-John von Neumann
Liquid Audio is infamous in Japan - it was one of the first two companies to be listed on the new Tokyo Stock Exchange "Mothers" board for venture companies; unfortunately, the relaxed listing rules allowed Japanese gangsters to get a foot in the door.
Eventually, what happened was one of the company directors was kidnapped by the CEO(?), a rather interesting personage who was missing a chunk off one of his little fingers... for those of you familiar with Japan, that should immediately ring alarm bells
These days, they're called Cyber Music Entertainment. Their stock price peaked at around 1,590,000 yen in September 2000; these days, they trade at around 10,000 yen
Most of the comments I've seen so far have been along the lines of "They should just give the extra money to ..." or "Invest it in...!". Incorrect - the fact of the matter is that many, many businesses have been, and still are in the exact same position. The only way to *keep* shareholders is to show you have enough money to still give them a return on their investment even if the company goes belly up. There are three trains of thought on this: 1) make up fake revenues, a la Enron, WorldCom, etc. 2) go flat broke up forget about the people who trusted you to make then richer, or 3) ensure that the people with a vested interest in your company has a reason to stay on board. Liquid Audio (for all their faults) should be commended for their commitment to the stakeholders, even at a loss to the company - its seems to be such a rare thing with all the business improprieties on CNN. Money is the name of the game, and whether you like it or not, making investors happy is the nature of the beast.
They had $150,000 in revenue?! That's insane. What did they do, rent out part of the office?
Belief is the currency of delusion.
Liquid Audio has never had a big footprint. It needs to either fold or radically reinvent the purpose of the company.
We need to move away from the Dilbertesque model of a company loosing money while it's growing but never having a plan for afterward. Unless Liquid Audio has some magic plan to emerge from its cocoon a beautiful profitable company, it will just burn money indefinitely. This cannot be good for anyone. That money should be invested in a more realistic venture.
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I am an expert in electricity. My father held the chair of applied electricity at the state prision.
Especially they use a proprietary format. When I buy music, I wanna listen to it other than on the computer. Otherwise, might as well buy the real CD or logon Kazaa.
And their selection is narrow. Marketing is not enough. So they're unheard to customers, unwise to computer geeks, and unliked to shareholders. It's time to give up and move on.
Oh yea...and the so called "resurrection" of Napster is as hopeful as the Atari or NeXT.
If a majority of votes (where the needed majority is regulated in the company charter) decides it is better to just throw in the towel than to continue, that's what will happen.
/Janne
Trust the Computer. The Computer is your friend.
would be to change the business concept of this company and turn it into an investment company, which invests in new bubbles, and cashes in time.
Now whether a specific company should close their doors is always a difficult to question, but if it is a reasonable alternative the board is required to consider it.
They bought a company (shares) at what seemed to be a good deal.
The company isn't making money, their good deal isn't that good.
They can't sell their shares at the value they think they're worth (stock price) they want to liquidate the company (book value)
Someone thinks the company is worth buying, they are offering to buy it for more then the stock price.
Sounds like a bunch of whiney shareholders who may or may not be the majority who don't quite understand how this stock market thingie works.
Yep, it is indeed a lousy deal for everyone but Mitarotonda and MM companies, formerly known as musicmaker.com. Remember them? They were shut down a couple of years ago around the time that Mitarotonda and his company (BGC) took control. I doubt he's thinking of anything but lining his own pockets and acquiring a large portion of that money stockpile in order to take over and shut down yet another company.
They are offering $3.00 per share in the buyout, less than the cash holdings of the company. They are effectively offering to buy a pile of cash for less than 90 cents on the dollar. The investors are saying "We'll just take the full $3.41, thanks." The management supports the buyout perhaps because of a sentimental attachment to the company, or perhaps because of golden parachutes they may (disclamer: I do not know this) be getting out of the 41 cents.
The sotck holders, quite literally, ownn the company. When you buy shares of stock you are buying a share of ownership of the company. Now most people never own many shares of a single company, much less than 1% and so their vote never really counts (they don't go to the shareholder meetings or anything). However usually there are a few investors with sizable chunks of stock. Sometimes they are company employees/founders/CEOs, but often not. Now the shareholders can hold a meeting and take a vote on what thye want done, majority rule, and it WILL be done since they own the company. Many companies never have to worry about this because someone like the founder and CEO will retain a 51% stock share and therefore have sole control, but that is not the case with Liquid. If the majority of shareholders vote to sell off all assets and liquidate the company, that is just what will happen.
Without going into the legal details and financial aspects, what are the technical leverages that Liquid Audio claims to offer vs. free competitors such as Ogg Vorbis.
Thanks.
social responsibility, right? such bullshit.
Thanks for clarifying that looking out for dedicated employees and being socially responsible is "such bullshit." It's like those damned do-gooders who get mad when tobacco companies advertise to kids, isn't it? Don't they realize that getting kids hooked on cigarettes, even if many die from cancer, is a small price to pay in order to enrich investors in RJ Reynolds? Damn social responsibility.
Let's see -
The CEO is making $ 500K per year.
Another co-founder is also making $500K per year.
All of this on revenue of $600 K per year.
And they say that shutting it down would ''...not represent[] the interests of all the shareholders.''
Do the words "bloated" come to mind ?
How about nervey ?
How about stupid ?
In my opinion much of the dot-com money was "value-subtracting," in that they took good money and did stupid things. Enough people did this that it poisoned the ability of real businesses to make real money, because the marketplace was conditioned to assume that things that cost money actually should be free.
I cannot think of a much better example of a value-subtracting business than Liquid Audio.
Shut it down.
Glad you resorted to profanity, makes you seem intelligent.
A few points.
The article doesn't explain if a majority of shareholders want to liquidate or not.
Book value is not cash on hand, there may be illiquid assets, or debts that would reduce cash.
The company is only worth what someone will pay for it. They bought, by their own admission, a dead end business.
Many companies trade below their available cash on hand, this is normal for many companies. Being able to exploit their non cash assets later may provide a greater return rather then shutting down now.
Something tells me they don't keep it in the office safe. Most of it would be invested in short term easily convertable assets. (bank accounts, T-bills)
Yes. "Cash" in business-speak means any easily liquefiable investments, usually short-term stuff like commercial paper or even long-term stuff which is easy to liquidate like T-bills. It doesn't mean greenbacks, and most of it usually isn't kept in bank accounts either.
For a public company, their responsibility is to make their owners/investors happy, and those are the stockholders
Maybe the major shareholders _are_ management. This is not unusual.
In related news, Microsoft has decided to close its doors, saying that Linux does what it does, for free. The xxx$ billion in the bank will go to its shareholders, who have been dumb enough not to insist on dividends, despite the fact that MS has xxx$ billion in cash.
We wish.
"Sometimes a woman is a kind of religion, she can save your soul & set you free from all your sins" - Bad Examples
Microsoft's cash pile is growing (at an obscene rate I might add)
Liquid Audio's is shrinking at an even more obscene rate.
retrorocket.o not found, launch anyway?
..."it seemed like a good idea at the time!"
With all the cash holdings, you don't have to ask why they called themselves "Liquid."
Because it's more important to keep people employed than to further enrich Wall Street gamblers.
It's also important to keep people employed gainfully, and grow the market (add jobs), by using resources as efficiently as you can. If you throw a thousand people out of work at one company when you dissolve it, but then take the money and invest it so that fifteen hundred people have jobs, are you still a bad guy?
Get off my launchpad!
Liquid Audio = Another proprietary audio format, and this one doesn't even have a big company like MSFT backing it... don't let the door hit ya, guys.
Liquid Audio has USD 81 mn in cash and equivalents as at 30 June 2002. We should see significant financial income in the Income Statement for the period, but there is only USD 318,000 "Interest and Other Income (net)", which is about 0.4% of USD 81 mn, a funny little return on the cash reserves of the company, even at today's interest rates.
So it looks like the boss is not doing a good job even of money management.
On the other hand, it looks like Liquid Audio IS preparing to give back USD 30 mn cash to its shareholders - their merger agreement with Alliance Entertainment has been amended (15 July 2002) to include this cash return. Check out: http://biz.yahoo.com/bw/020814/140345_1.html
As for the board of directors, as I said, they are appointed by the share holders, and can in principle be deposed at any time. The CEO in turn is appointed by the directors, and can (and sometimes will) be fired for pretty much any reason. A partial reason for a high salary for a CEO is exectly this lack of any job security (though that does not cover the sometimes ludicrous salaries you sometimes hear about).
Many company bylaws are designed to facilitate some kind of balance between the actors and the owners. It can include poison pill regulations, differential voting strength, making the directors shareholders, and what have you.
None of this does however change the basic feature that the company ultimately is there for the benefit of its owners and nobody else. Customer relationships may be very important for a company, but then it is so because that will ultimately benefit its owners more than the reverse. Conversely, some (smaller) companies now have far reaching environmental policies that strictly speaking are not profitable for it in the short or medium term, but that have been imposed on it by its shareholders. This is perfectly acceptable.
/Janne
Trust the Computer. The Computer is your friend.
The xxx$ billion in the bank will go to its shareholders, who have been dumb enough not to insist on dividends, despite the fact that MS has xxx$ billion in cash.
But they never needed to offer dividends because their share price has always been growing like gangbusters. Except for the past few years, when it has remained flat, and the next hundred years, where it will remain flat.
average professional company management is a little more
Well. Yes. Average people get poor to average results. You need TALENT to make capital dance.
So Stelios had family money. So Michael Dell had family money. So Richard Branson and a dozen others all had family moneey. WGAF. Thousands of better educated, richer people with better looks and bigger willies have started companies that bombed in a year.
And if Stelios told you he left because he was bored, and that it had nothing to do with shareholder confidence... he's a big fat liar!
Cinema?!? Cinema!!! You can bet a pund to a pinch of shit he'd rather run an airline than a cinema!
'did you enjoy your flight to nice?'
'did you enjoy spy kids 2'
Microsoft Market Cap ~ $284BN
Microsoft Cash&Marketable Securities on Balance Sheet ~ $38BN
You figure it out.
I'm the best IRC client ever.
Even if you're profitable, stockholders will only be happy if you're growing. (And growing fast)
I'm sure MS's cash flow is positive. In fact, I'm sure MS could take a LOT of market hits before its cashflow ever goes negative. While MS can sometimes be a little slow to adapt (Internet, for example), unlike the RIAA, they DO know how to adapt to a changing market and adapt well. Even if the market is close to saturation and MS's growth slows to a standstill, I don't see them hitting a money-losing situation for years, even of Linux continues its near-explosive growth in market share.
But it's possibly for a company to grow 20% in a year and STILL get slammed by stockholders. (Lucent was in this boat - 20% growth just wasn't good enough when Nortel, JDSU, Corning, and all the other guys in the optical industry grew 30-40%. Ignore the fact that a year after that optical networking crashed and now almost all of the aforementioned companies are in dire straits.)
LA is completely different... They have negative cash flow and no hope for it to ever go positive. They should quite while they're ahead.
retrorocket.o not found, launch anyway?
I mean, dotcom companies can be funny, but 1,590,000 yen is $20,670 CDN, or about $13,022 US per share. LNUX didn't go that high. It seems a little funny.
10,000 yen is about $130 CDN, or about $82 US per share. At that price they must be doing something right, right?
--
Internet Explorer (n): Another bug -- that is, a feature that can't be turned off -- in Windows.
The real question when it comes to the 'do-gooders' getting mad at the tobacco companies is why aren't they also going after the companies advertising alcohol in the same places, with the same target audience?
A simple explanation: Alcohol is not addictive (except to a small percentage who are alcoholic). Think how many kids you knew that took up drinking before turning 18. Do they all need to have multiple drinks per day now? Do they have to go outside their office building to drink every hour or so?
Tobacco gets heavier taxes and smoking gets banned from more and more places while alcohol kills more people
I can't believe that alcohol kills more people. There are some spectacular deaths when a drunk driver causes a major auto accident, but consider how many people die of lung cancer, emphysema, strokes, and heart disease from smoking.
This is an extreme case, but this problem is not unusual. Publically-held companies are always jumping through hoops to make their stockholders happy, and more often than not that means doing things that actually work against the long term growth of the company. Or, in this case, the short term growth!
>>Tobacco gets heavier taxes and smoking gets banned from more and more places while alcohol kills more people
>I can't believe that alcohol kills more people. There are some spectacular deaths when a drunk driver causes a major auto accident, but consider how many people die of lung cancer, emphysema, strokes, and heart disease from smoking.
Here's the deal: smoking gets banned because you are damaging other people's health when you are enjoying your legally acceptable cigar. Right now there's nothing illegal about smoking tobacco per se, but the Guv'ment is trying to prevent other people getting sick because of your secondary smoke.
On the other hand, alcohol isn't illegal to consume, either (unless you're a minor, of course), but it is against the law to drive while under the influence of alcohol. I guess people don't care much if I get all liquored up, get in my car, and drive off a bridge... hey, it's evolution in action, right? But people DO care if I crash right into a minivan full of soccer moms and kids.
So what's the difference? People have _known_ forever that drinking gets you stupid, irrational, and causes you to see people of the other sex as being hotter than they actually are. But people didn't know that smoking could kill you, and not only you, but the people around you; meanwhile, the tobacco companies have done their utmost to hide that kind of information from the consumers.
Besides, I agree with fmaxwell: alcohol in small to normal quantities is not addictive. Tobacco is. There's the difference.
Tongue-tied and twisted, just an earth-bound misfit, I
Learning to fly, Pink Floyd.
Now, if they decide to stop and give back the money, will they release the code as GPL?
If I remember correctly, the Liquid Audio codec was an implementation of the MPEG-2/MPEG-4 AAC codec developed by Fraunhofer. Unlike the company that makes RTLinux, I don't think Fraunhofer will easily cough up a license to use its patents for software licensed under the GNU GPL.
Will I retire or break 10K?
You would think the major labels would take a lesson from this.
They will take a lesson from it. It just won't be the lesson you expect. Instead of saying something like "This restricted format stuff just doesn't work", they'll say something like "Piracy is killing us".
Please mod this post only if you think others should/n't read this. I have enough ego^H^H^Hkarma. Thanks!
lets be honest directors want to drag this out till there isn't one sent left
As they want to suck out their cut from every cent spent.
People have cottoned on to the fact that web businesses are just thin-air scams, even if the people involved are still conning themselves.
That would be the day.
There is some indication that talent is overrated.
Libertarianism is rich wolves and poor sheep playing gambler's ruin for dinner.
My God, people, don't you realize the ace in the hole this company has? 90% of the dotcom's out there would kill for the hard capital this company has. In fact, it's the entire reason the .com bust happened-- All these companmies were venture capitaled to the hilt without any real assets of there own. When they hit the wall, they hurt their investors... Bad. Hell, after umpteen years of existance Amazon.com has only recently posted in the black. And don't think Bezos wasn't sweating bullets every day until that point, because if confindence for one minute faded in his ability, he was so far in the debt hole not even confidence could escape. Not your debt or my debt, but high millions debt. And that's not counting how he had to deal with his workforce (damn near 80% temps-- Hire em, fire em, hire em fire em...) to finally get above water. But for Liquid Audio to actually have assets... Unless the their problems were seriously irrecoverable, that's a major advantage to just piss away. I guess it's all about money now as opposed to long term success. Why not.
You need a FREE iPod Nano
If they go out of business you're screwed...
Things in the industry are that bad.
Doesn't help that a lot of their customers (KPNQwest, Worldcom) are going under.
retrorocket.o not found, launch anyway?
or they're fools. Money is only as good as those who wield it. $150K in and $5.6M out: the money is talking, and it's saying "These guys don't know how to treat me right, I'm going somewhere else". They should shut down immediately, and take what they can, or they aren't the greedy bastards they should be.
This post expresses my opinion, not that of my employer. And yes, IAAL.
Maybe you took a loss buying those shares, or maybe somebody else took the loss and sold them to you for $2 a share. Either way, it just doesn't matter. What you care about now is turning your $20,000 into $30,000. The usual way for that to happen is wait for the company to grow. But if you know your share of the company's liquidation would be $30,000, you have every incentive to liquidate -- especially if the company is likely to burn through its assets, making your shares worthless.
In general, prices of Japanese stocks are higher than what you'd see in the U.S. (at least; it sounds like Canada is similar), with fewer shares of stock per company. For instance, Yahoo Japan made news here two or three years ago when it hit 100 million yen (about US$950,000 at contemporary exchange rates) per share, but that was divided among just 10,000 or so shares IIRC.