The big four record labels have less market value than you might think. EMI, which just went private, is worth around $4 billion, and Warner Music around $1 billion. Sony BMG is is a joint venture and so it's more difficult to value, but $5-6 billion is a good estimate. Universal, the largest of the big four, is worth between $8 and $12 billion based on various estimates. In sum the four companies account for only around $20 billion in market cap. For comparison, Apple is 8 times that large.
I'm assuming he chose the fourth quarter because it grossly misstates the respective profitability of the two companies (Apple does well in the holidays, and Q42006 was right before Vista launch for Microsoft). First of all Apple didn't "earn" 4.4 billion on its Macintosh business, it produced 4.4 Billion in revenue from it. More to the point: MSFT's total 2006 profit was $12.6 billion, compared to AAPL's $1.98 billion. The real numbers tell a slightly different story.
Although in the past private equity firms have generally sought to buy firms with undervalued stocks, with the massive amount of money floating around today pe firms usually buy companies and extract value for themselves by leveraging the company (hence the term leveraged buyout).
In this case, that would be a terrible idea. AMD's debt load is such that a firm would be unable to raise it significantly, but most importantly, AMD competes in a cyclical industry. Many are worried about the recent Freescale LBO because in a highly cyclical industry like semiconductors if the industry turns down and the leveraged firm can't make its debt payments, then it goes belly up.
Considering all of these factors I think that an LBO of AMD is highly unlikely.
I recently read an article that noted how few details were known about Spore. Notably, the writer wondered how the game would be "scored", and how one would "win". In the view of the writer, these seemed to be terribly important aspects of a game. After I read that I wondered if they really are. Some of the most enjoyable games I've played lately (Nintendogs, Animal Crossing) lack these "integral" componenents. Both have some sort of loosely defined goal (raise a dog, build a cool town), but neither have anything closely related to a score or even a way to "win". Maybe Spore will be more fun if it lacks those comoponents as well.
Although I don't see the sale of music videos taking off, I can see a subscription based service doing well. If apple were to create something akin to Avantgo, where people could set preferences of the type of content they would like to receive I think it would be well received. One could sync their Ipod before going to work and watch News/Entertainment clips on the subway/bus.
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The big four record labels have less market value than you might think. EMI, which just went private, is worth around $4 billion, and Warner Music around $1 billion. Sony BMG is is a joint venture and so it's more difficult to value, but $5-6 billion is a good estimate. Universal, the largest of the big four, is worth between $8 and $12 billion based on various estimates. In sum the four companies account for only around $20 billion in market cap. For comparison, Apple is 8 times that large.
I'm assuming he chose the fourth quarter because it grossly misstates the respective profitability of the two companies (Apple does well in the holidays, and Q42006 was right before Vista launch for Microsoft). First of all Apple didn't "earn" 4.4 billion on its Macintosh business, it produced 4.4 Billion in revenue from it. More to the point: MSFT's total 2006 profit was $12.6 billion, compared to AAPL's $1.98 billion. The real numbers tell a slightly different story.
Although in the past private equity firms have generally sought to buy firms with undervalued stocks, with the massive amount of money floating around today pe firms usually buy companies and extract value for themselves by leveraging the company (hence the term leveraged buyout).
In this case, that would be a terrible idea. AMD's debt load is such that a firm would be unable to raise it significantly, but most importantly, AMD competes in a cyclical industry. Many are worried about the recent Freescale LBO because in a highly cyclical industry like semiconductors if the industry turns down and the leveraged firm can't make its debt payments, then it goes belly up.
Considering all of these factors I think that an LBO of AMD is highly unlikely.
I recently read an article that noted how few details were known about Spore. Notably, the writer wondered how the game would be "scored", and how one would "win". In the view of the writer, these seemed to be terribly important aspects of a game. After I read that I wondered if they really are. Some of the most enjoyable games I've played lately (Nintendogs, Animal Crossing) lack these "integral" componenents. Both have some sort of loosely defined goal (raise a dog, build a cool town), but neither have anything closely related to a score or even a way to "win". Maybe Spore will be more fun if it lacks those comoponents as well.
Although I don't see the sale of music videos taking off, I can see a subscription based service doing well. If apple were to create something akin to Avantgo, where people could set preferences of the type of content they would like to receive I think it would be well received. One could sync their Ipod before going to work and watch News/Entertainment clips on the subway/bus.