Ed’s Daily Notes for November 29th   1 comment

Another month comes to an end, this time on a short trading day.

Bloomberg: Microsoft, Yahoo Upgrades Shows Snowden Won, Obama Failed

Former U.S. National Security Agency contractor Edward Snowden succeeded where President Barack Obama couldn’t — getting Microsoft Corp. (MSFT), Google Inc. and Yahoo! Inc. (YHOO) to upgrade computer security against hackers.

The companies are adopting harder-to-crack code to protect their networks and data, after years of largely rebuffing calls from the White House and privacy advocates to improve security. The new measures come after documents from Snowden revealed how U.S. spy programs gain access to the companies’ customer data — sometimes with their knowledge, sometimes without — and that’s threatening profits at home and abroad.

“These companies actively fought against numerous mechanisms that would have mandated far more secure data,” Sascha Meinrath, director of the Open Technology Institute at the New America Foundation in Washington, said in a phone interview. “Now they are paying the literal price.”

While Google (GOOG), Yahoo, Microsoft and Facebook Inc. (FB) provide data to the government under court orders, they are trying to prevent the NSA from gaining unauthorized access to information flowing between computer servers by using encryption. That scrambles data using a mathematical formula that can be decoded only with a special digital key.

The NSA has tapped fiber-optic cables abroad to siphon data from Google and Yahoo, circumvented or cracked encryption, and covertly introduced weaknesses and back doors into coding, according to reports in the Washington Post, the New York Times and the U.K.’s Guardian newspaper based on Snowden documents. He is now in Russia under temporary asylum.

Nothing motivates companies like bad PR…

Motley Fool: Microsoft Should Be Scared to Death of Google’s Chromebooks

Speaking of Microsoft, the above article shows why the Steve Ballmer era can’t end too soon at Microsoft. The article references the following ad from Microsoft:

When I watch this ad, my first thought is, “Really? You’re advertising the competition fools!” Shining the spotlight on a low market share competitor is a recipe for disaster, even if your points are accurate. Mind you, I am not suggesting that Microsoft should ignore Chromebook, but don’t advertise it!

If Ballmer wasn’t retiring, I would seriously think about selling my Microsoft shares.

Seeking Alpha: China Search Leader Baidu Keeps Advancing

Above is link to a good article that summarizes China’s Baidu (BIDU) quite well. I was especially intrigued by this:

Baidu (BIDU) is China’s version of Google (GOOG) except that it’s being outpaced in growth by another tech rival called Qihoo 360 (QIHU), which is one of China’s fastest growing companies. Qihoo is quickly taking search market share away from Baidu and has already met its year-end goals in online traffic. Even so, Baidu is still the search leader in China and its stock is trading at a reasonable multiple while fundamentals are healthy enough for more gains.

While Baidu’s most recently reported third quarter revenues grew by 42.3 percent to $1.45 billion year over year, Qihoo’s revenues grew 124 percent for the same period. Baidu projects a 49.6 percent increase in revenue for Q4. Operating profit was up 1.2 percent to $545.4 million while net income inched up 1.3 percent to $498 million. The company’s marketing costs on mobile to compete with Qihoo increased by 115 percent from the previous Q3, following 77 percent and 83.5 percent increases in Q1 and Q2 respectively. Mobile advertising only accounts for 10 percent of the company’s search revenue. Baidu held onto 63 percent market share in desktop searches in the third quarter.

This begs the question of whether Qihoo is serious competition for Baidu, or just China’s version of AltaVista? Although the Seeking Alpha article above seems to take Baidu’s side, I am not so certain. The problem is that web search in China is still a growing industry, about where the U.S. was 10 years ago. It is real hard to pick a winner there. The only reason I lean to Baidu is that it’s search engine is very similar to Google’s, yet a bit smarter than Qihoo’s. For example, Baidu takes English-text searches, whereas Qihoo is limited to Chinese text. I know that isn’t a selling point in China, but it shows that Baidu is a little more advanced. But even with that, I will still say it is too early to call, mainly because Qihoo’s financials look pretty good. Both of these companies will be in the race as long as China’s search engine market keeps growing. It is when the market is saturated that the real winner will become apparent. Qihoo is not a bad play in the meantime.

Yahoo Finance: Fortune Magazine Names Genworth CEO Thomas J. McInerney to Its “Top 50 Business People” List

Good news for shareholders of Genworth (GNW):

Genworth Chief Executive Officer Thomas J. McInerney is recognized in this year’s Fortune rankings of 50 national senior business leaders. In naming McInerney, one of two Virginia-based chief executives on its fourth annual list, Fortune points out that “McInerney is only 11 months into the CEO job but has boosted profits 124% for the first nine months of 2013.”

I would add to what Forbes said by mentioning that Genworth grew earnings in the last quarter by 208% (year over year). In a quarter when revenues dropped over 5%, that is an impressive feat! With book value per share at $29.56, and the share price at the bargain basement price of $15.21, GNW is still a great deal for value investors.


Posted November 29, 2013 by edmcgon in News, Stocks, Technology

One response to “Ed’s Daily Notes for November 29th

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  1. Genworth is one that the two of us definitely agree on. Barron’s recommended it March 11,2013 and I bought it then at $10.43. If I can figure out what to sell, I would consider buying more now.

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