My FT column this week is on the e-book rivalry between Sony’s Reader and Amazon’s Kindle:

Ever since Sony lost the battle between its Walkman music player and Apple’s iPod, it has been trying to strike back. This week, it paid $900m to take full control of Sony-BMG, its music joint venture with Bertelsmann.

Sir Howard Stringer, Sony’s chief executive, wants to make it as easy as possible to download or stream music and films to all of Sony’s electronics devices, from Bravia televisions to PlayStation 3 consoles.

Sir Howard, still smarting at how Apple integrated hardware, software and its iTunes music store far better than Sony, has another target in mind. He wants 90 per cent of Sony’s hardware devices to be networked, and even to be connected wirelessly, within two years.

In one small corner of Sony’s empire, however, it has just made the same mistake all over again. It has squandered an early lead in a new field because another company was better not just at inventing an electronic device but also at linking it to a wireless network and making it easy for consumers to use.

You can read the rest here and comment below.

I suppose you can’t argue with the market but I do wonder about the price Motorola has paid to lure Sanjay Jha from Qualcomm to become chief executive of its troubled mobile phone division.

Mr Jha apparently wanted to be the chief executive of a public company - and doubted whether Paul Jacobs was going to move over at Qualcomm - but his pay and benefits package is reminiscent of a private equity deal.

Motorola plans to spin off its mobile phone arm and, if it does, Mr Jha gets to own 3 per cent of the company. If it does not, he will be paid $30m to compensate him for his time and trouble. His entire package is estimated as being worth up to $94m.

Continue reading "Private equity rewards at a public company" »

There is a fascinating piece in Fortune magazine about Jimmy Cayne, the former chairman and chief executive of Bear Stearns, by William Cohan, the author who is working on a book about the credit crisis.

The most interesting aspect of it is that Mr Cayne himself talks candidly about how he failed to prevent Bear from collapsing and having to be rescued by the Federal Reserve and JP Morgan Chase.

One reason was that he was in no physical condition to do so. He collapsed from a prostate infection last September and lost 30 pounds in weight while in hospital recovering. He was 73 at the time.

But the other is that, as Mr Cayne himself admits, he was the wrong man for the job. His background as a broker, trader and card player did not give him much insight into the chaos in credit markets and he compounded matters by firing Warren Spector, the man who ran Bear’s trading operations.

Continue reading "Why Jimmy Cayne could not save Bear Stearns" »

I have written the second part of the series running this week on the credit crisis, entitled The Big Freeze. My piece is about the future of banking and what are the prospects for independent investment banks.

It starts like this:

On Friday August 3 last year, as US financial markets were approaching the summer doldrums and bankers began to head off for holidays on Long Island or Cape Cod, Bear Stearns held a conference call for investors.

Shares in the investment bank, the fifth largest in the world, had fallen as investors worried about the collapse of two hedge funds that it managed and its exposure to the troubled housing market. But few were prepared for the candour of Sam Molinaro, its chief financial officer. Instead of reassuring them about Bear Stearns’ financial condition, he scared them even more: “I’ve been at this for 22 years. It’s about as bad as I have seen it in the fixed income market during that period . . . [what] we have been seeing over the last eight weeks has been pretty extreme.”

Later that afternoon, Jim Cramer, the former hedge fund manager, whose show, Mad Money, on the CNBC financial cable channel had become a cult among US retail investors, took to the air to sound his own alarm. Mr Cramer chided Bear Stearns for admitting publicly that it was struggling to cope but then launched into an angry tirade. He lambasted Ben Bernanke, chairman of the Federal Reserve, for not cutting interest rates aggressively, and said bank executives were calling him in distress. “We have Armageddon. In the fixed income markets, we have Armageddon,” he shouted, as Erin Burnett, his co-host, tried to calm him down.

If all of this sounded bizarrely alarmist at the time, a year later it reads like a fair assessment of the havoc that was breaking out in financial markets as the liquidity that had washed through the US economy and the rest of the world abruptly froze.

You can read the rest here and comment below.

My fascination with global positioning devices has not abated but it seems that not everyone shares my naive enthusiasm.

Devoted readers of this blog will recall my childlike sense of wonder at renting a car in Los Angeles last year and being guided around the city with a GPS device. Of course, GPS was already old hat then for many car drivers, but there we are.

My latest experiment has been to buy a small GPS Bluetooth fob for about $50 that links with my Blackberry and the Google Maps software that I have downloaded to it. As a result, I can now see where I am: a little blue dot on the map marks the spot.

Continue reading "The limits to all-singing, all-knowing GPS" »

My column in the FT this week is about cross-border mergers and whether they are really more risky than other kinds. It starts like this:

Tuesday was not a propitious day to be announcing grand plans for a cross-border merger.

That morning, Alcatel-Lucent ejected Serge Tchuruk and Pat Russo, its chairman and chief executive, over its own unhappy merger. Meanwhile, Robert Dudley was trying to run TNK-BP, the disputed joint venture between BP and some Russian oil tycoons, from a safe haven.

Neither was an advertisement for the benefits of link-ups with foreign companies. The lesson appeared to be that chief executives of failed mergers at best lose their jobs and at worst have to flee the country.

Yet Willie Walsh of British Airways and Fernando Corte of Iberia chose this moment to say they wanted to join forces, following the example of Air France-KLM and Lufthansa, which acquired Swissair in 2005.

Were they mad?

You can read the rest here and leave comments below.

You only find out who is swimming naked when the tide goes out, as they say, and the Detroit auto makers are providing an example.

They are now halting cheap leases that have enabled Americans who could not afford to buy an expensive pick-up truck or Sports Utility Vehicle to lease one instead. Banks no longer want to underwrite that business.

The financial incentives are not entirely going, as the Wall Street Journal points out, since they now want customers to buy them instead. That needs some encouragement, in fact a lot of it given the high oil price.

But it does make me wonder about their business model yet again. The Detroit three always used to say that Americans wanted big vehicles and it was a good market business because margins were higher on trucks than on cars.

Now it turns out that a lot of those higher-margin sales were in effect being subsidised by the auto makers with cheap debt. Take away the debt and the natural level of demand is lower.

But if the auto makers had not relied on leases to boost sales of trucks, their product mix might not have been so skewed and they would not have been so badly caught by expensive fuel.

Cheap debt does feel good at the time but it has a lot of pernicious effects, and some that you only realise with hindsight.

So is 22 the number?

Merrill Lynch’s $6.7bn sale of a bunch of collateralised debt obligations for 22 cents on the dollar has been hailed as the long-awaited “capitulation trade” by various analysts.

In other words, this is being treated as the moment that a financial institution finally throws in the towel and agrees to shed assets at a price it knows is too low, because it cannot bear it anymore.

Wall Street certainly seems to regard it that way, having marked up Merrill’s shares since John Thain’s abrupt decision to sell.

On the other hand, 22 is still a number in the double figures so it does not count as one of the all-time bargains for distressed debt buyers such as Lone Star, the fund that did the deal.

I suppose you must discount even the 22 a bit since Merrill is providing debt financing to Lone Star to cover 75 per cent of the deal. In other words, it is being paid some cash and swapping one piece of debt for another.

Still, if one truly thinks that this is the worst financial crisis for at least 30 years, which seems fair, then surely the capitulation number should be lower?

Even an irrepressible optimist sometimes get repressed. I feel a bit sad at the departure of Vern Raburn as chief executive of Eclipse, the very light jet maker that has not yet fulfilled his hopes of transforming air travel.

Mr Raburn has paid the price for the fact that it has proved much harder than he promised to built a cheap, snap-together small jet that would be used for air taxi services and bought as an alternative to small turbo-prop aircraft.

Mr Raburn is a entertaining talker and he went out in style, noting that “debt-holders don’t have much of a sense of humour” about missing financial targets. “It cost more money and took more time than we had promised and there’s a price to be paid for that,” he told the Wall Street Journal.

Whatever his flaws, he brought Silicon Valley insouciance and self-confidence to a deeply traditional industry. There will presumably be a lot of people who are pleased that his showmanship did not quite work out, but I am not among them.

Here is a suggestion for a statement that Apple could issue on Monday to end the speculation about Steve Jobs’ health:

There has been some concern about Steve Jobs’ state of health. Mr Jobs has had intestinal side-effects from his surgery for pancreatic cancer in 2004. Earlier this year, he had minor surgery relating to this condition and subsequently lost some weight. He is free from cancer and his condition is not life-threatening.

It seems extremely likely, from the hints Apple has allowed to escape, and from Mr Jobs’ conversation with Joe Nocera of the New York Times, that this is the truth. A statement to this effect would reassure investors who have become increasingly worried that Apple’s silence indicates that Mr Jobs is more seriously ill.

Instead, he appears to be suffering some unpleasant but fairly common side effects from the intestinal surgery he underwent in 2004. The good news for Mr Jobs and Apple investors is that his health problems - if this is indeed the case - are chronic and manageable rather than anything worse.

Nocera’s column is highly readable not only because I think he neatly sums up why Apple’s secrecy is misplaced but because he forced Mr Jobs into telling him what was up, albeit off the record. I liked Mr Jobs’ opening gambit:

“This is Steve Jobs,” he began. “You think I’m an arrogant [expletive] who thinks he’s above the law, and I think you’re a slime bucket who gets most of his facts wrong.”

There is also a good summary of what appears to be affecting Mr Jobs’ health and weight here on the Fortune magazine website.

A minor excursion from Apple’s habit of compulsive secrecy would be helpful at this point and could put the matter to rest.