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Tag: 100 dollars

Nokia Conducting Search for a New CEO

Very provocative headline for an interesting WSJ piece:

“They are serious about making a change,” one person familiar with the matter said. Nokia board members are “supposed to make a decision by the end of the month,” that person said.

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They should be very serious about making a change – its been disappointment after disappointment at the former Finnish phone giant (and its stock price, see above). But, this gives me a great chance to play $100-armchair CEO. So, what would I do if I was in the big chair at Nokia? I’d be focusing on three things:

  • Change the OS approach: With Nokia’s next OS Symbian^3 delayed and widely perceived to be inadequate, you really need to question the ability of Nokia to keep up in the industry-shaking smartphone platform war. In particular, Nokia’s challenge is that its attempting to take a software platform built to enable carrier services and high reliability on lower-end phones that weren’t meant to run software and somehow force it into achieving the same high-end software functionality that Apple’s iOS and Google’s Android provide. While there’s nothing that says this is impossible, this is an order of magnitude more difficult than Apple/Google’s initial problem of just creating a software platform without the burden of any legacy constraints/approaches, and, in an industry as fast-moving and disruptive as the smartphone space, that’s two orders of magnitude too many, invites all sorts of risk with no clear reward, and discards Nokia’s traditional strengths in wireless communications R&D and solid hardware design. What does that mean? Three things:
    • Re-tool Symbian for the low-end to be more like Qualcomm’s BREW (or heck, maybe even adopt BREW?): an operating system focused on enabling carrier/simple software services on the many featurephones out there. That category is Nokia’s (and Symbian’s) traditional strength, and that’s where Symbian can still add a lot of value and find a lot of support.
    • image In the mid-market (high-end featurephone/low-end smartphones), I’d tell Nokia to bite the bullet and adopt Android. Not only is it free, but it immediately levels the software playing field between Nokia and the numerous  OEMs who are itching to adopt Android allowing Nokia’s traditional strength in hardware design to win over.
    • imageIn the high-end, Nokia should go all-in with Intel on their joint MeeGo platform. In that space, Nokia needs a killer platform to disrupt Google/Apple’s hold on the market, and MeeGo is probably the only operating system left which might contest Android and iOS and drive the convergence of mobile devices with traditional computers that this category is pushing towards.
    • Double-down on Qt to make it easier for developers to “develop for Nokia”. A few years ago, Nokia bought Trolltech which had created a programming framework called Qt (pronounced “cute”). Qt had gained significant traction with developres as it made it easier to make a graphical user interface which ran across multiple devices and operating systems. This is a key asset which Nokia has tried to use to make MeeGo and Symbian more attractive (and which is probably one of the main reasons both OS’s still have reasonable levels of developer interest; although, interestingly, there has been an effort to bring Qt over to Android), but it needs to be emphasized even more if Nokia wants to stay in the game.
  • Pick your battles wisely: It is entirely possible that Nokia has lost the high-end smartphone battle in the US and Europe (even despite the operating system approach laid out above). But, even if Nokia was forced to completely cede that market, its not the end of the war – its simply the loss of a few (albeit important) battlegrounds. Nokia is still well-positioned to win out in a number of other markets:
    • image The featurephone world: Many of us tech aficionados often forget that, despite all the buzz that the iPhone and the Droid devices generate, smartphones actually make up a very small unit base. Featurephones are still the vast majority of the volume (for cost reasons) and, as devices like the iPhone continue to capture mindshare, there will be significant value in helping featurephones imitate some of the functionality that smartphones have. While it is true that Moore’s Law makes it easier for high-end operating systems like iOS and Android to be run on tomorrow’s featurephones, the incentives of Apple and Google are to probably better aligned with taking their mobile operating systems up-market (towards higher-end devices and computers) rather than down-market (towards feature phones) to chase higher margins and to continue to build highly optimized performance machines. So, given Nokia/Symbian’s traditional strength in building good devices with good support for carrier services, its natural for Nokia to solidify its ownership of the feature phone market and to emulate some of the functionality of higher-end devices.
    • Emerging markets: This is related to the previous bullet point, but much of the developing world is now seeing vast value in simply adopting basic services and software on their (by Western standards) very low-end phones. As banking systems and computer availability are extremely limited in Africa and parts of Asia, this represents an enormous opportunity for someone like Nokia who has spent years making their phones capable of mobile payment, geolocation, and carrier-enabled services. Couple this with the fact that there is enormous growth waiting to happen in markets like India, China, and Africa (where cell phone penetration is nowhere near as high as in the US), and you have the makings of a potential end-game strategy which could offset short-term setbacks in the US/European smartphone market.
    • image Japan: While Europe and the US are eagerly adopting smartphones (as in phones with rich operating systems), Japan has been a laggard due to differences in the carrier/vendor/services environment. While its been difficult for foreign companies to break into Japan, the recent technology deal between Japanese semiconductor company Renesas and Nokia might provide an interesting “foot in the door” for Nokia to enter a large market where its weakness in software is not so much of a hindrance and its strengths in hardware/willingness to play nice with carriers are a big asset. This is in no way a slam-dunk, but its definitely worth considering.
  • Figure out the key ecosystem player(s) to partner with: The previous two bullet points were mainly tactical suggestions – what to do in the short-run and how to do it. This last bullet point is aimed at the strategic level – or, in other words, how does Nokia influence the creation of a market environment which leads to its long-term success. To do this, it needs to figure out who it wants to be and what it wants the mobile phone industry to look like when all is said and done. I don’t have a clear answer/vision here, but I’d say Nokia should think about partnering with:
    • Carriers: Although Apple/Android have had to play nice with the carriers to get their devices out, the carriers probably see the writing on the wall. If smartphone platforms continue to gain traction, there is significant risk that the carriers themselves will simply become the “dumb pipes” that the platforms run on (in the same way that  internet service providers like AOL rapidly became unimportant to the user experience and purchasing decision). Nokia has an opportunity to play against that and to help bring the carriers back to the table as a driving force by helping the carriers expose new revenue streams/services (which Nokia could take a cut of) and by building more carrier-friendly software/devices which help with coming bandwidth issues.
    • image Retailers/Mobile commerce intermediaries: One of the emerging application cases which is particularly interesting is the use of mobile phones for the buying and selling of goods. This is something which is extremely nascent but has a huge opportunity as mobile commerce can do something that traditional desktop-bound eCommerce can’t: it can bridge the gap between pixels on the screen and actual real-world shopping. It can be used as a mobile coupon/payment platform. It’s camera and GPS enables augmented reality functionality which can let shoppers look up information about a product without having to type in search-strings. It can be used to provide stores with more information about a shopper, letting them tailor new ad campaigns and marketing efforts. I haven’t run the math to build a forecast, but there’s good reason to believe that this could be the application for mobile phones. While Nokia may have to cede application/ad revenue to Google/Apple, it may be able to eke out a nice chunk of profit (maybe even bigger than the one Google/Apple can get) from focusing on this particular need case instead.

Obviously, none of these are guaranteed home-runs, but if I were a Nokia shareholder, I’d hope that the next Nokia CEO does something along the lines of this. And, yes, I’d be willing to accept $100 (and “some” stock) to be Nokia’s CEO and implement this :-).

(Image credit – Business Insider) (Image credit – Android logo) (Image credit – MeeGo logo) (Image credit – feature phone montage) (Image credit – Japanese phones) (Image credit – Mobile coupon)

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Maybe $100 isn’t so cheap after all

Anthony and I are in the business of bidding $100 for companies/divisions that we think we can turn around. But, despite our convictions, we are well aware of the skepticism out there.

“But, Ben, isn’t $100 far too cheap?”

I have to admit the doubts did get to me, but no longer. Apparently, large, recognizable magazine business are bought for far less! From the Financial Times (courtesy of my Bench Press partner Eric):

The $1 for which OpenGate bought TV Guide “is probably the kind of deal that would be obtainable for Business Week”, Mr Phillips said. Another banker said: “I think they’ll end up giving it away.”

Nope, definitely not too cheap anymore. After all, Dogbert has shown an uncanny ability to land deals worth far less than $100!

Sorry, BusinessWeek, are you feeling that sinking feeling?

image (Image credit)

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No Money for Blockbuster

imageAs frequent readers of this blog know, my Benchpress-partner-in-crime Anthony and I like making $100 offers for failing companies/divisions. One may inquire, then, given Blockbuster’s plight, why we haven’t made our usual $100 offer.

The reason is simple, despite a couple of long discussions about Blockbuster: Anthony and I are simply not confident that we could turn around Blockbuster.

There really are only three ways for their management to proceed:

  1. Out-Netflix Netflix. The major benefit of this strategy is that this is the business model that its management would be most familiar with – selling/renting video content. However, that’s about the only benefit that this strategy has. They are now strategic followers in a game which Netflix created and perfected, rather than leaders. But unlike Microsoft, they lack the resources to outlast or outinvest their compimageetition (in 2008, Blockbuster lost $374 million compared to having only $626 million of equity [all their assets minus all their debts], while Netflix made a profit of $122 million on $347 million of equity) nor do they have a premium offering to combine with their new strategy (e.g. Microsoft can roll innovations in things like Virtualization or Cloud Computing back into Windows or Office). Blockbuster’s one asset over Netflix, their physical presence around the country, is now relatively unimportant given the prevalence of broadband internet (and new internet-enabled set top boxes) and the cheapness and speed of mail delivery and their traction thus far in gaining major electronics and set-top box wins has been disappointing. Their most promising press release (a partnership with Microsoft to use Live Mesh) may be the only thing going for them – and this happens to be with the player who’s not the leader in portable media players and who’s Live Mesh product won’t really get full force until late-2009/early-2010. This strategy is not promising.
  2. Fundamentally change their business model. This is an idea I pushed at first – suggesting that Blockbuster switch business models to selling home entertainment gear, something which could help tie with their current product offering and give them much needed partners to counter their current slump and lack of customer mindshare. However, Blockbuster’s lack of resources (as of Oct 2008, only $95 million in liquid cash) and profitability and the high risk and long-term horizon of this strategy make this un-feasible as a game changing play. Simply put, there’s not enough farm to bet on this strategy.
  3. Sell themselves. This is probably the most promising strategy in that Blockbuster will only need to turn itself around just enough to convince another buyer to acquire the assets. But, given that Blockbuster is the largest brick & mortar renter of videos and its dim prospects, its unlikely there are any buyers interested in owning a video rental store. Success would require finding a party interested in:
    • Buying an industry stalwart who’s likely to shed off much more in losses and brand value before being able to turn itself around
    • An unwieldy network of physical stores
    • Investing large amounts in either outcompeting Netflix, fundamentally changing their business, or some combination of the two

Sorry, Blockbuster – maybe Dogbert will cough up some dough for you?

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(Image Credit) (Image Credit) (Dilbert)

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What happens when you don’t accept our $100 bid

Circuit City, Anthony and I reached out to you and countless other troubled firms with our bid of $100. We presented some of our awesome strategy to revitalize your core business. Yet you turned us down. And what happened? You’re now seeking bankruptcy protection.

Circuit City Stores Inc. filed for bankruptcy amid rising competition from Best Buy Co., Wal-Mart Stores Inc. and online electronics retailers. The petition for Chapter 11 protection in U.S. Bankruptcy Court in Richmond, Virginia, listed $3.4 billion in assets and $2.32 billion in liabilities, driving the shares down 56 percent before the New York Stock Exchange halted trading. The company said it is entering court protection owing Hewlett-Packard Co. $119 million and Samsung Electronics Co. $116 million.

One can only hope that the court recognizes the error of Circuit City’s ways and take us up on our offer…

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A Hundred for Circuit City

A guest post (the first!) by my good buddy, Anthony , who after a couple of minutes of brainstorming with me on what companies to offer $100 for and what we’d do to save them came up with this little bit:

Hi everybody, I’m Anthony, Ben’s partner in low-ball offers to disastrous companies. A couple of weeks have gone by and unfortunately it appears that no one has been willing to accept our $100 offer to run the next failing bank or company division (Damn that Dogbert…).

Now Ben and I are realists, we understand that companies may be reluctant to take advantage of our offer, but when you change CEOs only to find yourself looking at a share price of $0.20 (down 95.24% in 2008) and scrambling for ways to avoid Chapter 11; it just might be time for a major change. Yes, we’re talking to you, Circuit City.

Circuit City’s financial situation has deteriorated steadily since 2006. Revenue gains have been marginal in comparison to Best Buy’s rapid growth. In 2007 Circuit City incurred a loss of $8 million in stark contrast to Best Buy’s $1.37 billion in profits. If that weren’t bad enough in the most recent quarter (ending Aug 2008) Circuit City racked up over $200 million in losses. Total debt has increased steadily over the past three quarters and same store sales (a number showing sales that don’t come from new stores, making it a good sign of how well Circuit City is managing sales growth) fell 7.7% in FY2008. Adding insult to injury Bernard Sands recently pulled its recommendation for vendors to sell goods to Circuit City over concerns the retailer would be unable to pay. On the other hand, their top competitor, Best Buy, is flourishing with its revenue growing by double digits over the past four years. Clearly, something needs to be done.

This is where Ben and I come in. For the low, low price of $100 (probably worth more than the company should be right now), the two of us propose nothing less than a complete revamp of Circuit City’s store format and business strategy.

Since “business as usual” is simply continuing to take on Best Buy on its own home turf, we believe the best method for reinvigorating sales is to provide consumers with a new consumer electronics store experience — one that acknowledges the rapid pace of development in consumer electronics and provides the consumer with a practical while flexible buying experience. This new store setup will differentiate Circuit City stores from the plethora of typical electronics retailers by emphasizing “platforms” rather than individual devices. The reason for this is that the rapid pace of technology makes it difficult for the typical consumer to always make fully informed purchasing decisions. This means that consumers may buy products which aren’t compatible with or don’t work well with one another (e.g. HDTVs and various speaker receivers). The wide range of electronics that these stores need to carry also make it very difficult for the store clerks to understand all the options that consumers may want.

What do we propose? Take a page straight out of IKEA’s playbook — instead of organizing the store by device (e.g. a TV section, a MP3 player section, etc.), organize the store into “platforms” — here is a hardcore gamer’s living room setup, here is a budget home office setup, here is a student setup, here is a always-on-the-go setup, etc. In each case, instead of highlighting specific devices, we would encourage Circuit City and its employees to highlight a particular electronics experience customized for a specific use. This would help Circuit City’s relations with its suppliers, as the suppliers already are attempting to target different products to different types of customers, and would serve as a useful service for customers who have no clear idea of which devices are tailored for them, nor how the devices can work together. Also, in much the same way that IKEA lets you customize specific pieces of the furniture, this store experience gives customers flexibility by presenting choices which don’t interfere with how the electronics work together (e.g. different colors, a slightly higher-end or cheaper device to substitute, etc.).

This new customer orientation also suggests a structure for a new, more useful website. Ben and I propose to integrate Circuit City’s website into its store business in a way that no store has ever done before. Whereas most companies operate their stores and websites separately, we would force Circuit City to not only organize the website in the same way that the store is (to help simplify things for customers), but to also tie them so closely together that a customer could quickly and easily use the website to schedule repairs and pickups, check on the availability of products in their local stores in real-time, download product information (e.g. manuals, flyers, drivers, etc.), and even check out ways to customize or replace specific pieces (e.g. a different color game controller, a slightly higher performance sub-woofer, etc.).

Neither of these initiatives are easy, nor do they represent all of the ideas that Ben and I have, but they are a good first step in how to save Circuit City’s sinking ship. As Circuit City spokesman Bill Cimino told the WSJ, “[t]he management team, board of directors, and its strategic financial advisers are conducting a comprehensive review of all aspects of our business to determine the best methods of accelerating our turnaround”.

They haven’t gotten back to us yet, but I’m sure, if they want their company to succeed, they’ll give it some thought.(Image source)
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Standing offer

My friend Anthony and I are taking a stand. We were miffed when Motorola didn’t even consider our offer of $1 for Motorola’s handset division (seriously, why give it to Qualcomm’s ex-COO?). We were annoyed when our offer of $2 for Lehman Brothers was ignored (and now look where they are).

So, we’re going to draw a line in the sand right here. Right now.

Anthony and I will offer $100 (that’s 50 times what we were going to offer for Lehman – and they probably weren’t even worth that) to run the next failing bank or company division.

Do we have much management experience? No. Hardcore MBA with financial experience or brilliant technical expertise? Not really.

But, come on. Experts ran Fannie/Freddie, Lehman Brothers, Bear Stearns, AIG, Merrill Lynch, Washington Mutual, Motorola’s handset division, Pfizer’s heart medication group, … the list goes on and on. And look where they all are now!

It’s time for some new blood.

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