Joseph Weisenthal's Techdirt Profile

Joseph Weisenthal

About Joseph Weisenthal

Posted on Techdirt - 10 September 2007 @ 06:35am

New iPods Demonstrate BLS BS

The obvious response to folks complaining about the iPhone price cut is that of course the price was going to be cut, because it’s a tech item, and the cost of technology invariably marches lower. Yes, technology is a constant deflationary force, not just because prices of it keep dropping, but because the quality of any given item tends to rise over time. We’ve made this point in the past, that inflation statistics have a hard time dealing with tech items, because the measures only look at price and have a difficult time adjusting for quality improvements. As economist Russ Roberts notes, the new iPod Classic is not just $50 cheaper than the original, it holds 40 times as much data. In other words, doing a like-for-like comparison between the original iPod and the new one vastly understates the amount of progress that was made in such a short time. What’s more, while it’s easy to note the data storage comparisons, how do you quantify the addition of video playback or pictures? It’s pretty difficult. So while inflation statistics serve a purpose, it’s important to recognize that there’s often a lot more at work than just price changes.

Posted on Techdirt - 7 September 2007 @ 12:30pm

Are Moody's And S&P The New Blodget and Quattrone?

It’s been said by many that bond ratings agencies are to the credit bubble what the tech analysts were during the dot com bubble. Whereas guys like Henry Blodget got dinged for touting IPOs for no other purpose than to move stock, many are wondering whether firms like S&P and Moody’s inflated debt ratings so as to help move more business. It certainly seems plausible, and now it looks like regulators are going to delve deeper into this question, as they look at whether repeat customers tended to receive better ratings for the securities they were floating. Regardless of what regulators determine, it seems likely that the reputation of these firms will be permanently tarnished. Nevertheless, there would still seem to be a need for third parties to rate debt, so that the market can determine the appropriate interest rate. Of course, it’s not like nobody saw this coming. For years now, people have been warning about the oligopoly in bond rating, and the potential for conflicts of interest. Perhaps the key is pursue a more decentralized system of disseminating information, although it will take some work (and regulatory flexibility) to figure out exactly what this model would look like.

Posted on Techdirt - 6 September 2007 @ 07:36pm

More Tech Firms Stung By Weak Financial Sector

Because a company can only be as strong as its customers, there’s no way for tech companies to be completely insulated from broader economic events. Companies with a lot of exposure on Wall St. are going to be particularly susceptible to a slowdown, as some companies, like Cisco, have already stated that they’re seeing weakness in this market. The latest to sound a similar warning is Tibco, a software provider with a lot of customers in finance. The firm described the financial sector as “notably weak” blaming it for an overall earnings shortfall. It should be noted that Tibco hasn’t had a particularly stellar few years, so the company was already struggling a bit. Still, what’s affecting Tibco is likely to affect a host of other related companies. Right now, there’s a lot of concern about the health of the financial sector, but if troubles continue to persist, then the malaise is likely to spread elsewhere, potentially leading to spending slowdowns in other sectors.

Posted on Techdirt - 6 September 2007 @ 11:29am

Still Not Betting On An eBook Revolution

eBooks have been touted as the next big thing for quite some time now, but invariably, each new generation of the new technology fails to win over consumers. Of course, that’s not going to stop the publishing industry from pursuing them in their belief that they’ll be the savior of the industry. The latest iteration comes from, and for $500 it offers the ability to connect wirelessly to an eBook store, meaning you won’t have to plug the device into a computer in order to make a purchase. For eBook aficionados, this might be a nice convenience, but it’s pretty hard to imagine this feature proving pivotal to winning over the broader population. Of all the problems people have with eBooks, the fact that you have to connect them to a computer probably isn’t a significant one. The above article also mentions Google’s planned foray into digital publishing, as it intends to sell digital versions of books from select publishers. But it’s not clear why Google thinks that customers will be particularly interested in this service. After Google’s previous foray into selling digital content, with its now-defunct video store, you’d think the company would stay away from this kind of business.

Posted on Techdirt - 5 September 2007 @ 05:35pm

Pockets Of Private Equity Still Very Much Alive

Fears of a credit crunch have put a chill on fresh private equity activity, while several pending deals are thought to be in trouble. But there are still signs of life in some parts of the industry. There continues to be strong interest in medium-sized media deals, as funds that specialize in this area continue to raise money and make moves. Considering the challenges facing many media companies, it makes sense that private equity investors would think there’s an opportunity to pick up assets at a bargain, reformulating them into something of more value. Obviously, the private equity industry isn’t going to grind to a halt. Deals that are predicated on nothing more than cheap credit will become rare, but investors will always be on the hunt for undervalued companies that can be turned around.

Posted on Techdirt - 4 September 2007 @ 03:46am

Prize Insurance Puts A Price On Conventional Wisdom

Since the first X-Prize competition, we’ve seen more and more interest in this model as a way to spur innovation. However, there are still a lot of questions about the competition model, in terms of efficacy and utility for private industry. While businesses are interested in the concept, the exact model remains unclear. Economist Alex Tarbarrok relates an interesting point about how the X-Prize was funded. Apparently, the group behind it didn’t actually raise the prize money, but rather it bought an insurance contract that would pay off in the event that someone actually won. And who wrote the insurance contract? None other than the established experts in the field: Boeing and McDonnell-Douglas. It just so happened that these companies thought the prospect of a successful launch was basically nil, so they gave the organization a very generous price on this insurance contract. The fact that the prize was ultimately claimed is a good indication that even the established leaders in a field don’t always have the best grasp of what advances are just around the corner. It also suggests a possible business model, whereby middlemen attempt to arbitrage the disparity between what the establishment deems possible and what individual inventors think they can accomplish.

Posted on Techdirt - 30 August 2007 @ 12:08pm

Peer-To-Peer Lending Sites Weather Credit Market Storms

Will all of the turmoil in conventional credit markets spur greater interest upstart peer-to-peer lending exchanges? It seems possible, since, in a way, sites like Prosper and Zopa are the antithesis of the highly impersonal, securitized industry that’s facing so many problems right now. From the outset, these P2P lending sites have emphasized diversification, manageable risks and direct relationships between lenders and and borrowers. Whereas traditional loan brokers are closing their doors left and right, these sites continue to do brisk business. Lenders aren’t seeing mass defaults, because the standards have been high since the beginning. Of course, the scale is different. You still can’t finance a house through one of these sites, but for other needs, they may work just fine. Between the lack of available credit to consumers and a desire to diversify investments on the part of individuals, this moment in the business cycle offers these sites an excellent chance to really prove their worth. Update: A number of commenters make some interesting points about default rates, suggesting that they may be higher than these sites would have you believe. Also, it’s pointed out that there are a number of users playing both sides of the game — borrowing at one rate only to lend out at a higher rate, which is not so different than traditional financial institutions.

Posted on Techdirt - 29 August 2007 @ 09:29pm

Computer Component Prices Flipping Around Again

The market for PCs and PC components continues to give off mixed signals. Earlier this month, there were reports that the PC makers would enjoy comfortable profits, as component prices were looking soft. Then, barely a week later, the opposite view came to prominence, as analysts and chipmakers alike called for good times. Now things are flipping once again, as DRAM prices are expected to collapse, with weakness continuing through the end of the year. Meanwhile, hard drive maker Seagate is upping its forecast, citing strong PC and mobile volumes. With all of these markets flipping around on a week-to-week basis, it should be pretty clear that there are very few significant trends here. In the long term, you can predict that component prices will continue to decline in price, just as all technology does, but it’s not particularly worthwhile to read deeply into short term price and volume changes.

Posted on Techdirt - 29 August 2007 @ 01:03pm

How Long Before Financial Advisors Rating Site Gets Sued?

Back in June, the launch of Avvo, a site for rating lawyers, was met with a lot of controversy. Lawyers aren’t used to being rated as if they were any other good on the market, and it didn’t take long before the site was sued by one lawyer unhappy with his ranking. Now a similar site is getting set to launch, except this time it will focus on financial advisors, another group which isn’t used to much scrutiny. It’s not clear whether or not this will prove particularly useful, but hopefully the site has some money socked away for legal fees, since it’s only a matter of time before one disgruntled advisor sues after a bad rating.

Posted on Techdirt - 29 August 2007 @ 10:32am

As Companies Go Public, Power Stays Private

As we’ve noted several times, the tech IPO came back in a big way this year, most recently evidenced by VMWare’s meteoric launch out of the gate. While this is good news for companies and their investors, Kevin Kelleher argues that we’re seeing a disturbing trend in the way these deals go down. In many instances, the terms of the deal are such that the general public shareholder has little power in the newly-public company, with most voting power concentrated in the hands of a select few insiders. What’s more, in many instances, the companies have sold stakes in themselves to certain outside investors at a price below what was available to the public. It’s easy to argue that such moves represent greed and a desire to keep the spoils concentrated, but there may be other reasons for these actions. As the rise of private stock exchanges suggests, public shareholders are increasingly seen as a liability, whether it’s due to the threat of shareholder lawsuits or activist investors. Kelleher’s concern is for the “little guy”, as he puts it, but it’s not clear that most investors actually care about things like voting rights. As long as investors understand where they’re at, and can weigh the risks accordingly, certain trends in governance structure shouldn’t be particularly worrisome.

More posts from Joseph Weisenthal >>