Friday, July 19, 2002

AOL for Sale

AOL's stock price dove again today on news of the management shake-up and part two of the Washington Post articles on the company's revenue recognition "issues." If that's what they are called. If you don't have the time to wade through the reams of newsprint that have been devoted to the company's woes, here are the key points:

1. The company's stock is now way under-valued. If you do some simple calculations on just the publishing and media properties, using conservative multipliers (8 x cash flow), AOL is a $15 stock. And that's without factoring in AOL itself or the music business.

2. The new management team has no idea how to get the most value out of the combined entities. Or if they do, they don't want to spend the money required to develop a fully interoperable information technology system. A fully interoperable information technology system can, for instance, recognize a "Sopranos" customer on HBO (and Time Warner Cable) and share that information across all the owned entities. Warner records could then sell that customer a Sopranos CD. Time Warner Books could sell "Sopranos" books/scripts to that customer. Time Warner video could sell that customer "Sopranos" tapes or DVDs.

It is the road to more revenue. It's not the only road, but in the long run, it's the most efficient. Certain "Time Warner" executives continue to sound almost hostile to the idea of a company-wide interoperable information technology platform.

3. AOL itself will be sold and probably soon. It is clear that the new managers have no regard for the company. Since the parent company is drowning in a sea of debt, unloading AOL seems a likely outcome.

4. The New York Times has been slaughtered on this story by both The Wall Street Journal and The Washington Post. Mr. Raines must look at that vast expanse known as "Business Day" and wonder to himself: "what do all those people do all day long?"

Wednesday, July 17, 2002

Shorting The New York Times Company

-- "The long-term story for the New York Times is still very good," (J.P. Morgan analyst Barton) Crockett said. "They're growing circulation, which is unique in the industry, especially since they're raising circulation rates." -- from Reuters

It is widely believed that most analysts on Wall Street are fools. Mr. Crockett is obviously not a fool. With business scandal all the journalistic rage, he chose the prudent path both for himself and for J.P. Morgan Chase. He sucked up shamelessly to The New York Times.

But it's an interesting question, don't you think? What are the long-term prospects of The New York Times Company and, in particular, the "paper of record." One suspects that if Mr. Crockett were completely candid he would say: "not good."

There are three major problems. First, New York Times management is dysfunctional. This is partly due to the company's bizarre family ownership arrangement and partly due to the fact that the whole point of the corporation is to milk cash cows in the outlying precincts to feed the paper at its core.

Second, under the direction of Sulzberger the Younger, the Times is now wasting mucho dinero on television projects that will fail. The whole idea of New York Times television is ridiculous. The point of The New York Times, at least in theory, is that it's much more substantive, much more subtle and much smarter than television. The notion that a gaggle of New York Times chin-strokers makes interesting television is insane. Sulzberger the Younger believes NYT TV is the future. How weirdly retro is that?

Third, and most important, The New York Times newspaper is squandering its greatest asset, which is its reputation for delivering high quality information. What The New York Times newspaper delivers all too frequently these days is political opinion masquerading as news. Whether its the phony story about global warming in Alaska or the equally silly story about the Bush Administration's imaginery "cuts" in the Superfund, almost every day brings front page news that is loaded with liberal spin.

And people are noticing. Even liberal websites, like Slate, seem amazed by the Times's open exhibition of bias. All of which is made worse by the paper's ceaseless and moronic Bush-bashing on its editorial and op-ed pages.

Perhaps the biggest problem of all is that no one at The New York Times seems to think that any of the above is a problem. They think the paper has never been better. They say that the seven Pulitzer Prizes this year prove that the paper has never been better. They view all criticism of the paper as essentially ill-informed and/or mean-spirited.

When the reality as seen from inside the building and the reality as seen from outside the building so diverge, trouble always follows. NYT Corporation stock sells at a multiple of nearly 40. The company has mediocre management. It is wasting money on projects that won't work. And it is sullying its reputation for reporting the news "without fear or favor." Sounds like a short to me.

Monday, July 15, 2002

The Stupidest "Scandal" Story of the Month

You can find it by clicking here.

Here's the real story. George W. Bush owns Harken stock. Harken plans an additional public offering. As part of that procedure, Bush signs a "lock-up letter" regarding the new offering. The new offering is cancelled. Bush, obviously, can't sell what he never had. He can, however, sell what he already has, which he does to raise money for his stake in the Texas Rangers.

The Open Championship

The Open Championship, sometimes called The British Open, will be held this week at Muirfield. ESPN coverage begins at 8am Thursday morning. Print coverage kicked off this morning, with today's theme being that Tiger Woods' opponents are not as tough as the competition that Jack Nicklaus faced in his heyday.

Really?. Everyone who thinks that Lee Trevino is a better golfer than Ernie Els, raise your hand. Everyone who thinks that Billy Casper is a better golfer than Phil Mickelson, raise your leg. Please.

Look Out Below

One of the rules of modern American politics is this: If the University of Michigan's Consumer Confidence Index falls below 100, the party in power in the White House is in trouble. If the Consumer Confidence Index is above 100, the party in power in the White House (barring scandal) is in good shape.

The numbers are in for last month and the Consumer Confidence Index now stands at 86.