The Old Joel on Software Forum: Part 4 (of 5)

Google IPO

Anyone planning on bidding for Google's IPO?

Edward
Wednesday, May 19, 2004

Speaking of Google's IPO, anyone notice how Microsoft technologists and spokespeople are popping up like lemmings everywhere, ready and willing to give interviews about Microsoft's renewed search focus?

.
Wednesday, May 19, 2004

Microsoft is ultimately doomed because they repeat the age-old error of hiring only people like themselves - people who think they are the only smart people on the planet. The inbred mindset of Microsoft will be its undoing - no real creativity is possible in an atmosphere of groupthink. Their Achilles' Heel is their mindless assumption that no one can do anything better than they can (OK, so tell us about Quicken vs. MS Money again).

When did Microsoft do any real innovation? All of their products are knock-offs of other people's ideas, poorly implemented. The only exception seems to be Excel, which is the only MS product that is really any good, and they didn't invent the spreadsheet.

They hire based upon dorky puzzles, such as "why are manhole covers round?" and equally irrelevant nonsense. They should just hire all their local MENSA members (and before you Mensa apologists start in, I have an IQ of 148, whatever that means).

I am enjoying watching the squeeze play of MySQL pushing MS SQL Server from below and Oracle 10g and IBM UDB pushing down from above. All Rizzo can come up with is to point out that SQL Server has the advantage (!) of being optimized for one operating system!

Sadly, all too many executive types have been assimilated. As I said to one CTO I once worked with (who was an ex-Microsofty), you can never really leave The Collective; once a Borg, always a Borg.

Data Miner
Thursday, May 20, 2004

"Microsoft is doomed.."

I have yet to hear one argument for Microsofts impending doom that didn't sound like wishful thinking.

Thursday, May 20, 2004

---" The only exception seems to be Excel, which is the only MS product that is really any good,"-----

I heartily detest Excel, but still admit its many qualities, and it was what gave MS a foothold in the appliications market, and indeed gave Apple a boost.

However it's anything but the only good product. Access is a wondrous IDE for one person projects; the underlying Jet Engine is flaky but you can use it to code for any backend.

I find Front Page to be by far the best HTML editor for hand coding pages. Mind you nobody ever thinks of using it for that, but try and you will find it's a well-kept secret. (OK they bought it, but they still have improved it).

Outlook has many problems (the awfully slow search being the main one, broken auto-archive being another, and the ability to destroy all your data without warning if you pass limtis as to number of messages or size of .pst another), but it still is a great productivity enhancer.

And as for the OS? Well producing a desktop OS that is more stable than Linux, or the old MacOS, is no mean acheivment. Would Mac users ever have had OS10 if it wasn't for W2K?

At least MS allowed you to use IE for your own projects. Netscape's refusal to do so was one of the main reasons for their demise.

Encarta at least sets the standard for design for an electronic encyclopedia. The fact that it is now the only one people will pay for, and has seen off rivals such as Britannia and the |BM Worldbook, and that it is still going strong in time of the Internet suggests it isn't that bad at all.

But yea, where embrace and extend doesn't work, it loses much more often than it wins,

Stephen Jones
Thursday, May 20, 2004

Gee, what a stupid rant!

Is this BBS going to the dogs..or what? Why do we have to bother with this kind of crap?

Do you actually think that companies that hire top notch people with good educations is a bad idea?

Gee, I really do feel sorry for you, as you have not a clue how these companies run. HP, Boeing and a host of other very successful companies that provide REALLY good jobs for people are ALL adopting MS like hiring practices. Of course…MS learned this from IBM anyway!

You go to the good schools, and then pluck out the best people you can buy for the money. Get the best with the best education!. In other words…you go for the cream! Nothing new…but why do the companies that have the best hiring practices also seem to do the best in the economy? Hum?

I am glad these companies like HP and Boeing hire the best they can find. I am glad that these companies believe that highly skilled people are worth it, and they pay then well.

Thank goodness these companies don’t succumb to some weak liberal minded person that thinks education, and testing to grab the top performers is a bad way to run a company.

Schools might be trying to eliminate marks and testing but companies are rapidly learning that getting the best the brightest is the best dollars they can spend. You have to hire people that perform…it is that simple. In the real world...people do fail!

Most of these companies are the envy of the world right now.

Gee, how poor do you want the economy to get? What, lets give all of the internet and gaming industry to Japan? Hollywood and gaming are now both the same size of an industry. Any company that works to create and keep jobs here is really a welcome thing. There is more money to be made outside of North America in movies, and also in the gaming industry.

So, companies that are involved in gaming software like MS are most certainly welcome, as it provides valuable trade dollars to purchase things we need!

After all, how do you think we can afford to build things like hospitals? And more important is to have a economy with good jobs so people can afford to go to that nice hospital!

As for sql-server being squeezed by Oracle and MySql? My gosh…what a laugh!

The last set of numbers that came out from gartner 2 years ago showed Oracle down by a whopping 20%. The ONLY real star of growth in the WHOLE industry was sales of MS-sql server. They actually gained both in terms of market share and in terms of revenue.
Clearly things are leaning towards ms-sql server right now in the industry.

Do a google search…and you will see the numbers.

And, as for the new Oracle suite being a MS killer? Doubt it…word is that Oracle is already too complex and the new suite just makes this even worse!

Anyway…I don’t want to argue about some stupid off topic issue…as the question had nothing to do with MS....but all to do with Google’s IPO. Man, this BBS is going to the dogs…and will continue to loose people like me!

If you believe that MS is poorly run, then don’t invest in them and invest in companies like Google. I would suggest that you do check out their hiring practices, and also take a look at how well managed the company is.

And, for what MS does with the software? Well, I guess compared to who, or what other products in the market place? I just been using outlook 2003 for about two weeks, and I am finding REAL gains in my personal productivity. Just the built in spam filter is worth it also (it caught 35 of them for me today…what a great feature…and I am talking about a stand alone product. not something that needs exchange server to make this work). Combined with the built in spam filter and some other features…the way outlook works really actually has had a positive effect on my productive during the day as compared to previous versions. It is that much of a improvement! I am very impressed!

Anway..lets get back on topic here!

So, the question and topic is should one purchase an IPO?

Well, lets first make clear what a IPO is…as MOST do not know how they work

It was the summer of 99. I was out in the beautiful Okanogan area in BC. I was taking some deserved time off and enjoying the beautiful summer.

Of cause, the campfire talk was about how all these people were making buckets of money from IPO’s. You would see headlines and hear on the radio daily how such and such company had a IPO at $12, and it closed at $60 by the end of the day. Of course. each week on Thursday, or Friday there was fresh batch of IPO’s hitting the news.

The radio announcer, or CNN would go on to say that the stock thus closed up 5 times in one day.

So, all these people were sitting around the campfire wondering why they were also not playing the market. and making these buckets of money. It was like these people thought that money grows on trees, and the ONLY thing one had to do was call up their broker or get on line and start purchasing these IPO’s when they came out on the first day? Sure, just walk into some building. give them your money. and every week a new IPO’s comes out that you too can make buckets of money!

It is sometimes difficult to hear people talk this way. These people seemed to be feeling that they were being left out of some gold rush. Of course…even more funny, and more ridiculous to me was that these people actually thought that you could walk in off the street. play the market , and make 5 times the amount in one day….and it all is so simple!

Obviously NONE of these people had ever tried to invest. and anyone with a brain knows that money don’t grow on trees like that! Why in the world would you people be sitting around a campfire and taking time off work when money can be made so easily?

Of course, my real blame for average stupidly lies squarely with the media. It is not so bad that average Joe thinks money grows on trees if they had an investment account....but when CNN said the stock went up 5 times..that is TOTALLY MISSLEADING the public (investors know better..but the general public does not).

What CNN, or any broadcast medium REALLY ought to have done is mentioned the opening trades, and the closing trades. In fact, if I was in government. I would actually pass a law that forces the media to mention both IPO price..and opening/closing trades for the day.

The IPO price is totally meaningless to YOU..as YOU do not get the IPO price. That IPO price is a perk for EXISTING shareholders BEFORE the IPO starts to trade. Those existing shareholders are typically owners, or employees of the company and these stocks are traded/given BEFORE the IPO date.

So, you see, what happens is you can’t just phone up your broker and say you want X number of palm stock at the opening price of $15. The only way to execute a trade is to go the market on opening day. Thus, you have to tell your broker what the MAX bid you going to purchase the stock at when the market opens. If you have no idea of the opening bids..then you can instruct your broker to simple purchase/trade at MARKET VALUE. By market value, that means you give your broker $1000, and say buy it! If the price is $100, then you will get 10 shares. In other words, state your max bid price, or simply execute a market value trade.

Either way, in VIRUALLY EVERY major IPO I have looked at, by the end of opening day, you would HAVE LOST money.

Palm firsts trades during the day where about $85, and it closed at about $60 by the end of the day. So, in fact..for ONE day, you saw a drop of about 40% in the value of your investment. So, if you purchased at market value on opening bell…by the end of the day..your $10,000 is now worth about $7000 grand.

And, if you opening bid was at the IPO price of $15..you where NOT EVEN close to what opening trades where being executed at (in the $80 range). So, your trade would not have executed at all.

By the way, it been a few years. and the above numbers may not have been for palm stock (I just quite can’t remember which one the above numbers applied to. However, I did research palm, yahoo and several others. Virtually all traded in this fashion during the first day (at that point, I threw out my research notes as it was obvious that purchasing an IPO on opening day is not a way to make money! I do wish I keep my notes and articles for a nice web article however.

Of course, then CNN goes on the air and says the stock closed up by a factor of 5 times from the IPO value? Really…who cares? The ONLY number that I care about is what was the opening trades. and the closing trades!

There is no question that having a stock at IPO price is a gift horse. but for simple folk trading on the market. it is a complete and utter illusion. Why tell me that palm IPO stock at $15 closed at $60? What use is that? How about telling me that the IPO at $15 opened at $85..and closed at $60 (now, that is much better..eh?...and conveys instant information in ONE sentence as to what actually happened that day!)

So, would I consider purchasing the IPO on the first day of trading? Hum, not likey..as most of these stocks do trade down in value by the end of the day.

And, there are some exceptions. As far as I can remember, I believe it was Yahoo that did trade down slightly during the opening day. However, in a few weeks…Yahoo was actually trading above what most first day trade prices were..and that is quite amazing. So, in fact, a few weeks later even some market investors made money!

So, if you believe in the company, and see it has a good future growth, then by all means invest in the company. However, don’t have some illusions that the getting in on the first day is some free ride. As long as you are not thinking about some get rich on the first day scheme, and you believe in the company, then sure invest.

So, if you bet on the first day…then you must be willing to hold on to the stock for growth. Most of the time…you will have to take a initial hit on your investment and wait for future growth.

Of course after researching a bunch of IPO’s…I never did purchase palm. I stick to mutual funds where they have full time people to worry about this kind of stuff!

Now that we are clear about how IPO’s work, then the real question is should one invest in a search engine company period? We need to ask that question BEFORE asking about Google!. My instincts say no, since it is a technology that can be duplicated with a reasonable investment. Staying on top of the search engine business is going to be VERY difficult

Further, Google, or yahoo for that matter has NOTHING special right now to prevent me from switching to something else. I can change between them at will without any cost, or real waste of my time.

Most products don’t allow consumers to change so easily. You can’t do that with your car for example (there is some effort and cost to change the car you use).

I can’t even say the same thing about using Outlook….as for me to change and give up my cool outlook 2003 would be very hard indeed!

So, it seems WAY too easy to change a search engine…and thus I don’t see how one company can keep customers…and if you can’t keep customers, and customers can change without any pain or cost then all customers could change tomorrow if they feel like it.

This means to me that the search engine business is too risky for me!

Albert D. Kallal
Edmonton, Alberta Canada
kallal@msn.com
http://www.attcanada.net/~kallal.msn

Albert D. Kallal
Thursday, May 20, 2004

You're right as far as it goes in terms of the difference between IPO price and opening price. But a story of opening at $85 and closing at $60 doesn't mean its a loss of $25 on the day (for those that bought on the day).

It means that's what the market value is at the end of that first day. Those that bought at higher prices are going to have to hang on until they make money (or take their losses).

Those that bought at significantly lower than that (which will be nobody buying after opening), can choose to take their profits on that market price (though there may be conditions on pre-IPO stock). If they do the tendency will be for the price to drop. If they hold and the large institution investors are buoyant then the stock will rise, all other things being equal.

Since I believe using a stock market to fuel the economy is a poor tool and that strong private companies almost never improve after going public, I generally have nothing but a sense of loathing about IPO's.

Simon Lucy
Thursday, May 20, 2004

Dear Albert,
That one was too long!

You are saying two things. Microsoft is a big well established company and follows the same hiring practises as other big established companies (your opinion, not mine) and big established companies provide lots of well-paying jobs.

IPO's are a way in which insiders cash in at the expense of the credulous or the greedy.

Incidentally I, like Joel, have been running Spam Bayes for a year, and no longer feel spam is a problem or that I need Outlook 2003 Spam filters. And any productivity gain with the spam filter wouldn't make up for the productivity loss caused by the security fix that blocks most atachments.

Stephen Jones
Thursday, May 20, 2004

I think google will be margenalized into irrelevance.

son of parnas
Thursday, May 20, 2004

>Dear Albert,
That one was too long!

Yes…you are 100% right. My apologies. There is long, and then there is rude long..I think my post was in the rude long area!

My apologies to all readers here.

I really should have just put that text about IPO’s in a link to my temp junk web site. (it just takes a minute anyway).

>running Spam Bayes for a year

I will have to check it out….

For the security fix….well I have a little script on the corner of my desktop that I downloaded.

http://www.dougknox.com/utility/scripts_desc/outlook_attach.htm

It simply lets me type in a list of legal attachments for outlook. if I get some new attachment …then I click on that script and add the new file type to the list. After a few weeks…my current list is:

mdb;mde;zip;nws

So, I have not even yet received word doc yet. And, to be honest. new issues of security are the only pain points in new products these days. Something we will have to live with!

Albert D. Kallal
Edmonton, Alberta Canada
kallal@msn.com
http://www.attcanada.net/~kallal.msn

Albert D. Kallal
Thursday, May 20, 2004