October 31, 2008

 

How companies can exploit current market situation.

The current stock market situation is unprecedented. Indian stock markets have never fallen this much from the peak. The BSE 500 index, which presents a more realistic picture than the 30-stock Sensex, has fallen 60% from its peak and at its recent bottom it fell as much as 70%. If observed closely, the sample space is filled with stocks which have lost 70-80% of their peak value.

Companies can remain indifferent from the stock market gyrations if they don't have to raise money from capital markets. But, in the growth economy like ours companies are constantly in expansion mode. The ones in a hurry do it aggressively. Since the taps of fund raising have dried, there is very little they can do.

Many of the promoters feel their stocks have been beaten down to unreasonable levels. These are clearly very depressing times for them. Now, how can they exploit this situation?

Three ways.

One. Buy back the shares from market. But, this applies to companies which are rolling in cash. And not many fit the bill. The companies will rather conserve cash for the tough times ahead than spending it on "unnecessary" buy-back.

Two. Buy other companies. Then again, this for companies with cash can afford this luxury. The India's most admired IT company comes to my mind which is sitting on some Rs 8000 Cr cash.

Here is the third and final way. And it applies to all the companies including those rolling in cash and those who have raised billions of dollars in debt. Award stock options to employees. And do it liberally. Keep the vesting schedule to 4 years (or more if allowed by regulation) with one year cliff. That is, if an employee is awarded 100 options with 4 year vesting period, then first 25 options are vested at the end of first year. And then the remaining options can vest on monthly basis.

It locks employees for at least 4 years. There is very little downside on stock prices (I shouldn't say that as theoretically the lowest price for stocks is zero.) So, after some time the stocks will always trade above the strike price. This is a tax-efficient reward as long-term capital gains are taxed at zero percent rate. If employees want to leave before vesting completion, they will leave serious money on table. When the good times return, salaries need not rise again to stratospheric levels if the compensation from stock options is tidy. The company need not worry about either attrition or wage inflation. This also aligns interests of promoters and employees nicely.

Now, is there anything obvious I missed out?

October 30, 2008

 

Is this good enough?

Viswanathan "Vishy" Anand regained the world title for the third time. There are hardly any peaks to be conquered for him. Can we end the 7-year drought of Bharat Ratna by recognizing Vishy as one?

Bravo, Vishy!

October 24, 2008

 

Gmail bloat?

Agreed that email is the second most popular application after search on internet. Violently agree that it is miles ahead of other forms of communication on internet including writing on wall, sending scrap, tweet, IM, etc.

But, does that justify the feature bloat of Gmail?

Thanks, but no thanks. I am quite happy with existing feature set. The only way to make me less happy is to keep on adding features to it.

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October 22, 2008

 

Zugzwang

Zugzwang is a term from Chess. From Wikipedia - "It describes a situation where one player is put at a disadvantage because he has to make a move."

The Govt of Maharashtra is in the same position as for as Raj Thackrey issue is concerned. They waited for too long to arrest him. And now that they have done it, the govt still stands to lose. As Raj is described in far more ruthless terms ("urban terrorist") on English news channels, his support base in Maharashtra can only increase.

I wouldn't be surprised if this turns out to be the cornerstone of his political career and his party comes to power in the next decade. While the English media cluelessly brands him as troublemaker, he is far more articulate, shrewd and perspicacious. The moment the party acquires substantial mass, he will attract the "thinking class," which people generally associate with BJP right now. Then the makeover the party will be complete.

October 20, 2008

 

Elephant in the tent

You must have gotten more than fair share of your dose of Jet Airways story from media. At the end, who won and who lost.

Biggest loser of the episode is, obviously, Jet Airways and the boss Naresh Goyal. When media has mastered the art of making non-news to a sensational story, how did they bungle it this big? Don't they have any HR person in the team? No PR person to mellow down the entire story? Mr Boss almost pleaded complete obliviousness to the matter. If the management didn't consult him on this decision, then rolling some heads on the top would have made us really believe that the decision was taken without his consent. And in case he was aware of the action, then his statement that he wasn't is, umm.. factually incorrect. Either way his reputation has taken a serious dent. Reputation in aam junta may not be of much value to him, but what about the image among the Jet employees?

Next in the loser's list is Jet empoyees. Being terminated in this manner is a huge reason for media to rake up this issue. All they had to do was protest mildly. Immediately, experts would have been called up to give a soundbite. Another panel would have discussed "Is hire and fire way of our culture," etc. You get the point. The mistake of Jet is so grave that they would have realized in the matter of hours and taken corrective steps.

Instead, Jet employees invited Raj Thackrey's MNS (Maharashtra Navnirman Sena) to "help" them out. MNS must have been escatic at this offer. They didn't waste a minute to ride the gravy train. Never mind if it involved helping the very "non-Marathi-Manoos" whom they routinely terrorize. Or if it involves giving instant lessons in Marathi. Or teaching Jet staff that Mr Raj Thackrey is actually "Mananiya Raj Saheb Thackrey".

Getting MNS involved in the matter meant, every political party will extract its pound of flesh. Now, they had Shiv Sena, NCP, Congress and the communist gang vocally joining the drama. In future, whenever there is a minor trouble with white-collar employees, all these guys will make an issue out of it. And why is it such a bad thing? Well, just to give you an example, IBM shut down many offices in Europe because of union troubles. And I have seen that happening in textile industry at my hometown in Solapur. As much as there is disdain about blood-sucking capitalists, let me assure you unionism is the surest way of closing down the industries.

As for Jet, last year they posted a loss of Rs 650 Crore. With no good news in sight, except for the lower crude price, it needs to be watched how long they can sustain such high losses. Just a quick common wisdom on aviation sector. In its entire history of existance, it has not made any money. Now, if people oppose any kind of downsizing in these times, then I suppose they would rather have everybody at company losing the job instead of few.

Biggest Winner? Obviously, MNS. With an army of rowdy followers, such opportunities are Diwali bonus in advance. Now that they have tasted the blood, they will not lose a single such incidence to make their presence felt.

As much as I hope, Jet incident is an aberration, I fear it may become a norm. Then we don't need a full-blown crisis in global markets to return to 5% growth rate.

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October 19, 2008

 

Gambler and banker

A quote from a recent forward making fun of investment banker :
What's the difference between a guy who just lost everything in Vegas and an investment banker? A tie.
Well, in my view, there is more.

The gambler had had fun of his lifetime while losing his shirt. He probably was sipping martini while playing roulette. He probably still has something good for day job to go back to. He played with his own money, whereas the bankers played with somebody else's money.

October 15, 2008

 

Bravery

IPOs are more visible when the stock markets are at the top. In fact, the flood of IPOs is indication that markets is at its peak. The sinking market is the worst time for IPO. I mean, when the true blue chips are available at multi-year low, who is going to buy shares of a new company?

Well, just happened to know about a company called Alkali Metals which is doing public issue to raise Rs 25 Cr. Now, that's a minuscule amount compared to the total IPO market. But you have to give it to them for sheer bravery.

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October 11, 2008

 

SMS Landing Charges

Verizon Wireless, the #2 wireless telecom operator in US, plans to charge 3 cents SMS landing on their network. Sending SMS costs between 2-10 cents depending on the pre-paid plan you buy. Effectively, the landing charges of SMS is anywhere between 33%-150% of what it costs to send a message. Verizon spokesperson justified the charges saying “It didn’t cost them zero to build or to buy spectrum rights.”

What happens if the same scheme comes to India? Well, it won't. Why? In majority of the markets, users do pay to receive call. In India, too, in early days, such charges were applicable. Results? Not too many picked the call if they didn't know who was calling. In early 2003, incoming charges were eliminated. That definitely was one of the crucial developments which resulted in explosion of mobile services. So, let's not worry about charge for incoming SMS in near future.

What happens to the hypothetical situation when it is applied selectively to only the entities which send bulk messages? It's difficult to completely rule out this possibility.

October 10, 2008

 

Conveniently Capitalist

When the business is growing through roof, Capitalist ask Govt to stay out of their way as much as possible so that they can drive at 200 kmph. But, when things turn sour, the very Capitalists beg to Govt to save them and the economy.

October 05, 2008

 

Printed Wikipedia

While traveling by train couple of days back, it struck me that how my brain has wired to check the references on Wikipedia. Much of the time I spend on wikipedia is mostly for amusement. It kicks off with a need to find something and then within few clicks I wander away from the original article. That's the beauty of Wikipedia - it's hard to get bored if you just want to read random stuff about a topic.

Old-fashioned that I am, the immediate thought that came to me was need for a printed Wikipedia. Now, by no stretch of imagination this a novel idea. In fact, it is already available in the market. It contains about 20,000 articles and sells at 20 euros. But, it is in German. :(

Now, for my pleasure reading, I am not looking for an encyclopedia with 20,000 articles. I want something in 300-400 pages, though this is not a non-negotiable size. Given the size it makes sense to have articles about a certain topic in this book, say Economic Ideologies. It will touch the ideas such as Communism, Capitalism, Socialism, etc in the depth which is just good enough to carry some interesting conversation with a guru of this field.

So, how do we go about it? Well, here is my genius idea.

There is a product called Wiki Slices from my prior company. I am not sure if it is still supported. You can enter a topic and it will create a slice of Wikipedia for you for that topic. It could probably be tuned to provide a slice of certain size (by word count or article count.)

There is a startup in India which offers on-demand publishing - Pothi.com. On-demand publishing means serving the long tail. It probably doesn't matter to them if a book is selling few tens of copies or hundreds or thousands.

Now blend these two ideas. If Pothi.com offers say 1000 books which are essentially the slices created by Webaroo's technology, Pothi is suddenly serving pretty large market.

And here is the kicker. Why should you be restricted at 1000 titles? Why not 10,000? Or 100,000. The Pothi team will initially seed few topics. Since Wiki Slices can be created by anyone, a user can create custom Wiki Slices. If others like that slice, they can just order a copy of that. There will be a very competitive list of Best-Selling Slices. I am sure there is some Web-2.0 jargon for this activity, just that I am not much in sync with fast moving world.

The author of the blog article on German Wikipedia wrote:
The real question, however, is why anybody would want to buy a printed and abbreviated version of Wikipedia. After all, you lose all of the advantages of full-text search and the ability to edit articles in this printed text.
Well, simply put, I don't care about searching the book, much less about editing it. I just want to READ the damn thing.

Now, where is my complimentary copy?

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October 04, 2008

 

Pune CYG 2008

Pune is hosting Commonwealth Youth Games 2008 starting next week. Bunch of random thoughts:

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