Tuesday, The White House hesitate to agree with Republicans' demand that President Obama accept more than $2 trillion in spending cuts in exchange for their agreement to raise the $14.3 trillion U.S. debt limit.
House Speaker John Boehner, the top Republican in the U.S. Congress, Monday laid down a tough new yardstick in talks over the U.S. debt, saying spending cuts must exceed any boost to the U.S. borrowing limit.
A senior White House official told Reuters that Obama agrees debt reduction is an urgent priority and the president has offered a "balanced, fair plan" for $4 trillion in deficit reduction.
Obama believes bipartisan negotiations led by Vice President Biden, which resume Tuesday, can lead to an agreement on further substantial reduction, the official said.
"But it is simply irresponsible to declare that you will tank the U.S. economy if you don't get what you want," the official said.
Treasury Secretary Geithner has warned of economic catastrophe
if the federal government's borrowing authority is not increased and has told Congress that he will be able to stave off default until Aug. 2 by drawing on other accounts once the debt limit is reached.
An increase of $2 trillion will be needed to cover the country's borrowing needs through the November 2012 elections, Treasury officials have told lawmakers, but Congress could opt for a smaller increase if more time is needed to hash out a deal.
Obama wants to raise taxes on wealthier Americans and shield popular entitlement programs like the Social Security and Medicare programs for the elderly.
( Source:Reuters )
House Speaker John Boehner, the top Republican in the U.S. Congress, Monday laid down a tough new yardstick in talks over the U.S. debt, saying spending cuts must exceed any boost to the U.S. borrowing limit.
A senior White House official told Reuters that Obama agrees debt reduction is an urgent priority and the president has offered a "balanced, fair plan" for $4 trillion in deficit reduction.
Obama believes bipartisan negotiations led by Vice President Biden, which resume Tuesday, can lead to an agreement on further substantial reduction, the official said.
"But it is simply irresponsible to declare that you will tank the U.S. economy if you don't get what you want," the official said.
Treasury Secretary Geithner has warned of economic catastrophe
if the federal government's borrowing authority is not increased and has told Congress that he will be able to stave off default until Aug. 2 by drawing on other accounts once the debt limit is reached.
An increase of $2 trillion will be needed to cover the country's borrowing needs through the November 2012 elections, Treasury officials have told lawmakers, but Congress could opt for a smaller increase if more time is needed to hash out a deal.
Obama wants to raise taxes on wealthier Americans and shield popular entitlement programs like the Social Security and Medicare programs for the elderly.
( Source:Reuters )
Goldman Sachs dramatically increased its exposure to debt issued by the US government and government-sponsored agencies like Fannie Mae and Freddie Mac in the first quarter of this year, apparently bucking the trend of some of the biggest bond traders to short US Treasuries.
At the end of the first quarter of this year, Goldman owned just over $100 billion of US government and federal agency debt, according to it's latest quarterly filing with the Securities and Exchange Commission. That's a $15 billion increase over the fourth quarter of 2010 and a $21 billion increase over its holdings during the fourth quarter of last year.
For a firm like Goldman, an extra $15 billion or $20 billion might not seem like much. But building the portfolio of US government debt while many investors, such as Bill Gross's PIMCO, are reducing their exposure definitely shows Goldman swimming against the stream.
At the end of the first quarter of this year, Goldman owned just over $100 billion of US government and federal agency debt, according to it's latest quarterly filing with the Securities and Exchange Commission. That's a $15 billion increase over the fourth quarter of 2010 and a $21 billion increase over its holdings during the fourth quarter of last year.
For a firm like Goldman, an extra $15 billion or $20 billion might not seem like much. But building the portfolio of US government debt while many investors, such as Bill Gross's PIMCO, are reducing their exposure definitely shows Goldman swimming against the stream.
China's largest social networking site Renren Inc ( NYSE: RENN) listed on NYSE with a blow as stock touched an intraday high of $ 24 last week ,while the offering of the stock was at $12 - $14. After the stunning listing stock has gradually come down almost every day and today it has touched $14.52 a new low after listing. There is no specific announcement or bad news about the company, but the reason it has come down is IPO pricing announcement by another social networking site LinkedIn. LinkedIn has offered shares at value of 12 times of its 2010 sales while Renren Inc was priced at 78 times its earnings. Investors cautions have grown because of this vast difference in offering.
See below report:
LinkedIn Corp has priced its closely watched initial public offering at a bargain compared to rivals such as Renren Inc RENN.O and Facebook, underscoring growing caution over social media valuations.
The debut of the social network for professionals founded by ex-PayPal executive Reid Hoffman values the nine-year-old firm at $3 billion. At about 12 times 2010 sales, its IPO is cheap compared to 78 times for Renren, the Chinese site often likened to Facebook.
Companies including Twitter, Groupon and Zynga have stoked heavy interest from investors betting on social media only getting hotter. Their shares, traded in markets for private investors, are commanding multibillion-dollar valuations.
Last week, Renren Inc (RENN.N), one of China's biggest social networking companies, rose 29 percent in its debut on the New York Stock Exchange.
LinkedIn is valued at a discount to peers, but as a social network, it is priced several times more than the likes of Google's and Yahoo's 4 to 5 times sales.
"In terms of the potential of how profitable LinkedIn can be, that's where most people feel that its upside potential is a lot more limited than some of the others," said Jay Ritter, a professor of finance at the University of Florida.
Sources say that even Facebook's seemingly inexorable climb in valuation may be peaking. In recent weeks, a group of investors looking to sell its shares showed a willingness to settle for a lower price than they wanted.
LinkedIn, which caters to professionals and job seekers, may not enjoy the same growth prospects as Facebook.
"LinkedIn is a subset of Facebook," said IPOdesktop.com President Francis Gaskins, who was disappointed by its revenue. "It's limited by its targeted market relative to Facebook."
The company earned $15.4 million in 2010 on net revenue of $243 million from roughly 100 million users, implying a multiple of roughly more than 12 times 2010 revenue.
In contrast, Renren's shares are trading at slightly more than 78 times the estimated annualized sales for the six months that ended Dec. 31, 2010. Facebook is valued at 35 times last year's sales.
Gaskins said LinkedIn's valuation is rich considering its price to earningsratio of 200 times 2010 earnings.
"LinkedIn is going to try and catapult off Renren's numbers," he said. "Uninformed investors will go after it."
There's little doubt among analysts and investors that LinkedIn will do well in its public debut. "I think we're far from a bubble bursting, and these kinds of events are just going to be a fuel to help the party continue for a couple more years at least," said Eric Jackson, managing member at Ironfire Capital, which owns stock in Yahoo and Renren.
LIMITED GROWTH POTENTIAL
LinkedIn said on Monday it would offer 7.84 million shares priced between $32 and $35 apiece, valuing the company at more than $3 billion.
In a government filing, LinkedIn warned that it expects its revenue growth rate to decline and its costs to rise as it ramps up hiring and re-invests in the business, and that it will lose money this year.
It cautioned that it "may not be able to generate sufficient revenue to sustain our profitability over the long term." LinkedIn makes money selling members premium subscription services, and hiring and marketing services.
LinkedIn is offering 4.8 million shares, and the rest will be sold by some of its stockholders.
Shares owned by co-founder and LinkedIn board Chairman Hoffman, who is among those stockholders selling shares in the IPO, would represent about 21.7 percent of voting power after the offering.
Other big stakeholders offering shares include Goldman Sachs , McGraw-Hill Companies Inc and Bain Capital Venture Integral Investors LLC.
Investors Sequoia Capital, Greylock Partners and Bessemer Venture Partners, which together own about two-fifths of the company, will not participate in the IPO.
The company expects to receive net proceeds of about $146.6 million from the IPO, based on an assumed offer price of $33.50 a share. It plans to use the proceeds toward product expansion, hiring and acquisitions.
Smokefree Innotec ( PINK: SFIO) again move up 34 % today as big players are accumulating this penny stock to gain. Traders and penny stock pickers might consider taking a position in the stock as there is very high probability it will gain more. Watch out this penny stock Smokefree Innotec for penny stock trade.
FONAR Announces 3rd Quarter Fiscal 2011 Financial Results. Company swings to profit of $1.2 million from a loss in the same quarter of 2010. Its financial conditions are improving QoQ and YoY. Investors give thumbs up to its performance, as stock jumped 25 % in the morning trade.
Below is the highlights of earnings.
Net Income Surpasses $1 Million for 2nd Straight Quarter
(Marketwire - May 10, 2011) - FONAR Corporation (NASDAQ: FONR), today announced its earnings for the third quarter of fiscal 2011, ended March 31, 2011. The Company has net income for the past four quarters and net income from operations for the past five quarters.
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| Fonar Corp logo ( NASDAQ:FONR) |
For the quarter ended March 31, 2011, net income was $1.2 million and income from operations was $1.4 million. This is compared to the same period ended March 31, 2010, when the net loss was $8,000 and income from operations was $25,000.
For the nine months ended March 31, 2011, net income was $2.9 million as compared to a loss of $3.0 million for the nine-month period ended March 31, 2010.
Total revenues increased 15% to $8.7 million for the three-month period ended March 31, 2011, from $7.5 million for the corresponding quarter which ended one year earlier on March 31, 2010. Total revenues for the nine months ended March 31, 2011 were $25.4 million, as compared to the nine months ended December 31, 2010, one year earlier, when net revenues were $23.2 million.
Total operating costs and expenses decreased 3% from $7.5 million for the quarter ended March 31, 2010 to $7.3 million for the quarter ended March 31, 2011.
Revenues from product sales were $1.9 million for the fiscal quarter ended March 31, 2011 as compared to $2.0 million for the corresponding quarter ended March 31, 2010. Revenues from service and repair fees were $2.8 million for the fiscal quarter ended March 31, 2011 and the fiscal quarter ended March 31, 2010. FONAR's principal product is the UPRIGHT® Multi-Position™ MRI.
Significantly, revenues from the management and other fees segment (management of the ten FONAR UPRIGHT® Multi-Position™ MRI diagnostic imaging centers segment) increased 46% from $2.7 million for the three months ended March 31, 2010, to $4.0 million for the three-month period ended March 31, 2011.
Pro Dex Inc ( NASDAQ: PDEX ) announced record quarterly and nine monthly results with operating income rose 171 % and revenue for the quarter ended march 2011 was up 24 % from the corresponding quarter of 2010. Stock of the company jumped more than 50 %, touched 52 week high to $4.03 and trading a little off from intraday high. It will definitely a break out but we won't advise buy positions at current level, rather wait for a stock to come down a little ( buy on dips ) and then initiate buy positions for trading purpose or investment purpose.
Below is the transcript for earnings :
Sales for the quarter ended March 31, 2011 were $7.6 million, 24% higher than sales of $6.2 million for the corresponding quarter in 2010. For the nine months ended March 31, 2011, sales were $19.6 million, 12% higher than sales of $17.5 million for the corresponding period in 2010. These results for both the quarter and the nine-month periods were due primarily to increases in sales of the Company's medical device products to its two largest customers, with the nine-month period also benefitting from growth in sales of the Company's motion control products.
Operating income was $1.1 million for the quarter, a 177% improvement from $409,000 for the corresponding 2010 period. For the nine months ended March 31, 2011, operating income improved 171% to $2.1 million from $778,000 for the corresponding nine-month period in 2010.
Net income for the 2011 quarter was $868,000, or $0.26 per fully-diluted share, which represents a 399% increase from net income of $174,000, or $0.05 per fully-diluted share, for the corresponding 2010 quarter. For the nine months ended March 31, 2011, net income was $1.6 million, an increase of 72% from net income of $937,000 for the corresponding period in 2010.
Gross profit for the quarter ended March 31, 2011 increased to $2.9 million, a 38% gross profit margin, compared to gross profit of $2.3 million, a 37% gross profit margin, for the year-ago period. For the nine months ended March 31, 2011, gross profit was $7.5 million, a 38% gross profit margin, compared to gross profit and margin of $6.2 million and 35%, respectively, for the corresponding nine-month period in 2010. The increase in gross profit as a percentage of sales during both periods was due to a change in mix toward sales of medical device and motion control products at relatively higher margins, and to cost reductions.
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| Daily Digest Stockinvetips |
Upgrades for May 10 2011 Tuesday:
1) Calpine ( NYSE: CPN) upgraded from hold to buy by Dahlman Rose.
2) Columbia Banking ( NASDAQ:COLB) upgraded from hold to buy by McAdams Wright Ragen.
3) Mindray Medical ( NYSE:MR) upgraded from perform to outperform by Oppenheimer.
4) Quicksilver Resources ( NYSE: KWK) upgraded from neutral to buy by Global Hunter Securities.
5) Rosetta Resources ( NASDAQ:ROSE) upgraded from hold to buy by Wunderlich.
6) Viacom ( NYSE: VIA.B) upgraded from hold to buy by Argus.
See More here
Downgrades for May 10 2011 Tuesday:
1) American Eagle ( NYSE: AEO) downgraded from buy to neutral by Janney Mntgmy Scott.
2) GenOn Energy ( NYSE: GEN) downgraded from buy to hold by Dahlman Rose
3) NN Inc ( NASDAQ: NNBR) downgraded from buy to hold by KeyBanc Capital Mkts.
4) Universal Display ( NASDAQ:PANL ) downgraded from buy to hold by Canaccord Genuity.
See More here
Coverage Initiated for May 10 2011 Tuesday:
1) Bob Evans ( NASDAQ: BOBE) coverage initiated with Hold by Miller Tabak.
2) NRG Energy( NYSE: NRG) coverage initiated with buy by Dahlman Rose.
3) One Liberty Properties ( NYSE: OLP ) coverage initiated with buy by Compass Point.
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World is Relative:
Story By Chirag Pandya.
As the defining term relativity, means everything is in context of something else. Here is some example that defines the term “World is Relative”
My colleague, Chirag Pandya, He is pursuing his MBA and a very good spiritual writer and speaker. He had experienced one very heart touching incident and try to correlate it with psychological views of the other persons. Story was very common to appear as an incident in any person’s life in either one or another way but the thought behind it might not appear in everyone’s mind !! “ World Is Relative “
“Yesterday, I experienced two very different but indeed very related incidents.
In the morning, I was purchasing some old magazines on some Book Store, near city area. Suddenly I heard quarrelling noise of two children. They are very poor as I can see from their clothes. Hardly. They have 2 pieces of clothes on their bodies. No shoes and even sleepers. They were fighting on the street, snatching each other like something to take out from one guy by another guy. When I observe them closely I saw both of them were bleeding, as nobody was around to appease them and ask what’s the problem. Usually, I never get in to this kind of situation, as other normal people do, but on that day somehow, I changed my way of thinking and rushed at those guys. I tried hard and finally I succeeded after 10 minutes to calm them and asked about the problem that made them fight so hard. I believed that it would be a very serious matter. When I found out the matter, I was stunned like spellbound for few seconds. They were fighting so much for the sake of two rupees. I felt like what a tragedy and what to tell those children. They sacrificed their good amount of blood for the sake of two rupees. OMG, what a great misery!
I gave five rupees to both of them. It was already noon and sun was also harassing me and I left with destabilized mind and painful heart but my mind doesn’t want to leave the situation. It was roaming roundabout the situation, as it was narrating real India Growth Story unlike we see in the headlines of News Medias creating a false hype. It was telling about India's social environment. It was telling how rich we Indian are ! It was telling what is the value of money. Two rupees are worthy enough to sacrifice good amount of blood(at least in India ). Really, India is developing!
I went home and tried to sleep to get re-stabilized.
On that day evening, I went out with my friend Nik to divert my mind and get back to routine life. We always go On Highway and find some quiet Tea Stall to sit there and chat for long. Nik has his own Car (Honda Civic) as his father is a businessman. We went to a Tea Stall where we spend most of our time. When we go there, we don’t need to order Tea or even snacks. Nik always give him a tip almost same as bill amount. On that day, Bill amount was 30 Rs and Nik gave him 50 Rs and said keep the change as he always does. When I pay the bill, I never use the words keep the change and get my change back as 20 Rs is big amount for me as a tip. Tea Stall Guy feels happier when Nik pays a bill because he gives him tip and I don’t. Suddenly, my mind went in a flashback and remmber the morning incident where 2 Rupees worth substantial amount of Blood and over here 20 Rs tip worth nothing like “ Keep the Change”.
On that night, I was constantly thinking about this two incidents the morning one where two children are fighting for two rupees and evening one where the guy doesn’t have a value of 20 Rs and giving it as a tip to Tea Stall Guy. It provoked my mind. The only question in my mind was “what is the value of money? “ For two children two rupees are worthy enough to quarrel. Two rupees are not worthy enough for me to quarrel but 20 rupees is big amount for me for a daily tip. But 20 rupees are not big amount for Nik for a daily tip but may be some amount is big for him. The question is “how much is enough to define big?” There is no single answer, It depends on Individual to individual. It is RELATIVE means “The World is Relative”.
Copyright StockinvestipsStory By Chirag Pandya.
As the defining term relativity, means everything is in context of something else. Here is some example that defines the term “World is Relative”
My colleague, Chirag Pandya, He is pursuing his MBA and a very good spiritual writer and speaker. He had experienced one very heart touching incident and try to correlate it with psychological views of the other persons. Story was very common to appear as an incident in any person’s life in either one or another way but the thought behind it might not appear in everyone’s mind !! “ World Is Relative “
“Yesterday, I experienced two very different but indeed very related incidents.
In the morning, I was purchasing some old magazines on some Book Store, near city area. Suddenly I heard quarrelling noise of two children. They are very poor as I can see from their clothes. Hardly. They have 2 pieces of clothes on their bodies. No shoes and even sleepers. They were fighting on the street, snatching each other like something to take out from one guy by another guy. When I observe them closely I saw both of them were bleeding, as nobody was around to appease them and ask what’s the problem. Usually, I never get in to this kind of situation, as other normal people do, but on that day somehow, I changed my way of thinking and rushed at those guys. I tried hard and finally I succeeded after 10 minutes to calm them and asked about the problem that made them fight so hard. I believed that it would be a very serious matter. When I found out the matter, I was stunned like spellbound for few seconds. They were fighting so much for the sake of two rupees. I felt like what a tragedy and what to tell those children. They sacrificed their good amount of blood for the sake of two rupees. OMG, what a great misery!
I gave five rupees to both of them. It was already noon and sun was also harassing me and I left with destabilized mind and painful heart but my mind doesn’t want to leave the situation. It was roaming roundabout the situation, as it was narrating real India Growth Story unlike we see in the headlines of News Medias creating a false hype. It was telling about India's social environment. It was telling how rich we Indian are ! It was telling what is the value of money. Two rupees are worthy enough to sacrifice good amount of blood(at least in India ). Really, India is developing!
I went home and tried to sleep to get re-stabilized.
On that day evening, I went out with my friend Nik to divert my mind and get back to routine life. We always go On Highway and find some quiet Tea Stall to sit there and chat for long. Nik has his own Car (Honda Civic) as his father is a businessman. We went to a Tea Stall where we spend most of our time. When we go there, we don’t need to order Tea or even snacks. Nik always give him a tip almost same as bill amount. On that day, Bill amount was 30 Rs and Nik gave him 50 Rs and said keep the change as he always does. When I pay the bill, I never use the words keep the change and get my change back as 20 Rs is big amount for me as a tip. Tea Stall Guy feels happier when Nik pays a bill because he gives him tip and I don’t. Suddenly, my mind went in a flashback and remmber the morning incident where 2 Rupees worth substantial amount of Blood and over here 20 Rs tip worth nothing like “ Keep the Change”.
On that night, I was constantly thinking about this two incidents the morning one where two children are fighting for two rupees and evening one where the guy doesn’t have a value of 20 Rs and giving it as a tip to Tea Stall Guy. It provoked my mind. The only question in my mind was “what is the value of money? “ For two children two rupees are worthy enough to quarrel. Two rupees are not worthy enough for me to quarrel but 20 rupees is big amount for me for a daily tip. But 20 rupees are not big amount for Nik for a daily tip but may be some amount is big for him. The question is “how much is enough to define big?” There is no single answer, It depends on Individual to individual. It is RELATIVE means “The World is Relative”.
Couples are quarreling more about household finances than they did a year ago, according to a recent study.
And it's possible the threat of an argument is prompting some of these couples to sneak purchases, sock money away in a secret bank account, or keep a credit card account hidden from their spouse or significant other, according to the study of 2,020 consumers, which was conducted by American Express.
Most couples—some 61 percent—admit that discussions about the household budget are turning into arguments. That's significantly higher than what the survey said a year ago, when 45 percent of people admitted this.
It's hard to say whether this a positive or negative sign for the economy. One could speculate either way—either seeing it as a sign of more financial stress or as a sign that consumers have more money to spend, and therefore more choices to make about how to spend it.
Notably, the trend holds up even among the most affluent responders, with 56 percent saying they argue with their sweetie this year, versus 44 percent in 2010.
"I do think that there are certainly signs of stress," said Leah Gerstner, vice president of public affairs at American Express.
She noted that many consumers are in a rebuilding mode, after the impact the financial crisis and recession had on their finances.
"They are rebuilding their nest egg," she said. "They are saving to do the things they want to do."
Another interesting tidbit is one in five women
who are in a relationship admit to hiding purchases from their partner. The number rises even further when you ask people if they have ever hidden purchases from their spouse, with three in five people admitting they bought items on the sly.
who are in a relationship admit to hiding purchases from their partner. The number rises even further when you ask people if they have ever hidden purchases from their spouse, with three in five people admitting they bought items on the sly.
Here, it's a little easier to speculate on the cause and effect as most people said that what drives them most crazy about their other half is that person making "frivolous" purchases.
Lending further support to this theory is that consumers in the North Central region of the U.S. are most likely to hide the things they buy. In this region the bar, at $281, is the lowest for the price level when one should tell their spouse before making the purchase.
In the Northeast region, consumers think they have to report the purchase when the price goes above an average of $282;
in the South, it's $309; and in the West, it is $335.
in the South, it's $309; and in the West, it is $335.
Consumers in the West are more likely to have a secret account or credit card, with 31 percent of those surveyed saying they do. In the South, the percentage drops to 29 percent, in the Northeast, it's 24 percent, and in the North Central, it's 24 percent.
Oh, and if you suspect your partner is hiding a purchase from you, check in their closet. Thirteen percent of those surveyed said that's where they stashed it..
( Source: CNBC )
As we have posted earlier that, Microsoft is close to buying internet telephony network Skype in an $8.5 billion deal, a source familiar with the situation said, as it seeks to regain ground on growing rivals such as Google. Here is some detailed view from Microsoft point of view.
Buying the loss-making but popular Skype would underline Microsoft's need to gain new customers and platforms for its software as smartphones and tablets explode in popularity.
Skype, which allows people to make calls at no charge, would also give Microsoft a foothold in potentially the lucrative video-conferencing market as global businesses seeking to reduce expenditure shift to lower-cost ways of communicating.
Microsoft has already put more energy and resources into mobile and internet
technologies as the use of PCs, which underpin its Windows and Office franchise, is under threat.
This change was starkly illustrated last year when Apple's portfolio of coveted consumer goods propelled it past Microsoft to become the world's most valuable technology company. The maker of iPhones and iPads has since been named as the most valuable brand too, overtaking Google.
The Skype deal -- which would be the biggest in the 36-year history of the world's largest software company -- is expected to be announced as early as Tuesday morning, the source told Reuters. Microsoft and Luxembourg-based Skype declined comment.
The $8.5 billion mooted price tag, including debt, was a surprise. Although the sum would not stretch cash-rich Microsoft, some said it was high for a company whose ownership has changed several times during its relatively short life.
"In this atmosphere of Internet Bubble 2.0, picking up an unprofitable online
company for roughly 10 times sales probably seems downright cheap," Shanghai-based Michael Clendenin, managing director of consulting firm RedTech Advisors, said.
"But if you consider (it) was just valued at about $2.5 billion 18 months ago when a chunk was sold off, then $8.5 billion seems generous and means Microsoft has a high wall to climb to prove to investors that Skype is a necessary linchpin for the company's online and mobile strategy," he added.
This was echoed by Ben Wood, head of research firm CCS Insight: "The big unanswered question is how do Skype assets work for Micrososft, they already have instant messaging, IP telephony...how do you justify the price?"
"That being said, Skype is a vibrant community, a diverse global community with a young population and Skype is making inroads into older parts of the population too," Wood added.
Skype, which delayed plans for an initial public offering expected to raise $1 billion, has been looking at other options, including tie-ups with Facebook and Google. Such a deal was seen as valuing Skype at $3 billion to $4 billion.
STOCK LANQUISHING
Despite doubling sales and profit in the last eight years, Microsoft's stock has largely languished, as investors worry about its ability to counter new rivals or adapt to new ways of computing, especially the threat posed by new mobile devices.
Microsoft has countered with a new version of its mobile software -- which will power the next generation of Nokia smartphones -- and is developing a new operating system that will work on low-power tablet PCs.
But online video chat remains a weakness. Although the company already has video in its Windows Live Messenger service, it is not available on its Windows Phone 7 software.
Skype also makes versions of its own service for use on iPhone and iPad, Research in Motion's BlackBerry and Android phones. It cannot be used on Microsoft phones.
Apple's FaceTime video calling service -- available on its latest iPhone and Mac computers -- has been a big hit. Google recently followed suit by adding video to its popular Google Talk application for smartphones running on its Android system.
Analyst's Opinion:
According to an analyst; Microsoft is an unfocused company and it doesn't know what to do with a tons of free money. Its move to buy Skype was dumb deal.
Buying the loss-making but popular Skype would underline Microsoft's need to gain new customers and platforms for its software as smartphones and tablets explode in popularity.
Skype, which allows people to make calls at no charge, would also give Microsoft a foothold in potentially the lucrative video-conferencing market as global businesses seeking to reduce expenditure shift to lower-cost ways of communicating.
Microsoft has already put more energy and resources into mobile and internet
technologies as the use of PCs, which underpin its Windows and Office franchise, is under threat.
This change was starkly illustrated last year when Apple's portfolio of coveted consumer goods propelled it past Microsoft to become the world's most valuable technology company. The maker of iPhones and iPads has since been named as the most valuable brand too, overtaking Google.
The Skype deal -- which would be the biggest in the 36-year history of the world's largest software company -- is expected to be announced as early as Tuesday morning, the source told Reuters. Microsoft and Luxembourg-based Skype declined comment.
The $8.5 billion mooted price tag, including debt, was a surprise. Although the sum would not stretch cash-rich Microsoft, some said it was high for a company whose ownership has changed several times during its relatively short life.
"In this atmosphere of Internet Bubble 2.0, picking up an unprofitable online
company for roughly 10 times sales probably seems downright cheap," Shanghai-based Michael Clendenin, managing director of consulting firm RedTech Advisors, said.
"But if you consider (it) was just valued at about $2.5 billion 18 months ago when a chunk was sold off, then $8.5 billion seems generous and means Microsoft has a high wall to climb to prove to investors that Skype is a necessary linchpin for the company's online and mobile strategy," he added.
This was echoed by Ben Wood, head of research firm CCS Insight: "The big unanswered question is how do Skype assets work for Micrososft, they already have instant messaging, IP telephony...how do you justify the price?"
"That being said, Skype is a vibrant community, a diverse global community with a young population and Skype is making inroads into older parts of the population too," Wood added.
Skype, which delayed plans for an initial public offering expected to raise $1 billion, has been looking at other options, including tie-ups with Facebook and Google. Such a deal was seen as valuing Skype at $3 billion to $4 billion.
STOCK LANQUISHING
Despite doubling sales and profit in the last eight years, Microsoft's stock has largely languished, as investors worry about its ability to counter new rivals or adapt to new ways of computing, especially the threat posed by new mobile devices.
Microsoft has countered with a new version of its mobile software -- which will power the next generation of Nokia smartphones -- and is developing a new operating system that will work on low-power tablet PCs.
But online video chat remains a weakness. Although the company already has video in its Windows Live Messenger service, it is not available on its Windows Phone 7 software.
Skype also makes versions of its own service for use on iPhone and iPad, Research in Motion's BlackBerry and Android phones. It cannot be used on Microsoft phones.
Apple's FaceTime video calling service -- available on its latest iPhone and Mac computers -- has been a big hit. Google recently followed suit by adding video to its popular Google Talk application for smartphones running on its Android system.
Analyst's Opinion:
According to an analyst; Microsoft is an unfocused company and it doesn't know what to do with a tons of free money. Its move to buy Skype was dumb deal.
Jim Schrager a clinical professor of entrepreneurship and strategy at the University of Chicago. says
“It's a classic move by Microsoft, trying to come late to an area, with no ideas and nothing but a bag of money to squander,” he says. “Dumb money always loses. Why is Microsoft great? Because monopoly is wonderful. Therefore, anything they do to hold and expand their monopoly is a winner, everything else is a loser."
“Being an (often slow) follower in games, phones, music and so on goes nowhere. These guys aren't strategically smart. But they have lots of money and are determined to waste it. Ask a simple question: How is this deal different from all the other bad deals they have done?"
“Answer: It is right out of the dumb deal playbook!”
“Being an (often slow) follower in games, phones, music and so on goes nowhere. These guys aren't strategically smart. But they have lots of money and are determined to waste it. Ask a simple question: How is this deal different from all the other bad deals they have done?"
“Answer: It is right out of the dumb deal playbook!”
