What, exactly, constitutes a “5 Star” rated stock?

Mar 30 2007

Things are more interesting for Dell, Inc. than perhaps the former and once again current CEO, Michael Dell would prefer. In today’s Wall Street Journal, you could find a report that “Dell’s Internal Accounting Probe Uncovers Evidence of Misconduct”.

Dell Inc., after a lengthy internal probe of its accounting practices, said it had found evidence of misconduct but didn’t specify what it was.

The computer maker said the investigation also found a number of accounting errors and deficiencies in the financial-control “environment.” Dell stressed that its investigation isn’t complete, however, and said it will delay filing its annual 10-K report with the Securities and Exchange Commission, originally due April 3, past an extension date of April 18.

In the wake of the options backdating feeding frenzy of the past year, additional news of corporate skullduggery large and small has started just bouncing off of me, leaving no meaningful impression, positive or negative. Such was the case with today’s Dell news, particularly given that Dell hasn’t filed a 10-Q with the SEC since June, 2006. They’re now going to be late with their 10-K for the fiscal year ended February 2, 2007, as well.

All rather ho-hum, to be honest.

Until, on the way home Friday evening, I heard a story reported by Jeff Tyler on the always enjoyable Marketplace radio show. (audio available at the link, in RealPlayer format). Excerpt:

JEFF TYLER: Dell has not clarified what kind of “misconduct” has been uncovered. And that’s left stock analysts guessing: How bad are the skeletons in Dell’s closet?

Morningstar analyst Rick Hanna says the company is giving investors little to go on.

RICK HANNA: They haven’t filed a quarterly report for over three quarters now. Think about an analogy. We’re kind of driving in the fog and it’s hard to see very far in front of you, because there’s not a lot of light that’s being shed on the situation.
Morningstar rates management practices at various companies. And Hanna says:

HANNA: They grade relatively poorly, quite frankly. On the Morningstar report card, Dell’s management gets a “D.”

In terms of consumer satisfaction, the company isn’t looking so hot either. A new survey shows Dell is losing PC customers to other brands.

{…}

Taken together, Dell might not seem like a very attractive stock. But despite the dark clouds, Morningstar analyst Rick Hanna says the business model is solid and the stock is under-valued.

HANNA: As an example, they’ve probably got close to 5, $6 a share, just in cash, sitting on the books. They’re still incredibly financially healthy. I mean, this is still a very, very solid, very strong company.

On a rating of 1 to 5 stars, Morningstar still gives Dell its strongest recommendation: 5 stars.

(ellipsis mine)

Since Dell’s 10-K isn’t actually due until Tuesday, they’re not truly lacking quarterly reports for “over three quarters now”, only two (Q2 2007 ended ≈7/2006 and Q3 2007 ended ≈10/2006). Nevertheless, the market has had earnings releases from the company, and so is not flying completely blind about reported performance. In other words, the analysts, such as Mr. Hanna, have the company’s reported income statements and conference call information to use in providing ratings and advice. It’s not quite like “driving in a fog”, and all due respect to Mr. Hanna, it’s not even like “it’s hard to see very far in front of you”. Perhaps a better analogy would be that it’s hard to determine if the speed bump you just plowed over did any damage to your muffler.
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Redux: Godzilla vs. Megalon, as reported by Punky Brewster?

Mar 30 2007

Not that I want to bash on the same topic too hard, but subsequent analysis I’ve seen of the Oracle vs. SAP kerfuffle (below), brings into question my understanding of copyright law, and my analysis of the overall case. Such as this bit, from an article of 3/27/2007 by Michael Hickins, entitled “SAP Could be ‘In a World of Trouble’”:

Analysis: The lawsuit that Oracle filed against its rival in the enterprise software market last week is going to get even worse. When all is said and done, SAP’s conduct, if proved true, could cost it hundreds of millions of dollars in penalties, untold points of market share and even, perhaps, jail time for some executives.

In the complaint, Oracle said it plans to register thousands of new copyright claims for its software and then “amend its Complaint to add further copyright allegations and causes of action when the registrations for these copyrights” are granted by the United States Copyright Office.

I’m no lawyer, and I don’t know who Michael Hickins is, but I’m guessing that either he’s no lawyer either, or he’s a lawyer similar in skills to the public defender assigned in the movie “My Cousin Vinnie”.

Where do I start? Purple prose like “…hundreds of millions of dollars in penalties, untold points of market share and even, perhaps, jail time for some executives” is an easy first step.

Business judgment errors, if they were even errors at all, by a tiny subsidiary of SAP called TomorrowNow, seem unlikely to damage the corporate reputation of SAP to the tune of “untold points of market share”, unless “untold” is a synonym for “zero”.

In order for there to be hundreds of millions of dollars in penalties, it would seem required that Oracle present evidence of hundreds of millions of dollars in damages. This seems highly unlikely, and not just because this seems clearly less than some corporate spying skullduggery than SAP’s division simply walking through unlocked doors at Oracle on behalf of Oracle’s former support customers. I don’t know what the controlling law is alleged to be, but treble damages, such as in the case of antitrust, don’t seem applicable, and I have trouble conceiving that TomorrowNow, with several hundred employees engaged in servicing all its customers, not just those who’ve recently moved from Oracle, somehow mulcted hundreds of millions in business.
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Breathless email solicitations

Mar 29 2007

I can’t explain my tendency to rail about small, irksome things that are just part of the landscape, but since it’s a tendency without obvious downside, I also can’t muster the will to stop doing so, either.

Among my pet peeves is the marketing practice of sending email messages highlighting white papers supposed to be of truly crucial importance to me, the reader. I’ve ceased trying to determine why it is that many of the marketers think so highly of the motivational power of their email missives. In trying to answer that question in the past, I used to quickly have a look at their web pages, PDFs, or webcasts, not because the topic lit a fire under me, but solely because I was trying to figure out why they thought it would.

And, of course, by simply taking the time to look at the sometimes-maundering presentations, I made their “lists” of hot prospects, targeted for incessant future follow-up and cultivation. Take one of this evening’s four such entries from my inbox:

A thorough understanding of what’s going on in your IT environment is no longer optional.

Without it, you’re leaving your enterprise vulnerable to security, litigation and vendor-compliance risks. And, because the cost of maintaining IT assets represents such a significant portion of the budget, you could be throwing money away.

So it clearly behooves us all to achieve best practices in software and hardware asset management. This paper offers practical guidance that will put you in the know through best practices in asset management – steps that can help you better manage enterprise risks, save money and more. You simply can’t afford to pass this paper by.

Lucky for me, these days I’m much better at finding enough reason in the email itself to disqualify the whitepaper from ever passing before my eyes. For instance:

A thorough understanding of what’s going on in your IT environment is no longer optional.

Wow. I had no idea that it was ever optional, so that would be a fun fact to suddenly know, if the implied predicate for the assertion were actually true.

And, because the cost of maintaining IT assets represents such a significant portion of the budget, you could be throwing money away.

Irrelevant – without regard to the proportion of budget dedicated to maintaining IT assets, there’s no guarantee I’m not throwing money way. Such as by wasting time reviewing the ten or more whitepaper notifications in my daily inbox contents.

So it clearly behooves us all to achieve best practices in software and hardware asset management.

Almost like standard practice in university calculus classes (and elsewhere), the “hand wave”, a/k/a “and therefore, it follows”. “It clearly” does nothing, let alone behoove me, not least because I am not a member of Genus Equine.

You simply can’t afford to pass this paper by.

Just watch me, Sparky. Just watch me.

The whitepaper referenced above may contain the secrets of the universe, for all I know. Regardless, I didn’t read it, and won’t be doing so in the future. The email solicitation was lame, it moved me only to the point of ridiculing it in a blog post, and I have enough respect for the sales people at ManageSoft not to send them on a goose chase of calling me or pestering me with further email messages I’d just ignore, as I’m not at all interested in their offerings.

Not that I know the sales people at ManageSoft – I don’t. And it’s possible that the sales people at ManageSoft are those directly responsible for the email message I’ve just finished making fun of, rather than some separate, largely incompetent, marketing department. No matter – enterprise software and services sales is a hard slog, filled with wasted salesperson time, and I think, regardless of their solicitation skills or the quality of their offering, that sales people are human, too; people whose time is as valuable as my own, even when I have no intention of doing business with them.

Perhaps I was just well brought up, but more likely, my recently-found reticence to even respond to solicitations that interest me for no reason other than to find out why they were supposed to is that I’ve tagged along on such sales calls with colleagues before, and I respect the craft, when done right.

I just wish that the sales craftsmen spent a bit more time trying to envision how their solicitations are actually processed by their intended, though sometimes poorly targeted, recipients.



Godzilla vs. Megalon?

Mar 28 2007

Godzilla v. Megalon

How else to describe a court battle between the two titans of enterprise software, Oracle and SAP? Heavyweights, both.

On March 22, 2007, Oracle filed suit against SAP alleging corporate theft. Per Oracle:

“This case is about corporate theft on a grand scale, committed by the largest German software company—a conglomerate known as SAP,” the lawsuit says. “From that Web site, SAP has copied and swept thousands of Oracle software products and other proprietary and confidential material onto its own servers.”

My initial reaction to the news was “Whoa. SAP just made a big mistake”. In the fullness of the news cycle, however, further details arrived, via a story in today’s WSJ (subscription req’d) entitled “SAP Unit Denies Oracle’s Claims”:

According to the complaint, TomorrowNow in some cases accessed information using log-in information for Oracle customers with expired support contracts. In other cases, TomorrowNow accessed information beyond what customers were entitled to access, according to the suit.

My reaction after reading this bit of news, in a story focused on SAP’s proclamation of innocence, was that Oracle’s position isn’t quite as iron-clad as it had first appeared to be.

I’m not the only one who thinks so. Wired Magazine, in an interesting article today entitled “Is Oracle Using Computer Crime Law to Squelch Competition?” questions how different the case would be had the Oracle customers simply provided written manuals in their possession to the SAP subsidiary. Further, Jennifer Granick, the author of the Wired article, doesn’t pick a likely winner in the case, but seems dismayed at the prospect of Oracle’s succeeding in their suit, but doing so simply because the access was electronic rather than physical.

There’s a larger issue that occurred to me in this matter, however. I’m no Oracle maven, but I remember quite vividly the marketing campaign Oracle ran earlier this decade touting “Unbreakable: Oracle’s Commitment to Security“. Ever since the 2002 debut of that campaign, naysayers have been a dime a dozen. In fact, Oracle itself, by its actions if not its advertising rhetoric, has admitted as much. No less a luminary than Bruce Schneier, founder & CTO of BT Counterpane was quoted thusly:

“When they say their software is unbreakable, they’re lying.”

Ouch. That could have left a mark, directed anywhere other than at Oracle’s marketing department, I’d guess.

But unless Oracle has dispensed with the fiction that they, alone in the technology world, are capable of providing a secure database, application, or portal, it would seem as though they’re begging for further ridicule when complaining that SAP (via its TomorrowNow subsidiary) was able not only to get into Oracle’s systems with expired passwords, but that SAP was also able, as if by magic, to access areas to which those same customer passwords were not authorized.

Friends of mine with cooler heads have pointed out that, if Oracle were attempting to get a customer to sign a new maintenance agreement, they might well have avoided disabling access for those expired accounts. My rejoinder? That still doesn’t explain or excuse the fact that their security over this information must be marginal, at best, if they allowed access to items for which the customers weren’t authorized.

And one logical conclusion a court could, but wouldn’t be forced to, draw, is that Oracle didn’t think highly enough of the supposed “corporate secrets” to even put a lock on the door.

Advantage, SAP?



US Attorney hubbub

Mar 28 2007

In an editorial today, the WSJ describes the reasons that Monica Gooding, a Justice Department’s liaison to the White House, will be exercising her Fifth Amendment right to not provide testimony to Patrick Leahy’s Senate Judiciary Committee.

Long story short:

Ms. Goodling has been around, and she can see Democrats don’t really want to know the truth; they want to shout “liar, liar” and set the stage to accuse Justice officials of criminal behavior. In a statement to the committee explaining her decision, Ms. Goodling said, “I have read public remarks by members of both the House and Senate Committees on the Judiciary in which those members have drawn conclusions about the subject matter and the testimony now under investigation by the Committee.”

They continue, a bit later, with this:

Count Ms. Goodling’s silence as one more unintended consequence of the Scooter Libby case. Mr. Libby made the mistake of cooperating with the investigation into a leak he had nothing to do with, and he later found himself charged with perjury based on little more than conflicting memories of who said what and when. The prosecutor never even charged anyone for the leak that started it all.

There’s no apparent underlying crime in this “scandal” either, but we’ll bet more than one Democrat will soon be calling for a “special prosecutor” to investigate it nonetheless.

The editorial page makes good and valid points. However, according to a story yesterday in USA Today:

In a USA TODAY/Gallup Poll taken Friday-Sunday, respondents said by nearly 3-to-1 that Congress should issue subpoenas to force White House officials to testify.

A majority (53%-26%) of the respondents thought that the attorneys were fired for political reasons rather than for job performance, and a majority (59%-30%) thought that the Democrats were investigating for primarily political, rather than ethical, reasons.

All three majorities are correct, in my opinion, though the impact of their being correct, and the focus that they and the Senate are taking appears misguided.

Yes, of course the attorneys were fired for political reasons, in some cases coincident with them not having done their jobs. They were political appointees, and as such, can be politically un-appointed at the discretion of the administration. This should not be a matter of concern or angst on anyone’s part, and I find it humorous that it is.

Yes, of course the Senate Democrats are trying to embarrass the administration, and that’s the way things have been done for much of the past decade or so. As much as I personally wish it could be stopped, this, too, should not be a surprise to anyone who’s been paying attention, and I find it humorous that it is.

Yes, subpoenas should be issued, and yes, the Senate should get their grandstanding and shaming done. But the focus, on the “politically motivated firing of US Attorneys”, is the problem. The real issue to investigate is the obfuscation from Gonzales’ office about what happened, why, when, and how.

Like so many things in the current Administration, rather than just having come out and said “We fired some political appointees. For political reasons. Get over it.”, it appears that there was some level of effort put into shoving the story under the rug. “Mistakes were made”, said Gonzales, in the Washington Post article linked above.

It’s the mistakes, the misstatements, and the mishandling that should be investigated, not (all due respect to Stuart Gerson, who claims that such mid-term firings shouldn’t be done), the unobjectionable dis-appointment of political appointees.

It’s all about the ham-handedness, you see.



Hello world.

Mar 27 2007

Welcome to the site.

Over the next (short amount of time), I hope to find that I’ve presented information and analysis of some staple topics which made it worth your time to visit, read, and comment.