Harry Newton's In Search of The Perfect Investment
Newton's In Search Of The Perfect Investment. Technology Investor.
8:30 AM Friday, November 25, 2005:
There is a minor tech boom going on. Companies like Microsoft, Dell, Intel,
Texas Instruments and Best Buy have been moving up. The reason is
+ Great new "must have" gadgets -- iPods, giant TVs, neat digital
cameras, satellite radio, cheap laptops and now, Microsoft's Xbox 360.
+ Some talk about how "cheap" the stocks have become. Cramer has been
hammering on the "tech boom."
In reality, they're going up because there's a "story." This year
2005 has been full of "stories." A few select stocks (think Avian
flu) bounce for a little while and them come back. If you want to play this
game, you need to recognize you're playing the short-term. Like a week or two.
Maybe a month at the most. For this "tech boom" I'd want to be out
by the last trading day of the year. A bundle of all the stocks I mentioned
above would probably give you a nice pop between now and December 30. Be careful,
though. Sell them on the first sign of something awry.
introduces its new Xbox 360: Facts: Microsoft's Xbox will sell millions.
But it's not like Apple's iPod. Microsoft has lost money on each Xbox it had
sold. (This one may be different.) It makes money on games it sells or those
its developers sell -- $10 a game royalty to Microsoft. This assumes it can
get developers to write to Xbox. Every five or so years, the world of gaming
-- which is bigger than Hollywood and the TV networks combined -- switches leadership.
Today Sony leads Microsoft by a huge margin. Nintendo drags along in the rear.
There is talk that the Xbox might grab leadership.
The Economist writes:
All the reviewers
love the Xbox 360, though they say it's expensive. The LA Times wrote:
Microsoft has been trying for years to move beyond the PC, and into other
devices such as mobile phones, television set-top boxes and games consoles.
The big über-strategy that this falls under relates to what's happening
in the home, says Robbie Bach, Microsoft's chief Xbox officer
and head of a newly formed business unit that brings together Microsoft's
gaming, mobile and TV divisions. ... Sales of non-PC devices are growing much
faster than sales of PCs. ...
Despite, or indeed because of, its success in PC software, Microsoft
has struggled for years to break into these other markets. Its Windows monopoly
was of no use outside the PC market, and while its hold on the market provided
a war chest, Microsoft was hampered by its reputation as a monopolist. The
leading mobile-phone companies formed a software consortium to keep Microsoft
at bay. Cable companies were wary of using its software in set-top boxes,
fearing that Microsoft would transform itself into the gatekeeper of their
And Microsoft's hurried and belated entry into the gaming business in 2001,
with the launch of the original Xbox, and its insistence on direct control
over its online-gaming service, prompted widespread skepticism. But it is
now clear that after years of effort, Microsoft is finally making progress
in all three markets. What changed?
Start with the Xbox. Since launching its first console in 2001, Microsoft
has sold 22 million units worldwide, putting it in distant second place
behind Sony's PlayStation 2 (which has sold 92 million units since
its launch in 2000) and just ahead of Nintendo's GameCube (which has sold
around 19 million units), according to figures from Forrester. ...
thought to have lost around $4 billion on the original Xbox
equivalent to a subsidy of nearly $200 for every console sold. Its venture
into gaming would appear to have been an expensive failure. But Mr. Bach disagrees.
He prefers to regard the billions spent on the original Xbox as an investment
that provided Microsoft with three assets: a prominent position in the marketplace,
several strong franchises (such as the Halo series of games) and
an impressive online-gaming service, Xbox Live. Now our job is
to turn that asset value into income statement value, he says. And Microsoft
is indeed widely expected to do far better in the next console cycle, for
a number of reasons.
For a start,
the new Xbox 360 is launching several months before its main rival, Sony's
PlayStation 3, which is expected to appear in Japan next spring and in America
only later in the year. (Nintendo's next console, the Revolution, is also
due in 2006.) One of the reasons the PlayStation 2 did so well was that it
got to market before its rivals, which never caught up. Microsoft hopes to
mimic that trick with the Xbox 360. And after the original Xbox flopped in
Japan, Microsoft has wooed Japanese games-publishers, hoping to counter the
advantage enjoyed by its two main rivals.
change, says Mr. Bach, is that the original Xbox was built from off-the-shelf
parts. This reduced time-to-marketthe Xbox took 18 months to design
and launchbut prevented Microsoft from reducing the cost of the console
during its lifetime. With no loss of performance Sony, for example, has gradually
reduced the number of chips inside the PlayStation 2, cutting costs and enabling
it to sell the consoles at a profit. Microsoft's use of multiple chips from
different suppliers (such as Intel and Nvidia) made such integration impossible.
But the Xbox 360 is based on a new, custom design that should give Microsoft
the flexibility to integrate components in future. As a result, says Mr. Bach,
the company will break even on the hardware over the console cycle. Since
software sales will be profitable, the Xbox 360 should actually make Microsoft
has a strong lead in the emerging field of online gaming. Games publishers
initially resented Microsoft's decision to centralize control of Xbox Live,
in which Microsoft acts as a matchmaker between players. But the system is
so slick and seamless that they have since put aside their objections. (So
impressive is Xbox Live, indeed, that users may wish that their PCs handled
downloads, updates and networking as effortlessly.) Xbox Live allows classic
arcade games, game trailers and upgrade packs to be downloaded, and points
the way to online delivery of games, and even episodic gaming,
in future. ... For the entire Economist piece, click
powerful but expensive Xbox 360 is the first entrant in what's expected to be
a ruthless fight for dominance in the $25-billion global games market. Rivals
Sony and Nintendo Co. are readying their own next-generation consoles for release
next year. Until then, Xbox 360 offers more than enough in the way of flashy
graphics, sophisticated play and worthwhile extras to keep gamers' thumbs tapping
to make PDFs:
PDF stands for portable docuement format. It's a universal computer file standard.
This means if you send someone a PDF file, they should be able to view it on their
computer -- PC or Apple -- and on some cell phones like BlackBerries and Treos.
Most computers these days come with Adobe Reader, a simple free program to read
PDF files. If you don't have one, click
But first, a reality check. At $300 for a basic system and $400 for a
nicely equipped one Xbox 360's technical charms are not to be had cheaply.
If they are to be had at all. Put it this way: If you didn't spend last night
lined up outside an electronics store, this review is probably about as close
as you'll get to an Xbox 360 before New Year's.
As with previous
game console rollouts, demand for Xbox 360 sharply outstrips supply. In addition
to games, Microsoft wants the white, curvaceous Xbox 360 to anchor living
room entertainment. Connecting it to a home network allows the console to
play music, run video and display photos stored on a personal computer. Changeable
faceplates allow finicky buyers to coordinate the console with their interiors....
processors and 512 megabytes of RAM equip Xbox 360 with unrivaled power to
render lifelike graphics. Best results appear on high-definition monitors,
but players with standard television sets will notice a difference between
the abilities of Xbox 360 and its predecessor. Many of the more than 20 titles
available today showcase Xbox 360's strength.
2K6," for instance, players work up a sweat, just as they do in real
life. Few details are overlooked: By the end of the game, Shaquille O'Neal's
white jersey had visible sweat stains, and his brow was soaked. On-court movements
were fluid and lifelike. The stiff, robotic motions of generations past give
way to natural running, jumping and shooting. Even uniforms flutter like actual
NFL '06," quarterback Donovan McNabb walks to the line of scrimmage before
a play and his eyes scan the opposing defense. After each play, an instant
replay is available, a great way to get a "Matrix"-like look at
what just happened. Zooming in close to the action even shows the mesh of
the jersey and the joints of the players' gloved fingers.
Duty 2" immerses players in a realistic World War II battlefield. In
the snow-covered ruins of war-torn Russia, the fog of an enemy's breath is
sometimes the perfect way to get a bead on him.
The games are
so engrossing that players may lose track of time. But at least they'll be
comfortable with Xbox 360's redesigned controllers. They fit in the hands
better than previous versions, which always felt too big and clunky. Buttons
are placed in natural positions. And a rechargeable wireless controller, included
in the $400 deluxe package, is liberating.
360 connects to the Internet and not just a TV, Microsoft has dedicated many
of the console's new features to online gaming, building on the success of
its Xbox Live online community...
Xbox Live offers
two levels of accounts: A free Xbox Live Silver account is included, allowing
players to sign on and send and receive voice and text messages, but not play
games online. For that, a Gold account is required, with prices ranging from
$7.99 for one month to $49.99 for a year. And gamers can even download new
games most for an additional fee and store them on their hard
drives for play at any time.
So what's not
to like? For starters, the price. Xbox 360 is being released in two packages:
the "deluxe system," which retails for $399, and the "core
system," which sells for $299. The deluxe version includes a wireless
controller, a three-month trial Gold membership on Xbox Live and a hard disk
drive, among other things.
To save game
progress, Xbox Live information and downloaded games, a hard drive is convenient.
So buying the cheaper core system means later having to buy the removable
hard drive for $100. And after playing with the wireless controller, being
connected to a line will seem dated. That means spending $50 for another controller.
Add that up, and the deluxe system seems like a bargain. But $400 might be
too much for some families to spend on a game system...
The 360 offers
the ability to rip and store music, movies and photos, presumably to play
on your TV. It's pretty hard to imagine anyone doing something like burning
a CD to the 360 when they can use iTunes instead. Also, Xbox 360 isn't fully
backwards-compatible yet, meaning not all of the games from the previous Xbox
Making PDF documents is a different matter. There probably 500 programs. None
do a perfect job. Which means they often mess up complex diagrams, shadowing,
etc. The best way of making perfect PDF documents - i.e. ones that look exactly
like the original -- is to use an expensive program like QuarkXpress and have
it save your document in PDF format. Microsoft eschews PDF (at least for
now). So you can't save any Microsoft Office document in PDF format. That means
a trip to a third party PDF doc maker. Among the many I've tested, the best value
for the money is a piece of software called PDF Printer Driver. You can
download a trial version of the software, but it will put a small plug for itself
on every page it converts to PDF. Or you can pay $9.95 (which I did) and buy the
real thing. To use it, you simply "print" your material to a file, to
a place on your hard drive, not to a piece of paper. It couldn't be easier.
If you rarely need to convert a document to a PDF, there's an another way. Send
your document to PDFOnLine.com. They'll convert it for you and return your
new PDF document as an attachment to an email. Click
There is one other
issue with PDFs. If someone sends me a PDF file -- say for a prospectus -- I
like being able to excerpt words, mark up the document with yellow highlighting
or add a little note with questions to myself. For that I've been using Adobe
Acrobat. Its only problem is that it's expensive -- $300. If you're curious
you can get a 30-day free trial, click
I've recently discovered something called Jaws PDF Editor, which seems
to have everything Adobe Acrobat has and a little more, namely the ability to
pull out, insert, delete and shuffle pages around. Best of all, it costs only
$43. For a free trial, click
another Thanksgiving story
A young man named John received a parrot as a gift. The parrot had a bad attitude
and an even worse vocabulary. Every word out of the bird's mouth was rude, obnoxious
and laced with profanity.
John tried and
tried to change the bird's attitude by consistently saying only polite words,
playing soft music and anything else he could think of to "clean up"
the bird's vocabulary.
was fed up and he yelled at the parrot. The parrot yelled back. John shook the
parrot and the parrot got angrier and even ruder. John, in desperation, threw
up his hand, grabbed the bird and put him in the freezer.
For a few minutes
the parrot squawked and kicked and screamed. Then suddenly there was total quiet.
Not a peep was heard for over a minute. Fearing that he'd hurt the parrot, John
quickly opened the door to the freezer.
The parrot calmly
stepped out onto John's outstretched arms and said, "I believe I may have
offended you with my rude language and actions. I'm sincerely remorseful for
my inappropriate transgressions and I fully intend to do everything I can to
correct my rude and unforgivable behavior."
John was stunned
at the change in the bird's attitude. As he was about to ask the parrot what
had made such a dramatic change in his behavior, the bird continued......................."May
I ask what the turkey did?"
+ Dumb reasons we hold losing stocks. Click
+ How my private equity fund is doing. Click
+ Blackstone private equity funds. Click
+ Manhattan Pharmaceuticals: Click
+ NovaDel Biosciences appeals. Click
+ Hana Biosciences appeals. Click
+ All turned on by biotech. Click
+ Steve Jobs Commencement Address. The text is available:
Click here. The full audio is available. Click
+ The March of the Penguins, an exquisite movie. Click
+ When to sell stocks. Click
This column is about my personal search for the perfect
investment. I don't give investment advice. For that you have to be registered
with regulatory authorities, which I am not. I am a reporter and an investor.
I make my daily column -- Monday through Friday -- freely available for three
reasons: Writing is good for sorting things out in my brain. Second, the column
is research for a book I'm writing called "In Search of the Perfect
Investment." Third, I encourage my readers to send me their ideas,
concerns and experiences. That way we can all learn together. My email address
is . You can't
click on my email address. You have to re-type it . This protects me from software
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here and here.