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Harry Newton's In Search of The Perfect Investment Newton's In Search Of The Perfect Investment. Technology Investor.

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8:30 AM Tuesday, September 13, 2005:
The merger business is booming. This says loads about buoyant business optimism. I'm personally not big on most mergers. They rarely work. I can't see Oracle's latest deal -- its deal for Siebel Systems -- succeeding. Imagine you're Oracle. One year you buy PeopleSoft for $10.3 billion. The next year Siebel Systems for $5.85 billion. Then you quietly pray that all the newly-rich executives will stick around for the seriously hard work of getting them all to work harmoniously together. At the first sign of Larry Ellison's fabled quirkiness, I'd be out of there. Meantime, you can't expect to get rich on Oracle's stock. It's going nowhere.

Off to see InSite Vision (ISV) present this morning: It's at 11:30 AM at the Friedland Investment Events' Undervalued Equities 2005 Conference, held at the DoubleTree Suites Times Square Hotel in New York City today. I know nothing about Friedland except that, according to their web site -- click here -- they put on a huge number of free investment conferences all over the country, i.e. somewhere near you. Meantime, my readers are sending me conflicting opinions on InSite. One doctor reader likes to stay away from putting excessive drugs in the eye. In answer to my question as to whether InSite is cheap, another reader writes:

Substantially undervalued Harry. We should have the preliminary results of the the Azithromycin/tobramycin arm of the phase 3 trial prior to the end of the month. Shortly thereafter, look for a partnering deal with big pharma providing a cash infusion. Of course the cash situation is currently effecting the stock price. Kumar is looking for reimbursement of the AzaSite trials expense, upfront payment , milestone payments and financing of ongoing R&D. Look for a royalty in the 25% area.

Consider that Alcon's revenues for Q2, 2005 on its inflamatory and infection products were 171 million, annualized, 684 million. Add to that their otic anibiotic revenue of 200 million.

AzaSite sales are estimated to be in excess of 200 million annually. This has been collaborated in a study by Navigant Consulting. Then we have the rest of the AzaSite franchise, AzaSite plus, the combination inflammatory/ ineffective drug, ISV's answer to Alon's combination drug, Tobradex, annual sales of 200 million. Then the otic antibiotic, Alcon's sales, 200 million annually. Then add the veterinary market.

Knowing that investors in biotech are influenced by a falling share price thinking that someone "knows something", the stock has been under attack by naked shorting the past year and a half. That will cease with good trial results and a decent partnering deal and cash infusion.

In my opinion, the stock should be valued at $1.50 currently and $3.00 after trial results and a decent partnering deal. Hopefully, the fair value of the stock will be reflected soon.
I'll know more today after I attend management's presentation. InSite closed last night at 63 cents, up from the 50 cents when I first looked at it.

Wow. The Big Easy is drying out. This is good news.

Only in China: Shi Tao, a former news editor for the Contemporary Business News in Hunan province, was sentenced in April to 10 years' imprisonment for leaking "state secrets". He was convicted on charges of emailing foreign-based websites with the text of an internal message circulated to Chinese journalists last year about dangers surrounding the 15th anniversary of the Tiananmen Square massacre in 1989. The Chinese government considers the Internet to be a hothouse of subversive thought. About 40,000 government officials are believed to be assigned to monitor emails, websites and cut off access to websites. Since the end of last year the Chinese Communist Party's propaganda department is believed to have stepped up operations at the organization known as "Office 1106", which trawls through cyberspace for signs of subversion. Companies who do business in China have to toe the local line. For example, Microsoft's China-based Internet portal blocks the words "democracy", "freedom" and "human rights".

How to fully destroy an economy: There is a growing madness in oil-rich Venezuela. Item: : This recent piece from the Financial Times:

Chávez set to extend government control over big banks:

Venezuela is preparing to extend political control of private banks operating in the country as part of a drive to spread "revolutionary" government control over the economy of the world's fifth-largest oil exporter. Venezuela's banking superintendent has privately told the heads of several of the banks that President Hugo Chávez wants to place two government representatives on the institutions' governing boards.

The move would affect Banco Santander and BBVA, the Spanish banks, which own Banco de Venezuela and Banco Provincial respectively, two of the largest financial institutions in Venezuela.

Other large banks that are expected to be targeted include Banco Mercantil and Banesco. A bid to extend government influence over the banks by installing official representatives, rather than by taking equity control, is part of Mr Chávez's drive to introduce what he describes as the "socialism of the 21st century".

Private companies across Venezuela are being asked to introduce "co-management" as the preferred model of corporate governance. Approval of new loans from state banks requires companies to formalize a minimum of 20 per cent worker representation on boards.

The Chávez government is also in the process of implementing a program to redistribute land from large estates to the rural poor. However, a move to extend political control over banks would mark a new stage in what analysts see as the creeping "socialization" of the Venezuelan economy under Mr. Chávez, a close ally of Cuban president Fidel Castro.

Experts said that government representatives on bank boards would act as "political commissars" whose role would be to ensure that credit flows are determined by political rather than by financial factors.

"The government has a revolutionary project and by necessity that has to go through controlling the flow of credit," said Francisco Faraco, a banking specialist and consultant based in Caracas. "Government representatives will act as political commissars deciding who should and who should not receive credit." ...

Two months ago, a central bank law allowing the government to withdraw and spend part of Venezuela's almost $30 billion in international reserves was passed.

Drinking late again
Boudreaux staggered home very late after another evening with his drinking buddy, Thibodeaux.
He took off his shoes to avoid waking his wife, Clotile.
He tiptoed as quietly as he could toward the stairs leading to their upstairs bedroom, but misjudged the bottom step.
As he caught himself by grabbing the banister, his body swung around and he landed heavily on his rump.
A whiskey bottle in each back pocket broke and made the landing especially painful.
Managing not to yell, Boudreaux sprung up, pulled down his pants, and looked in the hall mirror to see that his butt cheeks were cut and bleeding.
He managed to quietly find a full box of Band-Aids and began putting a Band-Aid as best he could on each place he saw blood.
He then hid the now almost empty box and shuffled and stumbled his way to bed.
In the morning, Boudreaux woke up with searing pain in both his head and butt and Clotile staring at him from across the room.
She said, "You were drunk again last night weren't you Boudreaux?"
Boudreaux said, "Mon cher, why you say such a mean thing?"
"Well," Clotile said, "it could be the open front door, it could be the broken glass at the bottom of the stairs, it could be the drops of blood trailing through the house, it could be your bloodshot eyes, but mostly..... it's all those Band-Aids stuck on the hall mirror.

Why Italians shouldn't be paramedics
Luigi and Salvatore are out in the woods hunting when suddenly Salvatore grabs his chest and falls to the ground. He doesn't seem to be breathing; his eyes are rolled back in his head.
Luigi whips out his cell phone and calls 911. He gasps to the operator, "I think Salvatore is dead. What should I do?"
The operator, in a calm soothing voice says, "Just take it easy and follow my instructions. First, let's make sure he's dead."
There is a silence...... Then a shot is heard.
Luigi's voice comes back on the line,
"Okay, now what?"

Recent column highlights:

+ Manhattan Pharmaceuticals: Click here.
+ NovaDel Biosciences appeals. Click here.
+ Hana Biosciences appeals. Click here.
+ All turned on by biotech. Click here.
+ Steve Jobs Commencement Address. The text is available: Click here. The full audio is available. Click here.
+ The March of the Penguins, an exquisite movie. Click here.
+ When to sell your stocks. Click here.

Harry Newton

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 scanning the Internet for email addresses to spam. I have no role in choosing the Google ads. Thus I cannot endorse any, though some look mighty interesting. If you click on a link, Google may send me money. That money will help pay Claire's law school tuition. Read more about Google AdSense, click here and here.
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