Filed under: Investments

In one of the biggest technology-related IPOs this year, website and IT system hosting company Rackspace Inc. late Friday filed to raise up to $400 million on the NYSE.

The company previously sought to raise $42 million in an IPO in 2001, but withdrew it in the wake of the tech market meltdown. Rackspace reported 2007 profits of $18 million on net revenue of $362 million. In 2006, it earned $20 million on net revenues of $224 million.

The offering, which will be conducted via auction, would represent a rare IPO exit for a host of investors that have backed Rackspace during its eight-year history. Norwest Venture Partners owns 16.2% of the company, while Sequoia Capital owns 11.6%. Chairman and former CEO Graham Weston is the largest shareholder, with 23.9% of the company’s equity. Goldman, Sachs & Co., Credit Suisse, Merrill Lynch & Co. and W.R. Hambrecht & Co. are underwriting the offering.

Continue reading at TechConfidential.com.

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Filed under: Earnings reports, Products and services, Industry, Dell (DELL), Hewlett-Packard (HPQ)

Lenovo Group Ltd. (OTC: LNVGY), which purchased IBM Corp.’s (NYSE: IBM) PC assets years ago, reported an outstanding financial quarter of this week. The Chinese company saw dramatic shipment increases into emerging markets as well as the Americas (even with weak demand in the U.S.). Shipments grew the fastest in the European region, with a 30% growth rate from the year-ago period.

Lenovo is behind Hewlett-Packard Co (NYSE: HPQ), Dell, Inc. (NASDAQ: DELL) and Taiwan’s Acer in terms of global Personal computer sales, but don’t tell it that. The company’s fourth-quarter profit more than doubled to $140 million from the $60 million year-ago quarterly figure. In the Personal computer industry, that’s a jump extraordinaire. Even though the Personal computer industry’s growth rose 15% in the company’s latest quarter, Lenovo topped that with an overall growth figure of 21%.

This is even more startling taking into account that Lenovo exports quite a bit to the U.S., which is in the midst of a consumer and business spending slowdown. This is where it comes in handy to have your sales dispersed in such a way that one region of the world doesn’t make or break your company. This is the fruits Lenovo is enjoying at the moment, as it has a very evenly distributed sales mix in every global region. Meanwhile, 60% of Dell’s 2007 sales came from the Americas only — and we wonder why the company’s sales have faltered.

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Filed under: Politics, Housing

The evils a broad bailout for reckless lenders and speculative buyers are so obvious that even President Bush can comprehend them.

Referring to the housing bill that has bipartisan support in the Senate, Mr. Bush stated that “Laws shouldn’t bail out lenders. Laws shouldn’t help speculators. The government ought to be helping creditworthy people stay in their homes.”

Bush has also threatened to veto the “cash for trash” bill that would use taxpayer money to insure $300 billion in mortgages for distressed home owners. Remember: if the banks won’t make the loans without a federal guarantee, it’s because they know that the loans are garbage. If we’re going to use taxpayer money to insure the loans, we should expect to shell out a good chunk of money when they end in default.

The larger point that people are missing here’s that no homes will be lost — the person who sees their home go into foreclosure will have to move into a rental –, but the sale of that distressed property might be the difference between renting and homeownership for a young family. Or it could be sold to an investor, adding to the supply of rental housing and making that more inexpensive. It’s not like the banks are foreclosing on houses and then burning them to the ground.

It’s a sign of an election year when an outgoing President of very limited intellect can understand something that far more intelligent politicians running for office can’t.

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Filed under: Good news, Products and services, Apple Inc (AAPL), Marketing and advertising

Apple, Inc. (NASDAQ: AAPL) just can’t stop taking market share in one area or another. The iPod and iPhone maker was found in a recent study by research house NPD Group to have about 66% of the PC market for machines costing more than $1,000. Although the majority of PCs don’t sell for over $1,000, Apple’s still kickin’ it when it comes to those nicer PCs.

Apple’s current share of the U.S. PC market stands at 14% which is impressive considering it’s grown that figure in every quarter since 2007. The company’s retail store presence has been a success, and the brand euphoria from the iPhone’s debut almost a year ago has helped Mac sales continue to grow.

This isn’t some overnight success story, though. PC competitors such as Hewlett-Packard Corp. (NYSE: HPQ) and Dell, Inc. (NASDAQ: DELL) ship millions of sub-$1,000 PCs every quarter, but Apple only has one PC below that price point, the diminutive Mac Mini, which does not even come with a keyboard, mouse or monitor.

A customer can buy a fully-equipped desktop of laptop PC (non-Apple) for that price — so why doesn’t Apple compete better in the sub-$1,000 space? Because it doesn’t have to. Its brand and product designs command premium prices and customers seem eager as anything to pay those prices. That’s the power Apple has — one that any manufacturer in any industry would love to have.

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Filed under: Earnings reports, Google (GOOG), Microsoft (MSFT), salesforce.com inc (CRM)

Before starting Salesforce.com (NYSE: CRM) in 1999, Marc Benioff was already a veteran of the traditional software world. He spent 13 years at Oracle (NASDAQ: ORCL) and even had a stint at Apple (NASDAQ: AAPL), where he programmed in assembler language. In fact, he started a software company - Liberty Software - when he was only 15 years.

But, of course, Salesforce.com is his biggest accomplishment and so far it has disrupted the industry. Basically, he has evangelized the virtues of using the Web to deliver software, as well as used the subscription business model rather than the up-front licensing fees. Benioff calls this “The End of Software.”

Well, last week, Salesforce.com reported its Q1 results. For the most part, the growth is continuing apace. Revenues surged 52% to $248 million and operating cash flow came to $84 million. There were 2,600 new customers, with the total at 43,600.

A key to success has been integration with various platforms such as Microsoft’s NASDAQ: MSFT). Salesforce.com also recently bolstered its partnership with Google (NASDAQ: GOOG) by seamlessly integrating its Office-like apps.

Another key is Salesforce.com’s extensive infrastructure that handles massive amounts of transactions. The company plans to build its first international data center in Singapore.

The growth of on-demand software is surging in Asia. According to a Springboard Research report, the market is expected to reach $1.16 billion by 2010, representing a 66% annual growth rate. Salesforce.com is apt to be a huge beneficiary of this major trend.

Tom Taulli is the author of various books, including The Complete M&A Handbook and The Edgar On the internet Guide to Decoding Financial Statements. He also operates MergerBook.com.

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Executive relocations hit the bottom lines of the public companies

Filed under: Management, Insiders, Housing

Executive compensation gone wild is a major pet peeve of mine. And if seven-figure pay packages plus restricted stock and options and country club memberships aren’t bad enough, some executives are now sticking their companies with the losses on homes they bought.

Here’s how it works: A company wants to hire a new CEO but she’ll have to relocate to take the job. So the company concurs to make up any loss on the sale of the home. In this real estate market, that’s becoming more of an issue. Qwest (NYSE: Q) lost $1.8 million on Edward Mueller’s old home.

Part of me doesn’t think this is such a massive deal. If that’s what it takes to recruit the executive, and the board is aware of the potential liability, it isn’t really any different from a higher salary. Current SEC rules that require companies to provide a summary compensation table showing the total value of the top officers’ pay packages including all perks make this less of an issue.

Of course, some pay critics are using this as an chance to jump on the greed of executives and the supine nature of corporate directors. But the focus should remain on corporate governance and the fact that executive pay is too often absolutely unrelated to performance. Issues like relocation benefits make for good stories, but they’re really not the issue.

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Filed under: Products and services, Launches, Consumer experience, Competitive strategy, Google (GOOG), Microsoft (MSFT), Yahoo! (YHOO), eBay (EBAY), Marketing and advertising

Microsoft Corp. (NASDAQ: MSFT) shares dropped 1.77%. OK, you can say it was just as much as the Nasdaq dropped, or you can also say that no one was really impressed with the software giant’s new cashback on search service.

It is no secret Microsoft is trying to boost its internet division and gain search market share. After so often being accused of being a monopoly, I guess it’s hard for it to see Google Inc. (NASDAQ: GOOG) now being accused of the same in the lucrative business of internet search. Well, Microsoft tried to acquire Yahoo! Inc. (NASDAQ: YHOO), No. 2 in search (although it is also losing market share to Google) but we all know that didn’t work out all that well… at least not yet. I get the feeling we haven’t heard the last on that subject yet.

To address its search insufficiencies, Microsoft Wednesday rolled out Live Search Cashback, a new service that pays consumers who buy selected items from participating retailers found through Microsoft’s Live Search engine. Only a portion of the purchase price, of course, between 2-30% will be paid — via check, direct deposit to a bank account or eBay Inc. (NASDAQ: EBAY)’s PayPal. So naturally, those wishing to use the service will need to sign up and provide Big Brother with even more personal information.

No one can tell me this doesn’t smack of desperation. Is Microsoft really serious in thinking this could actually make a dent in its search business? The cash rebate might attract some people, but that doesn’t mean they’re going to change their search habits. If anything, they might still search on Google, then go to the Live engine and find what they want there. The rest of time, I bet, Live will not be in use! Of course, the higher the cashback, the more people it will attract, but doesn’t that sound a little backward? How much can Microsoft spend on that? And couldn’t Google at any time counter with a similar offer should it choose to?

I’m sorry, but this just doesn’t sound like it would change anything in the reality of search today.

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Filed under: Competitive strategy, Marketing and advertising

A few days ago, something — I don’t remember what — reminded me of one of ideal parts of going back to school when I was a youngster in the early to mid-1990s: the Trapper Keeper.

I hadn’t seen one in years, but a swift internet search revealed that while Mead discontinued the product, it reintroduced a new version of the Trapper Keeper in 2007. I might have to get one. So that got me thinking about old brands that I miss and I wondered: Companies spend millions to develop brands into household names only to discontinue them after a rough patch or merger. Might there be some value in the brands — even years after they’ve been removed from shelves.

Turns out I’m not as creative as I thought. A cool company called River West Brands does nothing but acquire, incubate and launch long-dead brands. The current portfolio includes Coleco, Salon Selectives, and Brim coffee. The company also acquired — and has since relaunched and sold — other brands including Nuprin and Structure.

Rob Walker’s feature story for The New York Times Magazine takes a look at River West, and it’s one of the ideal business stories I’ve read this year. It’s a fascinating look at reviving brands, marketing, and the tricks our minds play on us that make us remember products we’ve never seen before fondly.

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Filed under: Deals

The Associated Press reports that CBS Corp. (NYSE: CBS) is buying CNet Networks Inc. (NASDAQ: CNET) for $1.75 billion. This $11.50 a share deal is a 45% premium over Wednesday’s closing price

CNet’s Web sites include News.com, TV.com, Mp3.com, MySimon and GameSpot. And CBS expects to use CNet to tap into the internet advertising market. This deal raises the question of whether any CBS competitors will decide to get into the game of buying internet content companies.

Here are three possible targets:

• TheStreet.com (NASDAQ: TSCM) - This provider of business, investment and ratings content has $65 million in sales and a market cap of $236 million.
• TechTarget (NASDAQ: TTGT) - This provider of online content for buyers and sellers of corporate information technology (IT) products has $95 million in sales and a $531 million market cap.
• WebMD Health Corp (NASDAQ: WBMD) - This provider health information services to consumers, physicians and other healthcare professionals, employers and health plans has $332 million in sales and it’s market capitalization is $1.7 billion

I think traditional media companies buying Internet ones could become a trend. It would only take two more such deals to make it one.

Peter Cohan is President of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter. He has no financial interest in the securities mentioned.

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Filed under: Deals

We haven’t heard much from the Jana Partners LLC contingent following CBS Corp.’s May 15 announcement that it would buy CNet Networks Inc. for $1.8 billion.

Jana leads an investor group that wants to nominate directors and raise other matters at CNet’s 2008 annual meeting. The firms have criticized the media company for failing to translate its strong brands into shareholder value.

Tech Confidential spoke with a person close to the proxy process who said that Jana and its investor group, which own roughly 21% of CNet, is still reviewing the transaction. At first glance, the deal supports Jana’s reason for going after CNet, the person said.

Continue reading at TechConfidential.com.

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