SeanReadsTheNews

Fortune's Barr: Goldman Not Going Anywhere

I've been staying away from Colin Barr lately because he's been using her unique voice to say the same thing over and over - basically all link bait about Goldman Sachs and executive compensation non-scandals.

That said, he was in rare form yesterday afternoon writing about - Goldman Sachs and executive compensation non-scandals.  What can I say?  He's a delight to read when riding her favorite hobby horse.

His piece today is on why Goldman doesn't just go private.

So with each plan to rein in the big banks, the market drumbeat grows for Goldman to take its ball and go home. The firm should relinquish its New York Stock Exchange listing and return to a partnership structure, according to one popular theory.

But as much as CEO Lloyd Blankfein might like to restore Goldman to a state of richly compensated obscurity, it is unlikely to flee the stock market. Doing so would hardly silence the firm's many critics and, more important, could hurt business.

He quotes a former Goldman partner who is now a business school professor on why that is so.

"Going private doesn't solve their problems," said Roy C. Smith, a former Goldman partner who is now a finance professor at New York University. "It's not very practical on a number of levels, but especially because access to the public markets is essential for a trading firm."

As someone who thinks that Goldman's best communications strategy is to apologize the least it can get away with, I'm sympathetic to the going-private argument but this article shows why that isn't a current option.  Basically, playing with other people's money is just too much fun.

TIME on Baidu's Adjustment To Google-Free World

TIME Magazine's veteran business correspondent Bill Powell provides a definitive look at Baidu.com, the Google of China, which has become even more the default search engine there since Google decided to stand up to Chinese censorship of its search results.

There is a major business story there - basically what life would be like for News Corp. if CNN suddenly went out of business.

The company already collects 64% of the revenue generated by search engines in China via advertising, according to Analysys International, a market-research firm, and claims 76% of overall search traffic. The comparable figures for Google are 31% and 20%. If Google soon shuts down its Chinese search engine (Google.cn) — as most analysts believe it will — Baidu will grab even more. Dick Wei, senior analyst at JPMorgan Securities in Hong Kong, estimates that if Google loses a quarter of its China traffic, Baidu will reap a 6% gain in revenue; the gain would be 12% if the number of eyeballs logging onto Google shrinks 50%.

Powell goes further than the obvious to write a history of Baidu founder Robin Li, how he built the site that was beating Google already and more broadly about Chinese business culture.

In 2008, CCTV, the powerful state-run television network, aired reports on the site's habit of serving up unlicensed doctors and illegal pharmacies in response to medical queries on its engine. It turned out those were Baidu advertisers. The disclosures hit directly at the site's integrity and temporarily crushed the stock.

With economy of words and using the Google/China news point as an excuse to explore the business rivalry more deeply, Powell has produced a great work of magazine journalism.

Forbes on the War on Redbox

This blog post on how desperate Hollwyood and Wal-Mart are to protect margins in movie DVDs by Dorothy Pomerantz of Forbes.com does a great job of handicapping a business battle.

Red Box, the kiosk-based rental service that rents for $1 / night is so successful that Hollywood has ordered Wal-Mart to stop selling to them.  Like a good blog post, that fact made me think.  Even when buying retail, Red Box can still make a profit renting disks for $1/night.  Blockbuster probably gets the best bulk pricing of anyone besides Wal-Mart and they are going broke trying to rent for $5/night.

The business message there is that Blockbuster's stores, displays and clerks don't ad value.  People just want the disks they've seen advertised elsewhere, and that's why Red Box can undercut by so much - because the marketing and store overhead is paid by someone else (in Clifton it's Shop-Rite).

Pomerantz closes with a down note for Red Box, noting that streaming video may overtake even their business model - but I have to figure it's a long way down before even streaming video can squeeze out $1/night.

But it’s worth noting that Netflix recently agreed to delay renting Warner Bros. new releases for 28 days. In exchange, the company will get access to more Warner Bros. library movies to stream on its fast growing “Watch Instantly” service. Right now Netflix has 17,000 films available for streaming. The company is making deals with the likes of Sony, Microsoft and Nintendo to allow films to be streamed over their video game consoles. It clearly sees streaming as the future of movie rentals. Not a good omen for Redbox.

Gay Dating Site Works Super Bowl for Publicity

CNN.com's Aaron Smith covers a failed attempt by homosexual dating site ManCrunch.com to buy a Super Bowl ad today, showcasing a brilliant use of media frenzy around the big game to grab market share.

I had never heard of ManCrunch before today and I'm millions of others hadn't either.  And my guess is that ManCrunch's management couldn't really afford to buy a Super Bowl advertisement anyway.  But in producing one, and getting rejected, they get a publicity bonanza without actually having to pay for the ad.

The anti-abortion people behind the Tim Tebow ad must be on their way to CBS now to demand a refund.  CBS claimed that the decision was financial but they also require companies buying ads in the game to keep the financial arrangements confidential - it's in the contracts - so ManCrunch's PR team could lock them into the kind of non-denial denial that cements the idea that the decision is anti-gay discrimination.

"It's straight-up discrimination," said Elissa Buchter, spokeswoman for the Toronto-based dating site.

Jacobs of CBS declined to comment on the charge of discrimination.

Buchter provided a copy of the CBS rejection letter to CNNMoney, which states that the ad "is not within the Network's broadcast standards for Super Bowl Sunday."

Frankly, the folks who run Go-Daddy.com commercials and Janet Jackson performances have a hard time arguing that ANYTHING is not within their broadcast standards.

It would have been more mature of the business media to ignore this as its really just a stunt by a for-profit business and not a March-on-Washington style fight for civil rights but the PR team behind ManCrunch just woke up and found a several million dollars of free publicity in front of them.  I have to hand it to them for thinking of it.

Newsweek's Fake Steve Sleepwalks Through Ipad Coverage

Dan Lyons of Newsweek became as famous as business writers get for his blog "Fake Steve Jobs," in which he assumed the character of an uninhibited Steve Jobs writing about the world around him.  It was brilliant, irreverent and true.

Which is why it is tragic that his column on the launch of the Ipad, instead of going for funny, goes for sentimentality about Apple and technology that borders on mawkish.

At the very least, we had hoped a tablet from Apple would do something new, something we've never seen before. That's not the case. Jobs and his team kept using words like "breakthrough" and "magical," but the iPad is neither, at least not right now. It might turn out to be magical for Apple, because what Jobs is really doing here is trying to replace the personal computer with a closed appliance that runs software only from Apple's online App Store. So instead of selling you a laptop and never hearing from you again, Apple gets an ongoing revenue stream with iPad as you keep downloading more apps. That really is "magical"—for Apple's bottom line, anyway.

Scott Adams, creator of the comic strip Dilbert, covers the same point in his blog post on the subject but absent the whining and gets the point across more clearly and directly. 

The iPad borrows a little from phones, and a little from laptops, and a little from their own iPod and iTouch, and a little from the Kindle. It's better in some ways than all of those things, but less portable than its smaller cousins, less functional than a laptop, and more expensive than a Kindle. There's no comparison that is a clean win.

Name technology columnists for major magazines shouldn't be out-written on their core subjects by cartoonists, even ones as insightful as Adams.

Panama Canal Revamp to Compete With Trains: Bloomberg

Here's a story that would have seemed more at home in 1910 than 2010 - but according to Bloomberg's Kyunghee Park and Eric Sabo, the fight for transporting goods from Asia to the East Coast of the U.S. between the Panama Canal and railroads is back.

Chinese toys and sneakers headed to Wal-Mart Stores Inc. and Target Corp. on the U.S. East Coast may bypass Warren Buffett’s $33.8 billion railway as the expansion of the Panama Canal slashes the cost of shipping them by sea.

The new deeper, wider canal will be 30% less expensive to use than railroads shipping from China to the East Coast, according to a Canal executive quoted in the story.  At the same time, train operator Burlington Northern's spokesperson is quoted noting that rail shipping across the country is nine days faster.

The article covers the ripple effects of an upgraded canal, potential impact on major business in the U.S., includes quotes from Chinese exporters as well as economists.

It's a great example of finding a story that is just sitting there and giving investors and business operators each information on which to act.

WSJ Cover Story on Bonus Hardships...Remember WWII

David Enrich, Sara Schaefer Munoz and Aaron Lucchetti today contribute a front page Wall Street Journal article on ways that financial institutions are working around the caps on pay set as a condition of the financial bailout.

For history students who know that employer-paid health insurance was a work-around during economy-wide wage caps imposed during World War II will find all of this depressingly familiar.

Such moves are a contrast to concessions recently made by large financial firms in hopes of defusing public anger, and political retaliation, over the comeback of sky-high compensation. Many banks and securities firms are paying bonuses with a bigger percentage of stock. Goldman, for example, sharply reined in pay and benefits during the fourth quarter. This week, the firm told partners that 60% of their 2009 bonuses will be in the form of restricted stock.

The new pay culture is squeezing bankers with hefty mortgage payments and private-school tuition bills—and has prompted some companies to find ways to assist cash-squeezed employees.

The caps and rules assume that companies pay employees large salaries as part of fraud when in fact the salaries are the product of a competitive marketplace.  During World War II when a company needed to woo a key employee from another company, they needed to find a way to pay more and used health insurance to do so.  Now banks are doing the same thing with employee loans.

The article further depresses by hinting at the incredible intellectual energy that is spent hiding from or dodging the rules, rather than focusing on making money for the shareholders.

The three reporters did a solid job of digging up information the companies surely did not want on the front page of the Journal.  Here's hoping it makes the rule-makers aware that compensation whack-a-mole isn't helping anyone.

FT: Twitter Fights Censors

FT columnist John Gapper is in Davos this week and reports on a really cool decision by Twitter's leadership to take a different tack in engaging censorship globally.  Rather than negotiate with dictators, Twitter's engineers are working to make it easier for people in the affected regions to bypass the censorship, making its products valuable even without official sanction.

{Twitter CEO and Co-Founder Evan] Williams said Twitter had an advantage in evading government censors through operating as a network of internet and mobile applications, rather than as a single website. “Twitter is a network that is accessed in thousands of ways.”

I did notice in China that Facebook was accessible via Blackberry but not on regular computers.  The announcement, a throwaway line in a news conference by social networking executives, didn't seem to get big play elsewhere and Williams was light on details of exactly what they are doing.  Still, kudos to Gapper for finding the news amidst the canned statements.

Fortune Blows Bubbles Again with Roubini Interview

Ben Rooney of Fortune snares an interview with noted bear Nouriel Roubini at Davos, whose current fame results from having correctly called the U.S. housing bubble in 2007.

Unfortunately, he's now been singing the same song longer than Ricky Martin and what's more, the "four bubbles" he shares with Rooney are pretty much the same four that Fortune's Shawn Tully wrote about on Monday and those were also fairly commonly identified.

He said asset bubbles are already beginning to form that could put the U.S. economy into a "double-dip" recession if regulators fail to impose even more strict regulations.

"There's a wall of liquidity chasing assets and some of those assets are oil, energy, food and gold," he said. While those prices have been supported by a gradual improvement in the global economy, he said that some of the increases have been "excessive."

He also observes that U.S. fiscal policy is bad, China is at risk of bubbles bursting and that we need to focus on deficit reduction "in the medium term."

Just because you're in Davos and you see someone you know from CNBC doesn't mean it needs to be in print.  Really.

NYT's Dash and CNN's LaMonica on Public Company Compensation

Eric Dash of The New York Times this morning and Paul LaMonica of CNN.com yesterday afternoon both cover the implications of being an employee of a public company.

LaMonica's column on how so many private company are on Fortune's Best Places to Work list covers the reasons that shareholders are a problem when you are cashing paychecks.

"There is something to be said for a private company's ability to think longer term. We don't have to worry about quarterly earnings reports. Sometimes public companies serve too many masters," said Alan Skrainka, chief market strategist with Edward Jones.

When times are tough, investors often look for companies to cut expenses in order to preserve profits. Pink slips are typically a quick and dirty way to slash costs and boost the bottom line.

His column was about how the demands of being public are unjust to the hardworking souls who show up at their cubicles every morning having to worry about their paycheck being victim to analyst expectations.

Dash takes the greedy shareholder's side, arguing that banks that reserve 90% of their earnings for salaries and bonuses are robbing the pensioners and widows investing in bank stocks of rightful returns.

But to keep up with the Goldmans, laggards like Citigroup are handing out fat slices of their profits, leaving little left over for their shareholders. Citigroup is, in effect, paying its employees $1.45 for every dollar the company took in last year. On average, its workers stand to earn $94,000 each.

It's days like this that remind me why I don't like to focus on executive compensation as an issue.  All of the consequences in both articles are the result of informed choices, either by investors or individuals in choosing where to work.

Institutional investors are alarmed by what they characterize as excessive rewards for bank employees. While banks are increasing salaries and bonuses for many employees, many have yet to restore dividends that were cut during the financial crisis.

“It’s not a fair shake,” said John A. Hill, chairman of the trustees at Putnam Funds, another big mutual fund company. “I think the shareholders who paid for building that franchise should be getting a bigger share of the franchise’s profits.”

Institutional Investors are alarmed at excessive rewards in the financial services sector?  Um, banks didn't just suddenly start paying their employees that way and sophisticated institutional investors should be the ones explaining that risk to their clients, not expressing surprise that the sun rises in the East.

Similarly, LaMonica points to the reason that talented employees sometimes choose to work for public companies that have to put shareholder interests ahead of their own sometimes.

Private companies may offer more stability. But one potential knock on them could be that as long as they stay private, they may not give employees a path to big riches down the road through an initial public offering or from the exercising of cheap stock options.

He goes on to note that private company employees often end up doing better anyway and its a good point as long as one remembers that individual choice is the important part, not trying to mandate a system that forces the same choices on everyone.