Davis Freeberg

http://www.davisfreeberg.com

68 Comments

    • ON: Fri Oct 10th 08:31 AM
      Commented on:
      Sirius Shares Priced Like Stamps
      It's no wonder that you've lost so much money investing in this stock. Sirius isn't priced like a stamp, they have a market cap of $1.27 billion and an enterprise value that is still over $5 billion. To put so much emphasis on the price per share is dishonest.
      View article »
    • ON: Thu Sep 11th 09:49 AM
      Commented on:
      Sirius XM Dips Beneath $1: Will the Street Give It Any More Time?
      Just about everyday you publish another Sirius article that says why they're so good or why they represent such a great value, yet you still fail to see the real issues. For someone who is tracking this company so closely, it's surprising that you don't have a better understanding of what's driving it's performance. You can talk about NFL deals or Mel's little pep talks or about how this is speculative but could be a bargain, but you never address the valuation. Instead of saying Sirius is under a buck, you should be saying Sirius' stock and debt is worth X. It's easy to trade under a buck when you have this many shares outstanding. Even at these levels the enterprise value for the companies is still ridiculously overvalued. Why not write an article that compares Sirius to other industries and looks at the metrics between this stock and others and then answer the question of which is more expensive. Do yourself a favor and pick the stocks before running the numbers or we'll just see you cherry pick more data to support your crazy assertions that there is value here. The reason why people are so concern with the debt is because of the sheer size of it compared to their real market opportunity. I've never been long or short, but could tell early on that this was a hype job from the beginning. Until people go back to the basics, you'll continue to see value erosion as the market figures this out. Mel knew that this was a problem too, so he created an arbitrage opportunity while they tried to work out their business model. Now that the opportunity is gone, you are continuing to see Sirius return to a more rationale valuation. If Sirius was a small cap start up without any debt your articles might be appropriate, but instead of focusing on every little micro detail like it's going to make you rich, you should instead be addressing the question of what it's VALUATION is worth compared to their peers.
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    • ON: Tue Jul 29th 09:23 AM
      Commented on:
      Understanding Sirius' History Of Converts May Ease the Pain
      Sirius and XM have been in trouble for a long time. Mel knew it so he hook up his stock price with XM to help preserve the massive satellite bubble that had inflated. Now the arb buyers are leaving and you're seeing all of the value sucked out. You can argue that this is a short term temporary event, but I don't believe it. Even with their monopolistic position there is no justification for the current valuation on the two companies. I see this one ending badly for their shareholders.
      View article »
    • ON: Mon Jun 30th 16:05 PM
      Commented on:
      New DivX Hook-Up with Matroska to Provide Enhanced Video Experience
      Thxs for the comment Rassoodock, I'm glad that you've enjoyed my posts, it's fun for me to track the company. You raise an interesting point re: Sony. I keep listening to Sony interviews in order to get a better sense of their strategy, but still can't figure out whether or not they are planning a DivX video store or if their plans are to try to cut out all middlemen. Seems to me, that they could just as easily make a video store using the VC-1 codec that Blu-Ray uses.

      Here is a link to an interesting interview with Sony's CTO discussing their plans. Other than making it painfully obvious that he doesn't understand what the digital revolution is all about, the video raises more questions than answers re: their plans for DivX and Netflix. From his description one would think that he's talking exclusively about a DivX download program, but his protectionist comments lead me to believe that they didn't learn anything from the walkman fiasco.

      www.beet.tv/2008/06/so...

      Anyway, I found the whole interview discouraging because it reaffirmed that Sony is going to fight tooth and nail to protect their oligarchy on content, but would interested in hearing your own conclusions from watching the video.
      View article »
    • ON: Mon May 12th 11:22 AM
      Commented on:
      Blockbuster Should Jump on Positive Citi Call
      In 2005, Blockbuster Video saved themselves from bankruptcy when their ill advised bid on Hollywood Video was blocked by the FTC. Ironically, by failing to approve Blockbuster's bid, the FTC managed to kill Movie Gallery in the process. Now BV wants to bite off more than they can chew again, this time to buy CC. Wattles has suggested that they lever the company up in order to pay for the transaction, but taking on additional debt will only create more problems for both struggling retailers. With the movie industry in such a great state of flux, I just don't see the logic of reducing your flexibility especially in the middle of a recession. If Blockbuster does manage to pull this rabbit out of their hat, I think that it will kill them just like the debt needed to finance Hollywood Video, ended up killing Movie Gallery. I can understand why Blockbuster would want access to CC's discounts on inventory, but I think that Jim Keyes must have been drinking straight out of the slurpee machine when he came up with this one because I can't figure out a better explanation for the brain freeze that's going at Blockbuster headquarters.
      View article »
    • ON: Fri Apr 25th 14:42 PM
      Commented on:
      Is DivX Just a Troubled Kid?
      @Tom - I think that you are mistaken about H.264 being a "codec", it's really a format standard for high quality video that anyone can license and support. This difference is subtle, but important. H.264 would be comparable to Mpeg4. Even though anyone can support Mpeg4, DivX has was able to build a business around their certification because there is so much confusion over what Mpeg4 really is. By creating the DivX brand, they've made it easy for consumers to know that their files would play on a CE device without having to worry about the technical specifications. Moving forward, we'll see more devices support H.264, but because most consumers don't know anything about video formats, there is a need for a brand name to tie it all together. This is why Apple has used Quicktime as a wrapper around their H.264. They don't want consumers to be worried about whether or not the content will play, they want it to be seemless for them.

      With so much confusion over H.264, DivX is in a great position to grow their brand around the format. As we move forward, I expect that DivX certification will eventually mean that both Mpeg4 and H.264 is supported and since Apple is a notoriously closed system, it creates an opportunity for independent companies like DivX to help fill this void. If Steve Jobs would open up his DRM to companies like Toshiba or Samsung, then h.264 Quicktime could be a threat to DivX, but somehow I don't see them allowing other gadget makers to muscle in on their monopoly over the content. In the past, better formats like Betamax did fail, but that was only because they were dependent upon the mainstream media's approval in order to get access to the content. Since the H.264 and Mpeg4 pirates don't seem too concerned about asking for permission, it allows DivX to continue to build their brand around these standards, even though Hollywood hasn't come to their senses yet.
      View article »
    • ON: Fri Apr 18th 10:51 AM
      Commented on:
      SA Weekly Quiz: 7 Headlines You Shouldn't Miss
      I don't know whether or not you've done these quizzes before, but I really liked this feature. It's like the funny graphs in USA Today except the questions are harder and its about finance instead of David Hasselhoff. Given that I pay attention to finance, I was surprised at how many of the questions I missed.
      View article »
    • ON: Thu Apr 10th 11:26 AM
      Commented on:
      Blogonomics: The Seeking Alpha Model
      David - I appreciate the response, but believe that you may be mistaken. The article you referenced doesn't contain any links back to my site (although I've since set up the TiVo.jp domain to auto forward to davisfreeberg.com because this article was meant to be an April fool's joke.)

      If you take a look at any of the articles that I've published on SA, you'll see that 90% of the davisfreeberg.com links have been changed to SA. Here is an example where SA changed my links from just last month.

      seekingalpha.com/artic...

      If you've changed your policy then that is fantastic and says a lot about SA's willingness to listen to feedback from their writers, but in my experience, I haven't found this to be the case. Part of my frustration with the SA business model has been the lack of consistency in following through on these sorts of issues. In Barry's article, he mentions that there were several times that he also privately complained about SA changing content, but it still kept happening. When you tell a writer that you'll quit messing with their articles but don't actually stop, you lose credibility. Hopefully, this is just a mistake and somehow my posts managed to slip through the cracks, but when I see other writers echoing similar complaints, I can't help but wonder whether or not this policy has really changed at all. All that I ask is that you be open and honest about what the rules are. Mistakes happen and are easy to fix, but they wouldn't keep happening, if this practice wasn't still being used on the site. I can appreciate SA's desire to build critical mass, but when it comes at the expense of your writer's critical mass, then it disincentives them from wanting to syndicate their content. I don't mind if SA gets a bunch of traffic from one of my posts getting picked up by Gizmodo or another site, but it does bother me that SA hasn't shared that traffic with their contributors by honoring the integrity of the original article.
      View article »
    • ON: Thu Apr 10th 09:27 AM
      Commented on:
      Blogonomics: The Seeking Alpha Model
      I've been publishing through Seeking Alpha from almost the beginning and while there are certainly some real advantages to the extra exposure, I also feel like SA doesn't treat their writers very fairly.

      The cost of syndicating through the site is zero, but there is a real opportunity cost that we give up as writers. Over the last several years, many stories that I've written have hit the front page of Digg, Slashdot or other large sites, but it's the Seeking Alpha copy that has gotten coverage instead of my own site. This really isn't SA fault and has more to do with other bloggers and journalists being lazy, but it is frustrating to work on an article only to see it quoted elsewhere as Seeking Alpha said this or that, instead of recognizing the work that the author put into it.

      I'm willing to give up this traffic in exchange for having access to SA's platform and there is a real argument to be made that someone wouldn't have even seen my articles to begin with if it weren't for the SA business model, but this problem does set the stage for tension between SA and their writers.

      Providing a cut of the advertising revenue would be one way to reward writers, but I think that it would be a mistake. Anyone who is trying to write for CPMs or CPCs isn't making the best use of the platform. You bring up a number of good examples where people can use SA to advance their careers, but since my writing is mostly a hobby, I'm more interested in what I can do to improve visibility on my own blog.

      When I first started publishing through SA, David Jackson told me that there would be minor editing to ensure the quality on the site, but that none of my links would ever be changed. This was our deal and I viewed this as a social contract. I provide good content and you provide the platform to cultivate an audience.

      After the site picked up the Yahoo! syndication deal, SA started to change the links in my articles so that they would redirect back to SA's copy of my writing instead of my own site. This is a mistake and one that should be corrected.

      Links are the currency of the blogosphere and by linking back to SA, I have no doubt that it improves repeat page views for your site, but it also takes away one of the huge incentives for your writers. A quick link in a story might not deliver a lot of hits, but it's enough recognition to create an equitable balance between the writer and publisher and it motivates the writer to want to see their articles syndicated in as many publications as possible. Instead, SA leaves in the links to sites outside of their network, but penalizes their own writers by cannibalising their work. I would rather see SA add random links back to their own sites, then to take away a link that I've put in my content.

      I've written privately to SA about this issue several times and each time I've been assured that they would quit changing my content, yet there has been no change in policy to date. When you give your writers lip service and don't follow through, it creates doubts about the integrity of SA and places a strain on the relationship that you have with them.

      If SA really wants to reward their writers, don't give us money, give us the exposure that we are looking for to begin with, that is after all the primary motivator for most writers on the site.
      View article »
    • ON: Thu Mar 6th 12:11 PM
      Commented on:
      Is the Breakdown of Stage6 the Beginning of DivX's End?
      The paradox between the heart and the mind is a big part of why I've been so fascinated with DivX to begin with. It's a conflict that really goes beyond my feelings on DivX and is at the center of almost everything I've written since I started to share my thoughts online. I don't know how to reconcile my interest in the stock market with my passions as a fan, but its not the first time that I've struggled to find the right balance for this paradox. If I was invested in DivX, I'd probably feel differently, but my investment is emotional which means that hearts trump diamonds.

      If this was only about Stage6 closing, I probably wouldn't be as concerned, but what really bothers me is the shift in focus by DivX from long term investing to short term earnings. This is a key development and one that I disagree with. DivX has essentially moved from a growth company to a value one. Don't get me wrong, there are times when businesses should make this adjustment, but DivX is still only on the cusp of a tremendous market opportunity and to see them buyback stock when they should be investing in growth makes me wonder what their agenda really is.

      Closing Stage6 will add to the net income, but it's more about manufacturing earnings growth then securing DivX's strategic future. There will be some long term benefits in the cost savings, but $20 million for a share buyback won't go very far. It won't even be enough to buyback the stake that Insight dumped. If DivX was struggling to stay afloat or was dealing with a lot of debt, I could understand the rush to pull the plug, but they have more than adequate cash flow and the reserves to fund the site for at least another six months while they try to continue to raise financing. In the past week alone, we've seen CrunchyRoll raise an initial $4 million, Akimbo raised another $8 million in what has to be their 100th round of funding and TidalTV raised $15 million of series A financing. Even in this cash starved market, there are people who are willing to invest in digital video. Even if the board disagreed with how much of an ownership piece they wanted to keep, wouldn't it have been better for DivX's long term future if they kept a small piece of a funded and vibrant Stage6 over giving up on all of their investment and closing down operations? If they were focused on growing the company, they would be using their cash to solidify their market opportunity instead of focusing on milking the existing business for cash to buy back stock.

      Ancient Chinese Proverb:
      "Do not fear going forward slowly; fear only to stand still."
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    • ON: Mon Mar 3rd 14:20 PM
      Commented on:
      Time to Short Financial Stocks - Starting with BofA
      Using sub-prime as a reason to short BAC is pretty weak. I like the articles where people give fresh insights into the market instead of entries for the captain obvious award. In response to the commenter who wants to short the bond market, I'd check out the Rydex Juno fund. It's pretty expensive, but if you feel that T's yields are going higher then it would be a way that you could capitalize on the trend.
      View article »
    • ON: Wed Feb 20th 10:33 AM
      Commented on:
      Modavox: The Next Big Internet Patent Licensor?
      At a market cap north of $60 million, this company is obscenely overvalued. Why you think that someone would be willing to pay 25 times sales for a company that is losing money is beyond me, but I wouldn't touch this one.
      View article »
    • ON: Thu Jan 10th 13:41 PM
      Commented on:
      Macrovision Upgraded to Buy, Shares Jump
      The problem with them buying Gemstar is that the real value is embedded in Gemstar's years of tax losses. Assuming that the merger goes through, it will be very difficult to spin off these assets for at least two years without invalidating the tax benefits from Gemstar's losses. I suppose that there is always the chance that the merger doesn't go through, but to make a bet that they are going to start spinning off businesses seems pretty foolish given the comments that Macrovision has made regarding the Gemstar purchase.
      View article »
    • ON: Wed Jan 9th 11:13 AM
      Commented on:
      Does Market Timing Actually Work?
      I thought that this was a fantastic article and appreciate your take on the data. I'm not sure that I agree 100% with all of the conclusions, but I think that some of these relationships are certainly worth thinking about. Your article does a great job of taking some of these complex financial ratios and making it easier to understand what those numbers are reflecting. I don't think that there will ever be a magic bullet that can tell you how to beat the market, but I still enjoy sifting through this type of data.
      View article »
    • ON: Mon Dec 17th 11:07 AM
      Commented on:
      Akamai Will Be Essential for Hotspot Prevention
      With VOD, IPTV and other broadband intensive applications popping up everyday, I don't think that anyone doubts that Akamai is well positioned for growth, but that doesn't answer the question of what should that growth should be worth to investors. In your article, you point out how much Akamai is making, but there isn't any discussion of why these numbers deserve such a high multiple. I'd like to see a discussion of why they are worth a premium, instead of just pointing towards IPTV as a growth driver. With a market cap of $5.5 billion, how much upside is really left in this story? In the past, Akamai has been valued on free cash flow, but as their tax breaks end, what impact will this have on their valuation? While Akamai is clearly a very well run company, at what point do you have to consider the competition, instead of valuing the company as a monopoly? These are all questions that people should be asking. Instead of focusing on the growth of their underlying business, I'd rather see an open discussion of why investors should be paying almost ten times their sales, for a company that is seeing their core business commoditized?
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