Wall Street Journal (Online)
The 'Journal (paper edition) is a great read but you need 6 feet of clearance around you to turn those wide pages. Thankfully, the electronic edition solves the clearance problem and makes the reading experience more efficient overall (scanning the first paragraphs of each story, and hyper-linking to get the rest of it, is easier than wandering through pages and pages of newspaper).
Electronic news is nothing new. CNET, Yahoo, and others supply hundreds of stories a day. Ironically, that's a problem. We don't have the time! The 'Journal provides a solution with a high editorial waterline. You could say that for business, if it makes the 'Journal it's news, if it doesn't it's not.
sec.gov (10K, 10Q, S1, etc.)
If you are serious about analysis of a public company then you'll have to dive into the 10Ks and 10Qs located at sec.gov (or at least get somebody like me to do it for you). There are great nuggets to be found but you'll have to pan through a lot of sand. Like a great piece of music, the silence is as important as the notes (what is written). Even the order of things sends signals. Is the Income Statement or Balance Sheet displayed first?
A 10K or 10Q usually raises more questions than it answers. This is good, because it is a springboard to more focused primary research with customers, ex-employees, suppliers and industry partners.
For Canadian public companies you can find filings of quarterly and annual reports at http://www.sedar.com
Tornado Reports
What does the share price tell you about the worth of a company? Nothing, unless you know how many shares are outstanding. Then, at least, you can determine the market capitalization of the company. Market capitalization, on the other hand, is meaningless unless you know how much cash a company has on hand and what their sales are. The Tornado Ratio solves that problem. In one calculation it accounts for: market capitalization, cash, and sales.
To see the latest Tornado Reports, and to learn more, go to the Tornado Report Archive and Info page.
High Stakes, No Prisoners - Charles H. Ferguson
In my opinion, no business author so vividly depicts the roller coaster ride of a startup as well as Charles Ferguson, author of High St@kes, No Prisoners. Mr. Ferguson writes about starting up Vermeer, which eventually got bought by Microsoft in January 1996 for $130 Million.
Although $130 Million may seem like a paltry figure compared to some of the insane valuations during the internet go go years, the Vermeer deal sent shock waves through the software industry at the time. People could not understand how a company which had barely sold any product could be worth so much. Little did people know that this was just the beginning.
Mr. Ferguson holds nothing back as his play-by-play action unfolds in the first third of the book (chances are that if you knew him during that time period, you would be in the book). The second third of the book provides a good analysis of how Netscape blew their market opportunity (the other company interested in Vermeer was Netscape), and how Marc Andreesen desperately needed adult supervision. The last third of the book gives praise to the individuals and agencies that created the internet and then goes on to give other examples of how important government is in advancing technology. As I wrote in another article, without the U.S. government involvement we may all still be online today, but there would be no standard. We'd have to choose between AOL, Prodigy or Compuserve. Why? There's no reason for these companies to work together! Only government could have brought about the kind of internet standards we see today.
Microsoft Prospectus
This document should be required reading for every software executive. Think Microsoft knew exactly how things would unfold? Think again. It hedged all over the place. Xenix operating system, Xenix applications, Multiplan for TRS-80, Multiplan for Wang PC, etc.. Hedge hedge hedge.
Don't get confused by their offering price of $21 per share as compared to their recent (July 2002) price of forty something. Microsoft's eight splits (some two-for-ones, some three-for-twos) means that their effective share price in 1986 was 15 cents a share. Hmmm - let's see - 15 cents a share in 1986, forty something in 2002. You do the math.
The Microsoft prospectus was not without controversy. The IRS was threatening to charge Microsoft a $30,000,000 personal holding company (PHC) tax. (PHC tax is intended to prevent individuals from setting up a corporation simply to avoid taxes.) Another more interesting threat was a lawsuit by Seattle Computer Products (this was the company that Microsoft bought DOS from, for $50,000).
Read the prospectus. Think Microsoft had it all figured out? No way. Their success is due more to how they reacted to their failures, than to their success.
The prospectus, in MS-Word format, is here:
(to save the prospectus on your system just right click your mouse and Save As ..)
Books about Microsoft
What I like about the books pictured above is that they, in combination with the Microsoft prospectus, reveal the dozens of failures and chaotic moments at Microsoft. Failure and chaos are natural in an environment where people are trying to aggressively hit a moving target (high technology) and where people are stretching themselves. Too often, companies expect 100% success and 0% chaos. Gates' success is predicated on his relentless "hard drive", his hedging capabilities, and his failures.
Many people criticize Microsoft for it's two-platform focus (Microsoft and Apple). What many of these people don't realize, or are too young to remember, is that Microsoft had a multi-platform strategy. Then something bad happened. Something humiliating. Microsoft wanted to get into applications and decided to take a run at the spreadsheet market which was dominated by VisiCalc at the time. Microsoft was planning to beat VisiCalc by building superior functionality into a product called Multiplan, which would run on Xenix, TRS-80, Unix, Apple, and more. Their "we'll run on more paltforms than anybody else" strategy failed. They ended up humiliated by Lotus, who designed and optimized a spreadsheet for a single platform: MS-DOS. Because Lotus optimized it for MS-DOS it ran faster than other spreadsheets and had Lotus could add more features because they did not have to account for portability. Microsoft's Multiplan had piggish performance compared to Lotus 123. It may have been that humiliating experience (Lotus 123 trouncing Multiplan) that Gates saw the power and market scalability of platform concentration.
Peter Drucker
Peter Drucker adds depth to any executive's thinking. He brings a seasoning and perspective that give a higher purpose to the companies we build, the shareholders we invest with and the community we live in. Although there is nary a mention of a higher power, it can be said that Peter Drucker brings some sense of integrity to the corporate world which is something that is badly needed amidst the ugly truths of Enron and Worldcom.
"I admired one executive for many years but always thought that his character flaw was that he diluted his efforts by giving too much back to the community in the form of charity committees he was involved in. I was dead wrong. Peter Drucker's books helped me see how this executive actually sustained his success by being involved in the community."
Patrick Lannigan
Peter Drucker adds depth to any executive's thinking. He brings a seasoning and perspective that give a higher purpose to the companies we build, the shareholders we invest with and the community we live in. Although there is nary a mention of a higher power, it can be said that Peter Drucker brings some sense of integrity to the corporate world which is something that is badly needed amidst the ugly truths of Enron and Worldcom.
A favourite Peter Drucker book? I haven't finished reading all of them yet! (Peter Drucker is very prolific). "The Essential Drucker" is valuable in that these are the writings that Drucker himself has deemed to be his most important work. Another book we found enjoyable was "Shaping the Managerial Mind" which is a book about Peter Drucker, written by John E. Flaherty.
A few Drucker quotes:
" I never comment about the stock market anymore, but I will tell you that I pulled [my own investments] out of it completely last January (1998)"
"Business has only two functions -- marketing and innovation."
"Concentration is the key to economic results. No other principle of effectiveness is violated as constantly today as the basic principle of concentration."
"There is nothing so useless as doing efficiently that which should not be done at all."
"Start with what is right rather than what is acceptable."
Benjamin Graham and David Dodd
Stop the presses! There is (at last) an updated and revised copy of "The Intelligent Investor", written by Benjamin Graham (who is the one that Warren Buffet points to as the one who showed him the way investment decisions are made). I always liked the Intelligent Investor but found the writing style to be very painful to read. Check out the new revised copy on Amazon or your favourite neighbourhood bookstore.
Benjamin Graham's first book, Security Analysis, published in 1934, brought some rationality to the lethargy of the stock market after the 1929 crash.
(For Technical
People)
Bell Labs Technical Journals focused on Unix and C.
What's going to happen to Bell Labs, now run by Lucent? Will they be able to weather the telecom storm? It would be terrible if Bell Labs, which gave birth to such technologies as Unix, Lasers, and the Transistor, were to slowly fade.
Unix and the C computer language were breakthrough software technologies that brought a superior level of abstraction to the computer industry and helped make hardware a low priced commodity. Today, operating systems like Linux, AIX (by IBM), Solaris (by Sun Microsystems) and HP-UX (by Hewlett-Packard) were all, in some form or another, derived from Unix. MS-Windows, WindowsXP, MS-Word, etc., are in turn, all written in the C language or some derivative thereof. Thank you Bell Labs.
If you are technical, you may be interested in reading an early white paper introducing the Unix operating system.You can get the Unix paper here (note: the Interdata 8/32 mentioned in this paper was one of the first computers I ever worked on, and was the first non-DEC port of Unix)
The Bell System Technical Journals that focus on Unix and C are:
Bell Systems Technical Journal Volume 57, No. 6, Part 2, published in 1978
Bell Systems Technical Journal Volume 63, No. 8, Part 2, published in 1984
Both of these publications are out of print. Most of the white papers published are on the web, but if there is something in particular you are looking for send us an email.
