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Barry Randall

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  • NIC Inc.: A Dominant Player In Government e-Services [View article]
    I agree, and given that budget pressures are almost eternal, the trend seems likely to continue. I kind of soft-pedaled EGOV's Federal opportunity, because it's only getting started. Federal is a large, but different because the "transactions" through which EGOV (or any outside vendor) get paid are more often department-to-department than department-to-citizen. Most retail interaction with government is with state (and local) government; less so with Federal agencies.

    My fantasy is to find the Indian company bringing that country's massive, people-intensive bureaucracy on-line. Now THAT is an investment opportunity!
    Dec 20 12:48 PM | Likes Like |Link to Comment
  • LinkedIn May Find Itself LinkedOut Before Long [View article]
    As a stock, LinkedIn has plenty of issues, starting with its triple-digit valuation for a company that is not making money and whose forward earnings estimates had to be revised downward after its recent earnings release.

    I went over these issues in my SeekingAlpha report about 10 days ago:

    But as a company, LinkedIn is dominant and your "drive-by" report on "Identified" won't worry anyone at the company. I would suggest you ponder how LinkedIn came to its dominance and the multi-million hour investment that LinkedIn members have made in posting and curating their information. While the lesson of MySpace is that no lead is safe, it will require more than a "tag-you're-it" type of social network to unseat LinkedIn.

    A lot more.

    Barry Randall
    Dec 16 11:13 AM | 3 Likes Like |Link to Comment
  • Cramer's 4 Buy And 2 Sell Ideas [View article]
    You need to educate yourself about Red Hat and their business model. They do not compete with "free" software. You pay for Red Hat, just as you would pay $ for alternatives.

    I agree with you that Red Hat has a premium valuation. They have always had a premium valuation because they have a superior business model. You could have sold it at pretty much any time in the last 10 years because the stock was "expensive" and you'd have missed out on a company that has gone from $3 to $50 during that period of time.

    Yes the ride has been volatile. Not every holding period would have resulted in a gain.

    But advising people to sell it now because it is expensive, is like punishing yourself...for being right. The correct, alpha-generating strategy is to advise invesotrs to trim it back, if a) they owned it; and b) it has out-gained the relevant benchmark and has become too large a position. Trim it back to the same level it was before the appreciation.

    Again, you should do more work on Red Hat's business model before you comment on it again.

    Respectfully yours,

    Barry Randall
    Dec 12 04:44 PM | Likes Like |Link to Comment
  • LinkedIn: Living In Facebook's Shadow [View article]
    As of November 15 (180 days from the IPO), there were 24m shares freely tradeable - this includes the original IPO shares, the 8m shares from the secondary, plus some other shares held by institutions and employees.

    Virtually all the remaining shares (56m) are held by pre-IPO investors (e.g. Greylock, Sequoia); these shares are locked (per Rule 144) for another 90 days, which will end on February 13.

    Generally, shares sold into the public market (the IPO, the secondary) are unlocked and part of the float. Shares still held by insiders, VCs are locked to some degree and are subject to sales restrictions.

    Hope that helps.

    Barry R.
    Dec 5 05:52 PM | Likes Like |Link to Comment
  • Ariba: A 'Desired Monopoly' In The Tech Space [View article]
    Thanks for your comment.

    1) I agree with you: Ariba will never get 100% of all supply chain transactions. Partly this is as you say: larger companies and certain industries will have their own transaction networks. But part of being a "desired monopoly" is that there is an inherent tendency toward monopoly: people want there to be only one middleman, so long as that middleman doesn't charge too much. If Ariba could ever broker, say, 10% of global transaction volume, then that's 400% greater than they have now, which would make for pretty huge revenue growth over the next 10-15 years.

    2) I'm not sure I understand your second point exactly, but let me comment on pricing: I think that Ariba was wrong to raise prices last year, partly because of the factors you mentioned: network effects should be lowering their costs, so that even while holding prices steady, their profit margins would increase. Instead, they seemed to be testing their own pricing power, which is probably wrong for a potential monopolist to do - it encourages competition, among other problems. Keeping prices low, or even lowering them further, would solidify their leading market position, discourage competition and keep them in good graces with their customers.

    It would be a red flag for me (and I own Ariba in the portfolio I manage, the Crabtree Fund) if Ariba raised prices again.


    Barry Randall
    Crabtree Asset Management
    Dec 5 04:45 PM | Likes Like |Link to Comment
  • LinkedIn: Living In Facebook's Shadow [View article]
    LinkedIn is the leader in this space and I wanted to use more than the traditional metrics (e.g. revenues, unique visitors) to justify that opinion.

    I included the developers number and the API calls because they're relevant for any web-based company attempting to become the center of an ecosystem. Back in the day (e.g. the 90s), I might have written about how many "third-party applications" had been written for a given "platform" (e.g., WinTel, Mac). But it's 2011, and LinkedIn is a Web 2.0 company, so API calls are a relevant stat.

    You may be right about having an inefficient API design - but taken in context with all the other LinkedIn data, the API calls are meant to support my assertion of the company's (current, anyway) dominance.

    But their stock price is still going down in the near future...

    Thanks for the comment!

    Barry R.
    Dec 5 02:29 PM | Likes Like |Link to Comment
  • LinkedIn: Living In Facebook's Shadow [View article]

    Thanks for the comment.

    Google's "employment networking" effort is centered (for now) on their Google+ social network, with Google+'s "Circles" and Google Profiles serving as something similar to LinkedIn. Of course, it isn't nearly as sophisticated as LinkedIn, but they're Google, so they're doing it their way.

    Here's a quick comparison between the two:

    During my research for this piece, I learned something interesting: even though LinkedIn is an actual professional network and Facebook is more of a social network, more people find jobs through Facebook simply through the fluid interactions that happen every day on Facebook. This makes sense when you think of all the jobs you've had and whether you learned about them first through an ad or through an acquaintance or relative.

    So I think that Google's strategy is attempting to capture some of this social-first dynamic with Google+.

    And so the answer to your question is that I'm sure Google sees plenty of opportunity and profits in the "employment networking" space, but buying LinkedIn would

    a) require a strategic re-think (not impossible, given Google's willingness to start over - remember Buzz?-); and

    b) would probably be difficult to get through the Antitrust regulators at the FTC and the U. S. Justice department, given that Google and LinkedIn are market share leaders in their respective spaces.

    Hope that helps.

    Barry R.
    Dec 5 12:11 PM | Likes Like |Link to Comment
  • Zillow: Admit It, You Can't Help Looking At This Stock [View article]
    The only comparison I made between Google and Zillow is that they are both Software-as-a-Service companies and both did low-float IPOs. Otherwise, they have nothing in common.

    You wrote, "I would be very cautious about buying this for the long-term because it is basically a derivative play on an industry that has been in perpetual distress for at least 4 years already."

    Well, imagine how powerful Zillow's business model is to have grown at 100%+ rates in that awful environment. Will that environment last, or is it cyclical? If you believe it's cyclical and will bottom out, then wouldn't Zillow be a really good investment at that time? You seem to answer your own question with your last sentence...
    Dec 3 05:47 PM | Likes Like |Link to Comment
  • OpenTable: Trying To Not Screw Up A Free Lunch [View article]
    Is Google prepared to offer a fully integrated reservation system, one that involves hardware, installation, and integration with non-web-based reservations? Google owns Zagat - how will restaurants react to an entity that offers reviews (some potentially and unfairly bad) and reservations? Keep in mind that OPEN is non-judgmental: they just do reservations.

    Why would Google "build" a whole new reservation system, when they could buy OpenTable for what amounts to about a week of cash flow?

    OpenTable has a lot to worry about, but competing against Google isn't one of them.
    Dec 3 05:41 PM | Likes Like |Link to Comment
  • Why It May Be Time To Sell LinkedIn And Groupon [View article]
    Dude, where have you been for the last three weeks, during which time GRPN has fallen from $31 to $16 and LNKD has fallen from $85 to $58?

    And you're just now telling people to sell?

    If you look in the dictionary under, "Value-add," your picture will not be there.
    Nov 29 01:59 PM | 1 Like Like |Link to Comment
  • OpenTable: Trying To Not Screw Up A Free Lunch [View article]
    In the fourth paragraph above, I meant to say that the mean was much higher than the median. Sorry for the confusion.
    Nov 25 11:41 AM | Likes Like |Link to Comment
  • OpenTable: Trying To Not Screw Up A Free Lunch [View article]
    It doesn't matter if toptable's "growth" reflects a period of time before which OPEN purchased the company. The growth is real, and the revenue from the growth is real, and the growth reflects whatever qualities that the toptable service possesses, qualities that OPEN now owns and from which they benefit. No one believes that the 200% growth rates are sustainable. But they are impressive and warranted mentioning.

    The data does not show that Livebookings is losing material amounts of market share to OPEN in Europe. But Livebookings' strategic responses (i.e., changes to pricing) are logical when confronted with a competitor (toptable) that suddenly has an owner with much deeper pockets and much bigger ambitions.

    You are right: they are only rolling out in the U.S., which speaks to their relative market strength in each geography. But keep in mind that even being "free" may not overcome the positive network effects that benefit the restaurant customers who pay cash money to have OPEN's solution and be part of OPEN's network.

    Think of it this way: back in the day when there was one and only one Yellow Pages, would you as a businessperson have advertised in a newcomer, "Green Pages," for free, even though though the Green Pages might have only reached 1/10th as many potential customers? After all, it takes time and money to manage marketing efforts, so "free" may not have been as inexpensive as the word, "free" implies.

    Let me repeat my stance on OpenTable: I think it's a clever business model and the clear leader in a relatively young space, but I think they structurally charge too much money for their service and will have to pass through a period of reckoning, during which they may lose share. But referring to them as a Desired Monopoly only reflects that in the end, everyone will be better served if there's only one reservation service provider and I think that OPEN can be that one and only, provided they face this pricing issue head-on.
    Nov 25 09:43 AM | Likes Like |Link to Comment
  • OpenTable: Trying To Not Screw Up A Free Lunch [View article]
    I am the source of the 600,000 restaurant figure, deduced from a variety of independent sources. The 55,000 figure comes from OpenTable itself, but no industry or investment analyst has challenged it and provided a materially different figure.

    I do the math in my piece, but I'll do it again here for you: 16k/55k = 29% market share for OPEN. I'm not sure how you arrive at "the addressable market is 1/2 saturated." I don't think you're wrong, I simply think there isn't enough data to say.

    OPEN claims their 55,000 figure culls out restaurants that are inappropriate or ineligible for their reservation service or any other. I don't know what criteria they use, but since in my brief experience they tend not to exaggerate about other facts and figures, I'm willing to give them the benefit of the doubt.

    One thing you should keep in mind: the median life of a restaurant in the U. S. is 2 1/2 years; the mean (average) is 5 years (much higher than the mean because of restaurants that have been in business for 50-100 years). In other words, the turnover in restaurants is so great that the concept of "low-hanging fruit" is naive: so many new restaurants come on the scene in any given 4-5 year period that there will always be a fresh supply of restaurants, which will include a statistically meaningful number of them for which OPEN is a solution or for which it isn't.

    It's a very fluid market, and thinking of it as "1/2 saturated" or saturated to any degree ignores this huge, constant flow of new prospects for OPEN or any other reservation solution.
    Nov 25 09:26 AM | Likes Like |Link to Comment
  • OpenTable's Earnings Much Worse Than Portrayed [View article]
    "Smear it into my face!"

    I like that!

    Seriously, I think your points are valid and I discuss the pricing pressure at length in my own piece.

    One thing you don't mention, however, is that OPEN's profitability remains quite strong, even while their growth is slowing. I think this fact alone can support a reasonable (maybe 2-3x sales) even if outright revenue growth slows to zero.

    Another factor is pricing, which is under external pressure, but which hasn't really declined (the slowing revenue growth is almost entirely due to the deceleration in signing up new subscribing restaurants). I believe that if OPEN was much more aggressive right now in lowering prices, they could foreclose much of the competitive pressure they are likely to face.

    As I wrote in my own piece, I am neutral on the stock and will continue to be until either, 1) international becomes profitable ; or 2) year-over-year total revenue growth levels off.

    Congratulations on your successful short of OPEN.

    Barry Randall
    Nov 23 06:29 PM | Likes Like |Link to Comment
  • OpenTable: Trying To Not Screw Up A Free Lunch [View article]
    Keep something in mind: as you can read at the end of my original post: I'm neutral on OPEN. Not BUY, not SELL. I think it's a clever, profitable business model. But I think they're charging too much for their service, and apparently so do a lot of their restaurant customers.

    Anyway, as to your second point: I agree. It makes sense that whatever "customer management system" a restaurant uses, it should incorporate the functions you mention, as well as some others. And I expect that in time, it will.

    I have to say you seem pretty conflicted about OPEN. Here's an excerpt from your original post:

    "The customers are the restaurants, who want to be found, want to be able to stand out in their advertising and would just as soon NOT have Open Table exist at all. This is because Opentable does not make its customers stand out. To retain credibility all customers have to be treated equally"

    So if OpenTable does not make its customers stand out, isn't it then...treating all customers equally? As you wrote in your second post, OpenTable is not advertising. So doesn't that make them a middleman, who shouldn't favor anyone over anyone else? Would you, as a restaurant, sign up with OpenTable knowing that you would be treated unfavorably?

    My point is that OpenTable is providing a reservation service, which requires that they treat everyone equally. And apparently they do.
    Nov 22 01:37 PM | Likes Like |Link to Comment