The Lonely Economist's  Instablog

Here we are, in a dingy little chapel on the Las Vegas Strip ready to see the shotgun wedding between the cool, suave Oracle Corp and the delicate, sensitive Sun Microsystems Inc. The groom, Oracle, looks bored and ready to get it over with while the bride, Sun Microsystems, looks like she expects someone to ruin her lovely wedding.

The Priest at the gaudy alter is asking those in attendance (the investors from both companies): “If there is someone who wishes to protest this wedding, speak now or forever hold you peace?”

Several seconds pass by as everyone holds their breath and all is silent, then just as we’re all ready to release one giant sigh of relief: “BAM!”

Oh Boy, it’s the Antitrust Regulators.

On Friday, U.S Antitrust Regulators asked for more information concerning Oracle’s deal to purchase Sun Microsystems. In particular, they are asking for more information about Java’s licensing. The regulators have no problem with Oracle’s purchase of Sun’s database or software, but they do have questions concerning Java.

Several experts within the field are surprised to see the delay, but truthfully many where expecting some sort of objection to come forth. Oracle Corp. is one of the world’s largest software makers and Sun Microsystems owns some of the world’s most popular technologies: Java and MySQL for example.

Oracle offered to buy Sun Microsystems after Sun’s talks with IBM deteriorated. The major reason behind this deterioration was that one of the conditions that IBM demanded was that if the Justice Department brought forth any objections, then IBM would be allowed to pull out of the purchase.

The delicate and sensitive Sun Microsystems said: “Nope, I won’t let you leave me.”

IBM replied: “Thanks but no thanks” and pulled out before the marriage even started.

It doesn’t matter whether IBM decided to stick it through, or if Oracle got that chance to buy Sun. The problem was and is: “What are they going to do with Java”? That was it really, because Java is one of the world’s most popular programming languages. It’s a huge bargaining chip and the Justice Department wants to make sure that they don’t take advantage of that power.

In the end though, it’s no surprise the Antitrust Regulator are yelling: “I protest this wedding!” They were going to do it anyways, no matter who Sun Microsystems was getting hitched to.

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Thomas Edison, one of the worlds’s most acclaimed inventors, brought to life the world’s first commercially practical light bulb.  Innovation and technologies were the primary drives in his life and by the time of his death he had hundreds of patents under his name. Edison was not only a scientist at heart but also a successful business man. In his lifetime, he founded several companies and yet only one achieved world renowned status. He was one of the founders of General Electric Corporation.

Edison’s love for innovation allowed GE to be viewed as a company that pioneered research, development and technological evolution. Consumers soon came to count on GE for its productive and durable products that worked to simplify everyday life. This evolution happened during Edison’s lifetime, but now Edison has long been gone and times have changed.

GE eventually created a unit called GE Capital. It is the financial services unit of General Electric and provides up to 37% of GE’s revenue. It had become GE’s bread and butter. It was a feasible and profitable unit for GE until the mortgage crisis came about. GE held so many residential and commercial mortgages, as well as loans given to consumers, that the conglomerate almost collapsed during the crisis. Its investor ran for the hills and left the company in the dust, and its shares are currently trading for less than a share of JPMorgan Chase or Bank of America.

The company has since then recognized that its salvation lies on its reinvention. GE will no longer rely on its financial unit for the majority of its profits. The company is scaling back the unit so that it will now only provide less than 30% of its revenue. The company is also going back to its roots and doing what it does best: creating and providing innovative products.

GE is investing more money in its medical division and lowering the prices for it medical technology. This is part of its plan to increase its presence in the healthcare IT sector over the next couple of years.  The company has also announced that it is building a new research center in Michigan. It will be called “The Advanced Manufacturing and Software Technology Center” and will create 1,100 new jobs. Here, researchers will work to create new technologies in the Energy sector, IT sector, as well new gas turbines, and engines.

There is much more work to be done within the company in order to turn it around, but the initiative has been set and has begun. It would be a disservice to Thomas Edison and the GE brand if the company were to neglect the severe trouble it has found itself in. Edison was an innovator first and a business man second. Wealth was just a byproduct of his incredible inventions; it was never his goal. GE was founded to enrich and simplify consumer’s everyday lives. Great Products were first, profits second. It’s the reason the company became one of the world’s largest brands.

GE was founded on Thomas Edison’s passion: “We bring good things to life”.

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Palm Inc., a Smartphone company, will announce its fourth-quarter fiscal year 2009 financial results on Thursday, June 25^th, after 4 p.m ET/1 p.m PT. The company will then hold a conference call for the public at 4:30 p.m.

Analysts expect the company to report -$0.64 cents earnings per share.

The company ended its 3^rd quarter with $90,624 in revenue compared to the same quarter in the previous year with $312,144, in thousands.

This is not surprising considering the company has been losing revenue for several quarters now:

 We expect our handheld business to continue to decline through fiscal year 2009 and future years as a result of demand shifting to voice/data converged products and the maturity of our handheld products.

The company had $272,107 in Cash and Cash Equivalents, Short-term Investments and Accounts Receivable compared to $342,443, in thousands, in immediate liabilities. They also had $391,000, in thousands, in long term debt.

The company is losing its market share in the U.S and abroad:

Net device units shipped in the three months ended February 28, 2009 decreased 76% internationally and 61% in the United States compared to the year ago period

The company summarized their financial condition in their own terms, as of the end of their 3^rd quarter:

We anticipate our balances of cash, cash equivalents and short-term investments of $219.4 million as of February 28, 2009 will satisfy our anticipated operating cash requirements and debt service or repayment obligations for at least the next 12 months. Although we believe that we can meet our liquidity needs for at least the next 12 months, we have had net losses since the beginning of fiscal year 2008 and our actual level of losses for the last four fiscal quarters were unanticipated 12 months ago which have resulted in decreases in our cash, cash equivalents and short-term investment balances during the last four quarters. We are experiencing reduced demand for our maturing legacy smartphone products and a challenging economic environment and we expect further declining revenues and continued margin pressure from our legacy product lines. Based on our current forecast, we do not anticipate any short-term or long-term cash deficiencies. If we fail to meet our operating forecast or market conditions negatively affect our cash flows, we may be required to seek additional funding. If we seek additional funding, adequate funds may not be available on favorable terms, or at all. If adequate funds are not available on acceptable terms, or at all, we may be unable to adequately fund our business plans and it could have a negative effect on our business, results of operations and financial condition.

Nevertheless, the company has had some positive news since their last quarter. They recently released their highly anticipated smartphone called the Palm Pre which has been widely popular among consumers and they reportedly sold 50,000 units in the first weekend.

Palm Inc’s CEO of 16 years stepped down and was replaced by Jon Rubenstein. Rubenstein worked at Apple Inc. for many years and has been credited as being instrumental to the development of the iPod. He was instrumental in the development of the current Palm platform, the WebOS, and the Palm Pre.

Recap:

·         Dubious financial health

·         Declining revenue

·         Decreased Market Share

·         New Product, resulting in renewed interest in the company

·         New CEO, years of experience in the technological field, brings new direction to the helm

The company has certainly garnered its fair share of positive media recently, but the company’s future and success still remains in question. It faces fordable competition from Apple Inc’s iPhone and Research in Motion’s Blackberry line, as well as a slumping economy.

It would be best to continue monitoring the company and wait for some hard evidence that shows its progress before investing in the company. 

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