The mortgage oasis mirage is real.

Posted on August 31, 2007
Filed Under Companies, Markets & Finance | Leave a Comment

A few weeks ago we saw an obscure reference in a blog about a new mortgage type/home equity loan that actually allowed homeowners to borrow money against the *future appreciation* of their home.  At the time it seemed too wild to be true.  Since we didn’t find anymore confirming evidence of it we let it go.

Then today we see Herb Greenberg’s post about the Fed chairman actually suggesting the mortgage industry get more innovative with options including what he described as a "shared appreciation" provision. 

As unbelievable as it sounds it’s now apparently a fact that the Fed may be willing to go to great lengths to soften the blow from a correcting real estate market.  By pushing rates low enough and encouraging mortgages that basically push the issue again into the future we may not enjoy the level of bargains many of us anticipate.

The U.S. credit industry is indeed an amazing creature!

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Skype decline.

Posted on August 30, 2007
Filed Under Research, Software, Technology & The Web | Leave a Comment

We published a free report noting our increasing concern that Skype growth is rolling over.  It could be partly due to seasonality but the numbers for the past few months are poor for a company that should be in a secular growth whirlwind - some outages notwithstanding.

On top of it all the signals we get from management in the company suggests a total washout of real business objectives and success measures.  For eBay we expect the core business and PayPal to more than make up the shortfall but it does suggest the field for consumer and small business VoIP is open and ready for alternatives.

Anyone wanting the original short report can find it here.

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Aha! High energy costs another negative catalyst for real estate…

Posted on August 29, 2007
Filed Under Companies, Markets & Finance, Energy | 1 Comment

There are plenty of good posts out there arguing for weakness in real estate.  The listings we get every week tell the same story.  At least in the Boston area we see numerous price reductions and most sales below offering prices. 

Lately however a number of new listings and price reductions made us realize that at least in the North East we might see additional pressure to unload properties that are especially old and inefficient when it comes to energy use.  We’ve seen some listings we might have jumped at two years ago but now won’t even look at them because they would cost a small fortune to heat and power.

For those around during the NYC real estate crunch in the late-80’s it was the high monthly maintenance charges on some apartments that made them almost impossible to sell.

Energy prices are already high and if you believe forecasts from people like Goldman Sachs they will go higher this winter (oil at $95 according to them.)

Bulls might say that this would also increase demand for newer, more efficient properties which is a valid point.  However the overall impact is likely to be driven more by the increase in supply and the greater incentive for sellers to reduce prices and unload these properties.

We don’t think anyone can really forecast the economy or the real estate market but having lived through the NYC experience we think time is on the side of the buyer these days and should remain the case for another year or so. Unless super-low interest rates reappear soon the scenario should play out as many expect.

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SCO vs. Novell: Come see me in five years

Posted on August 13, 2007
Filed Under Software, Technology & The Web | 12 Comments

If you care about open source software (OSS) market trends and investment issues related to OSS for the IT industry’s largest companies, the OSS blogosphere is telling you that you should be excited about a Utah Federal District Court ruling on August 10. The judge ruled against SCO (SCOX) and in favor of Novell (NOVL) on a number of claims in a five-year-old court case over who owns 35-year-old UNIX copyrights related to a 12-year-old asset sale. But IBM, Microsoft and any company that runs Linux is also involved.

Remember, this ruling came down in Utah, where Novell was formed (although it is now based on Cambridge, Massachusetts), where SCO is located (although it was formed in Santa Cruz, California) and where the court still distributes forms in WordPerfect. Also remember today’s SCO is not the 1995 SCO, and today’s Novell is not the 1995 Novell (but that would take too long to explain). These factoids could all become relevant in any appeal process.

My first thought in reading Friday’s court opinion is that if I am ever charged with murder I will try to retain the lawyers that Novell used in 1995 in its dealings with SCO when Novell was selling SCO its UNIX business. SCO says it thought it “bought the business” with all the normal-people, non-lawyer implications of those words. According to the judge, it looks like the only thing Novell sold to SCO in 1995 was some rights to trademarks Novell had already basically given to X/Open and the right to keep developing something descended from AT&T UNIX System V.

The change from Novell selling SCO what SCO thought it had bought to Novell selling SCO a few useless trademarks all happened as the pens were being pulled out of the vest pocket protectors over a few days in mid September 1995. Were SCO’s lawyers and executives in 1995 this bad, or is there more we are not hearing? Every debatable dispute in the ruling is decided in Novell’s favor by the judge. He never answers the mystery: What was the purpose of the amendment in 1996 to the Novell-SCO agreement in respect to copyrights if not to straighten out the copyright issue caused by the X/Open-related wording in the original. Even Novell at one point in June 2003 seemed to agree that that amendment meant SCO owned the UNIX copyrights according to the judge. And on the top of page 72 of the 102-page ruling, it even looks like the judge invited SCO to start the whole thing over again on different grounds.

So I don’t get all the blogosphere excitement? According to the OSS blogosphere, a new day has dawned, Linux is liberated, Microsoft is toast, and so forth (the usual litany). But this is going to be appealed for years. And I didn’t see anything that decided whether IBM or anyone else put any UNIX IP in Linux.

If the ruling survives the inevitable appeals, the blogosphere believes (and Novell has said) that Novell will do the right thing and indemnify IBM and the OSS community from further action. But why should Novell? If IBM and the OSS community did what SCO says it did vis-a-vis Unix IP, Novell shareholders should demand the same compensation SCO’s shareholders did.

As for Microsoft, all parties agreed that this had nothing to do with patents.

So come see me in five years and tell me how it all turns out. It is very likely that this is not the last word.

–Dennis Byron

Tags: patents, UNIX, Linux, IBM, Novell, SCO

Lawson is still “the” IBM ERP play

Posted on August 9, 2007
Filed Under Companies, Markets & Finance, Software, Technology & The Web | Leave a Comment

Despite Lawson’s (LWSN) relatively small size in the applications market at under $500M in applications and maintenance revenue in its FY 2007, which ended May 31, 2007, Research 2.0 follows Lawson from time to time because it is basically the last ERP pure play. SAP (SAP) is now doing over a billion dollars a year in middleware and most of the other name-brand application players sell more standalone applications (HR, CRM, project management, and so forth) than they sell ERP. Therefore Lawson is one of the best overall ERP market indicators. (Lawson does sell a lot of standalone HR but that functionality works in an ERP suite if users want it that way, so we consider Lawson’s revenue to be all ERP.)

A little over a year ago, when the Lawson/Intentia merger was formalized I wrote that Lawson was rapidly becoming “the” IBM ERP play. I don’t think (IBM) would appreciate that characterization because IBM itself does not offer an ERP product and partners with multiple partners other than Lawson that do. But Harry Debes, CEO of Lawson, hinted at the concept during his presentation August 8, 2007, to financial analysts. He said that Lawson was the alternative for J.D. Edwards’ users and other IBM-centric users acquired by Oracle (for example, a good percentage of the Peoplesoft base ran on AS/400) that are certainly going to be directed to Oracle middleware and databases, and away from IBM, over time. As for all the ex-AS/400 application suppliers kicking around inside Infor (JBA, Software 2000, SSA and more), Lawson is probably the most modern application middleware technology of any of that group.

Lawson emphasizes an IBM-WebSphere-based foundation for these users and all others for that matter. Earlier this year, Lawson announced that it would incorporate the IBM enterprise service bus into its foundation as well. The foundation runs on generic UNIX and Windows, as well as IBM operating software. In fact, in terms of porting to WebSphere, Lawson is doing with its M (legacy Intentia) and S (legacy Lawson) Series what Peoplesoft told its customers it would do with IBM in September 2003, before Oracle acquired Peoplesoft.

A key part of the investment play is the Lawson strategy to address a small number of industries at a very niche level (for example, not just retail, but grocery) as well as areas where asset-intensive services are involved. Both Lawson and Intentia were good in complementary industries like this when they were separate so there is no reason they cannot keep moving the ball up the field.

A year ago, Lawson said it needed to keep its diverse customer set happy and better compete with SAP (SAP), Oracle (ORCL), Infor, Intuit (INTU), Microsoft (MSFT) and The Sage Group. With about 4,000 customers (about 1,800 each in Europe and the Americas, and almost 400 in Asia/Pacific), it is succeeding at the former. As many as 2,000 of them according to Jim Anderson, EVP of Services, are still running on older Lawson architectures (pre-WebSphere but mostly IBM also) and are key prospects for upgrade to the foundation. But of course that means that about half have upgraded already, an impressive rate.

The IBM connection is still a good way to look at the St. Paul/Stockholm-based Lawson from an investment perspective.

–Dennis Byron

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