About Frédéric Filloux


Posts by Frédéric Filloux:

Spooks hooked at Second Life

On Second Life, same rules apply to anyone : anonymity, global access (50,000 people are on the network at any moment), and possibility to quickly setup businesses – including illegal ones. This is why the US intelligence community is getting involved in Second Life. According to the Intelligence Advanced Research Project Agency (Iarpa), features in avatars crowded games can be efficient tools for terrorists : from recruiting, to planning, to money laundering
> story in the Washington Post

Shareholders on the offensive at the NY Times

Not everyone is discounting the value of great newspapers. Take Scott Galloway for instance. He’s leading the fight for a board position at the New York Times after Firebrand/Harbinger LLC, a company created for this offensive, disclosed a 4.9% stake in the capital of the NY Times Company. His pitch : creating more value for shareholders (the usual crap) by a “redeployment of capital to expedite the acquisition of digital assets.” according to the letter sent to Arthur Sulzberger chairman and publisher of the Times and Janet Robinson k the CEO. The fall of the New York Times stock (from $47 to $18 since 2004), shows a true erosion of the “value for shareholders” and it makes the media group tempting for investors such as Firebrand/Harbinger ‘even though the family-controlled board shields the management from outside interference’.
> Read the letter from Gallaway, filed to the Securities and Exchange Commission. A monument of takeover-era rhetoric.
> And the profile of Scott Galloway in Portfolio magazine
> Forbes magazine is detailing the achievements of hedge funds manager Philip Falcone. Not exactly the kind of guy you want at your board for the kind of complicated turnaround the Times is facing.

The Endless Fall of American Newspapers

I know. Such kind of entry looks like the Monday Note’s weekly shot of pessimism. OK, but ignorance does not deflect peril. Then, let’s have a look at the latest data extracted from a recent article in the New York Times about the US market:

  • Adjusted for inflation, 2007 ad revenue was more than 20% below its peak in 2000
  • Since 2003, the number of copies sold has bee slipping about 2% a year
  • Papers like the Boston Globe, SF Chronicle, or LA Times (see Monday Note #20) have lost 20 to 30% of their circulation in just a few years
  • Newspapers execs and an analysts said than it could take 5 to 10 years for the newspaper industry to stabilize – also because operating profit margin remain high (often in the 15%-20% range for big media groups) even if the dollar amount is falling. (Money loosing business like steel or manufacturing are much faster to adjust).
  • From a revenue perspective, the Internet is not likely to be a substitute : when an advertiser pays $1 to reach a print reader, it pays only 5 cents to reach an internet reader. In other words, newsrooms and journalistic ambition will have to downsize dramatically.

> Now if you don’t have enough, click here for the original story

Infrastructure — Vulnerable/Reliable Internet

Ten days ago, two undersea telecommunication cables were cut offshore Alexandria, Egypt, causing major disruptions in Egypt and India. Conspiracy theories are blooming. India displayed its vulnerability to such incidents with its huge computer and telecom outsourcing industry. Big call centers managed well, not small businesses.
> story in the Christian Science Monitor
> conspiracy theories at work, and summarized on Australia’s ABC News.

Emerging economies — Knowledge vs. Infrastructure

Technology is spreading to emerging markets faster than anywhere else. Soon, there will be more internet users in China than in the United States. In India, the phone subscriptions are growing by 8 million a month, and the country produces more engineers that the US. But outside modern urban centers, the lack of reliable infrastructure, maintains the digital divide.
> the Economist details the latest report from the Word Bank of the issue.

Infrastructure — A Giant Leap for your Bits

Cisco Systems likes numbers. Big and metaphor-rich ones. Here is the latest form last week, when the network giant introduced its new digital switch : the Nexus 7000 can transfer 90,000 movies (the entire library of a big rental company like Netflix) in 38 seconds over the internet. In theory, it solves the question of the network needs for new applications (they’re supposed to grow exponentially). The applications Cisco needs to sell more iron? Well, they’re up to you.
> story in the New York Times
Cisco has been using such a tremendous power and speed for its own development. The company holds 600 telepresence sessions each week. The tools : a 65-inch display ensuring a HD-like quality for videoconferencing. In this story, the company CEO’s John Chambers is “traveling” across the world in 3 1/2hrs.
> article in Fortune.

Numbers — A new metric is born : the Kerviel

The Kerviel unit is about E4.9 billion, approximately $7.2bn. This is the amount lost by the n°2 French bank Société Générale. There is also the Kerviel Plus, about E50bn ($72bn). This was the total position taken by the young trader; SocGen felt it had to dump it in the midst of a bear market. It’s a little too easy to call Jérôme Kerviel a “rogue” trader. He’s rather a searchlight suddenly throwing a piercing ray of truth on the the financial system follies. Unfortunately, even if this only about a very narrow sector of the system, Kerviel becomes a beacon for the legion of opponents to the free market economy. Plus, and here’s an interesting surprise, he’s exonerated, even lionized by the crowd . See Le Figaro’s poll last Friday, only 13% think Kerviel bears most of the responsibility in the SocGen mess, versus 27% who say it’s the regulators, and 50% the management of the bank. People are ready to forgive the index rider who went, well, slightly off track. But this new metric turns out to be an interesting tool to compare real and virtual economies. Let’s wonder : how many Kerviels (kvl) is your company worth these days ?
- Yahoo (11,500 employees) : 6,2 kvl (according to Microsoft)
- Google (11,400 emp) : 22 kvl
- Boeing (154,000 emp) : less than 9 kvl
- Total (95,000 emp): 23 kvl
- News Corp (53,000 emp.): 8.3 kvl
- The New York Times Co. : (11,500 emp) one third of a kvl Well, you get the picture. These economic discrepancies don’t make any sense, except that all the companies mentioned above feel the tremors when a market related incident occurs (drop in stocks, increase in interest rates, etc.). -
> A large part of the excesses of the financial sphere is tied to a corrupting compensation system. Read this insightful analysis – written before the SocGen debacle – in the Economist.