Financial Markets

Recent product releases are still paying dividends for Microsoft. The company just reported third quarter revenue of $14.5 billion, with $4 billion in net income.

Microsoft saw growth across the board. Revenue, at $14.5 billion, was up 6% year over year. The $4 billion reported net income was a large 35% year over year gain. This raised earnings per share to $0.45, an even higher 36% increase.

The company pointed to Windows 7 as a major factor in the successful quarter, “Windows 7 continues to be a growth engine,” Microsoft said. Although the top line was strong, large increases in profitability are in part due to “continued rigor on cost management.”

According to the Microsoft press release, some 10% of the world’s PCs are now running Windows 7, driving total Windows revenue up 28% year over year. This makes Windows 7 the fastest selling operating system of all time.

While Windows 7 was important, Microsoft “also saw strong growth in other areas like Bing search, Xbox LIVE and [their] emerging cloud services.” In short, across the board Microsoft, like Apple and others, killed it.

What is the driving force behind this great quarter for technology? It seems to be rising general demand coupled to blockbuster products that continue to impress and woo customers who might still have tight wallets.

The financial markets are closed; Microsoft shares were up an inconsequential amount on the day before the earnings were released.

Original title and link for this post: Windows 7 Boosts Microsoft Profit In Most Recent Quarter

Charges of fraud brought against banking titan Goldman Sachs by the Securities and Exchange Commission rocked financial markets Friday, but experts say the allegations are merely the first of many to come, Reuters reported.

After the SEC went public with the allegations, the Dow Jones dropped 125 points and Goldman Sachs stocks dropped 13 percent — the largest one-day drop in company history.

"This is just the tip of the iceberg," said James Hackney, a professor at Northeastern University School of Law. "There are a lot of folks out there in different deals who played similar roles, and once it starts building steam, plaintiffs' lawyers will figure out this is where the money is and there should be a lot of action."

Reuters Global editor at large Chrystia Freeland said the significance of the charges is "huge."

Goldman Sachs' members like to think of themselves as "the smartest, the richest," but Freeland said they also like to think of themselves as the "most virtuous."

"Someone once said, 'I don't want to be just another rich guy in New York,'" she recalled. "They want o be part of civil service, part of government, doing good, giving back."

The charges against Goldman relate to a complex investment tied to the performance of pools of risky mortgages. In a complaint filed Friday, the Securities and Exchange Commission alleged that Goldman marketed the package to investors without disclosing a major conflict of interest: The pools were picked by another client, a prominent hedge fund that was betting the housing bubble would burst.

Goldman said the charges are "unfounded in law and fact," the Associated Press reported. In a written response to the charges, the bank said it had provided "extensive disclosure" to investors and that the largest investor had selected the portfolio - not the hedge fund client. Goldman said it lost $90 million on the deal, but the fact that Goldman lost money has no impact on the fraud charges.

Goldman Sachs was not the only bank to pursue the practices that brought on the SEC charges. It wasn't uncommon in 2006 and 2007. At the tail end of the real estate bubble, smart investors searched for bigger and better ways to profit from the approaching disaster of using derivatives.

The SEC's charges against Goldman Sachs are already stirring up investors who lost big, according to plaintiffs lawyer Jake Zamansky.

"I've been contacted by Goldman customers to bring lawsuits to recover their losses," Zamansky said.

For President Obama's push to reform Wall Street financial practices, the allegations couldn't have come at a better time. As the Los Angeles Times put it:

The accusations against the iconic Wall Street institution offer a chance to revitalize a simple political narrative that he has all but lost in recent months: that he and his party are protecting ordinary Americans victimized by the economic meltdown.

All 41 Senate Republicans declared their unanimous opposition to financial reform in a Friday letter to Majority Leader Harry Reid.

But Reuters editor Freeland said Republicans are going to have a much tougher time convincing Americans that immediate financial reform isn't necessary after the SEC's charges.

"I think now that there has been a lot of momentum behind the financial reform bill, and I think that that momentum is only going to increase," Freeland said. "The charges on Friday will give the Democrats who wanted a tougher bill a lot more energy."

The Associated Press contributed to this report.

You may have noticed that there's a movement afoot to persuade capitalists to behave better. Persuade is the operative word. The agitators I'm talking about aren't socialists. They tend not to put a huge amount of faith in regulation. They celebrate entrepreneurship and innovation. But they think something has gone wrong with the way businesses and financial markets behave, and that it has to somehow be put right for the world to prosper again.

Umair Haque and Roger Martin here at hbr.org serve as excellent proxies for the movement. But there are lots of other champions, including seemingly unlikely ones like Michael Jensen, the former hard-nosed champion of shareholder value who now travels the world preaching the indispensability of integrity in business.

As for me, I'm definitely a fellow traveler. But I do have occasional doubts, and they've been rising to the surface as I read another example of the genre, Matthew Bishop and Michael Green's The Road from Ruin: How to Revive Capitalism and Put America Back on Top (full disclosure: Matthew is a friend). The book offers a wonderfully clear and comprehensive account of the economic and financial history of the past half century, and the forces that led to near-disaster in the next decade. But when it comes to the prescriptions, while I don't disagree with them, I do wonder: is that really going to do the trick?

Consider the list of "10 ways you can fix the economy and build popular capitalism" that Green recently listed on HuffingtonPost: Move your money into a community bank! Put your money in a socially responsible mutual fund! Sign a management oath! Agitate to get TV networks to include campaign-finance disclosures when politicians appear air! Avoid "companies that are all about short-term greed"!

Okay, sign me up for all of that. (In fact, I'm in the midst of applying for a mortgage from Wainwright Bank here in Boston after deciding I didn't want to go through a mortgage broker who would likely hook me up with some disembodied servicer thousands of miles away.) Still, it's a bit underwhelming. Can a bit of bottom-up activism here and a touch there really bring a big shift in business behavior?

Yes, you can make the case that good business practices lead to better long-run results than scuzzy ones (although in the long run we're all dead, or at least laid off). Also, in the April issue of HBR, Chris Meyer and Julia Kirby argue compellingly that, for a variety of reasons, it has become harder for businesses to get away with bad behavior. And as Craig Newmark described the other day, it's getting harder for individuals to escape bad reputations too.

But I don't think anyone has come up with an argument for or description of better business behavior that has anything like the elegance and power of the economists' "incentives matter." As long as it remains possible to get rich via less-than-upstanding behavior, and enjoy those riches, a lot of people in business will choose that path. That's an argument for laws, and regulation. Of course, lawmakers and regulators have their own perverse incentives, which is why so many of us are dubious of more laws or regulation. Plus, having too many rules to follow can make us focus more on the rules than right vs. wrong. Clearly, I'm stuck here. Can somebody help me out?

Just when you thought things couldn’t get much worse for journalists, they might be replaced by automated software bots in the future.

Two US projects covered by the Guardian today point to a future where news stories are written by algorithms.

StatSheet and Stats Monkey both plan to automate sports reporting by taking stats from games along with historical data about teams and players to create a news story that reads like it was written by a journalist.

StatSheet’s solution should be in service from this summer, even though the technology is still in the early stages of development. Just take a look at this text from Stats Monkey below ; it almost feels natural, but not quite:

“SOUTH BEND, Ind. — Tony Bucciferro put the Michigan State Spartans on his back Sunday and spurred them to a 3-0 win over the Notre Dame Fighting Irish (7-11) at Frank Eck Stadium.

Bucciferro kept the Fighting Irish off the board during his nine innings of work for Michigan State (12-4). He struck out five and allowed one walk and three hits.

Senior Matt Grosso was not able to take advantage of a big opportunity for the Irish in the ninth inning.”

While the technique is currently being used for sports reporting, it’s easy to imagine it being expanded in future to cover the financial markets and even more complex subjects like world politics. We’re still a long way off that but in the longterm, many news reporters could be out of a job.

Of course if journalists face the chop then so might professional bloggers. Or maybe we are already robots? No, surely not… Malfunction! Malfunction! Bzzzt…….

[Image credit: Arthur40A]

Original title and link for this post: Journalists Starting To Be Replaced By Robots

It's rare when you will see a post in this blog about Saas and its place in the financial markets. But a report by former ReadWriteWeb-er Bernard Lunn shines an interesting perspective on the SaaS market.

The report is noteworthy as it comes on the heels of the annual earnings report from Salesforce.com, the first SaaS provider to hit $1 billion in annual revenues. We feel the SaaS market may be the most pivotal sector of the cloud computing world and we expect several other companies in the SaaS market to also reach the $1 billion mark.

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We think it's important to look at the market from an investor perspective to get a view of the overall enterprise sector, which is now deeply affected by the onslaught of cloud computing.

SaaS providers should be smiling about this kind of report as it demonstrates that they have a place in the IPO market. Jive Software is believed to be moving toward an IPO.They are just one example of many companies we expect to see move in this direction.

The report looks at the following:

• Early stage companies, in particular those with venture capital funding
• Mature ventures with the financial strength to be IPO candidates
• Publicly traded companies

For our purposes, we find the Salesforce.com analysis of most interest. The report gives reasons why Salesforce.com is either over or undervalued.

Here's an excerpt from the report about why Salesforce.com may be overvalued:

"Marc Benioff is selling shares. This was announced in the previous quarterly report on November 25th 2009. The % of his shares that he "may" be selling is significant. He has basically announced that he "may" sell 2,750,00 shares out of a total of 13,371,006 shares he owns. That is 21%. Whether investors are concerned about this remains to be seen. Insider selling is often a trigger for smart outsiders to sell. Currently he is selling shares at a rate of 10,000 per day. Maybe he wants to give serious money to charity and who can fault him (or Bill Gates) for doing that? Concern factor: low."

And undervalued:

"Internet market leaders are never cheap stocks. Waiting for these leaders to become bargains has seldom worked. The only times they are bargains are when other stocks are super- bargains."

The market is still young even though SaaS is mainstream. A report like this one helps provide additional perspectives on the state of the market.