The Stalwart

Psst... The Indians Are Coming

While we are accustomed to fears of the Chinese or Japanese "owning America", it seems that now there's another Asian player on the global acquistion stage.

China raised a storm of controversy in the U.S. earlier this year when its cash-rich corporations announced their intention to acquire several American companies, including oil producer Unocal Corp. and appliance maker Maytag Corp. (MYG ). But while China was bidding for -- and losing -- overseas acquisitions, another big Asian country, India, was also investing abroad, but with a minimum of rancor.

The article highlights tech, autoparts, and peculiarly pharmaceuticuals as three industries keen to expand abroad.

Ten years ago, India's overseas gold rush would have been impossible. The government in New Delhi imposed severe restrictions on the export of the country's foreign exchange -- in part because there wasn't much of it. Today, India's booming tech, auto, and pharma businesses have attracted a flood of foreign investment. The country holds reserves in excess of $140 billion, and curbs on foreign investment by Indian companies are largely gone.

Generic pharmaceuticals in particular seem to have a simple strategy- buy underperforming generic drug companies abroad, and then just use them as international sales channels. India's domestic generic drug market can act as a steady revenue base to get these companies through the initial ups and downs of international sales.

The Ebay of the Steel Industry

The website www.steelsalvor.com has dubbed itself "The Ebay of the Steel Industry", and it does seem justified. The company allows buyers and sellers to conduct auctions on spare steel which may be lying around in warehouses all over North America. How does spare steel arise? From a recent article, here's an example:

On a specific lot of steel, here’s how it worked in one recent case. A cargo of cold-rolled coil came into the U.S. at a prime price of $34 per hundred weight. The original trading company was not willing to accept the metal in its condition because he felt it was not prime, but he was considering what is known as a retention offer at $18 per hundred weight. On behalf of the insurance company and the trading company, SteelSalvor posted the material on the web site, conducted an auction and got 172 bids, and sold the same steel – in its damaged condition – for about $33.50, reducing a $250,000 claim in favor of an $8,700 claim. This was a win-win for everybody involved, and the trading company avoided a boost in insurance premiums to boot. It’s a good example on the marine insurance side.

The rational...

About four years ago, a couple of entrepreneurial executives recognized the potential for broadening the market for secondary steel distribution via the internet. “We knew a lot of steel, including salvage, order overruns, market rejections, damaged or otherwise rejected material was moving through the distribution chain. We also knew it was moving maybe with exposure to typically a half-dozen or so companies per transaction. We developed a carefully prepared database which would open these markets to thousands more buyers and sellers,” Shapiro added, “and while I wouldn’t say we are an internet company, we are a marketing company that uses the internet.”

Great idea. There must be tons of similar auction opportunities for other materials, no pun intended. This is such a great idea that we at the Stalwart will donate some free advertising for this HOT! HOT! HOT! 69 tons of Auto Quality Galvanneal Coils:

Guidant in Trouble Again.

With Guidant (NYSE: GDT) being probed for potential criminal activity, it's good to get some perspective. Medgadget is a good source for the litanny of complaints against the company.

One also has to wonder if the proposed merger with Johnson & Johnson (NYSE: JNJ) could be in jeopardy.

That being said, in the medical device space, particularly stents and pacemakers, recalls and production flaws are clearly par for the course.  Certain industries, it seems, are just prone to controvery and investigations, like the private education market.

The Real Story About Energy

Forbes.com cuts through all the obfuscations, nonsense, apologies and excuses about energy prices, finally just coming out with the truth: Energy Costs Drain Joe Six-Pack.  However we felt that even this was lacking because it doesn't say much new, and starting with the title, it's awfully cliche ridden:

Nostrud enim suscipit ea velit nulla molestie dolor autem ut consequat exerci blandit esse luptatum, tincidunt. Facilisis et, aliquip duis vel erat dolore minim wisi dolore dolore, lobortis delenit ullamcorper duis magna. Luptatum odio dolore ipsum nisl enim dolore exerci veniam facilisis facilisis delenit illum, ut nulla ut, in. Dolore nulla amet ea quis volutpat qui iusto eros duis dolore feugiat augue duis, vero velit suscipit, at sed feugait odio ad zzril blandit, eum. Delenit, feugiat vero, feugait, iriure et, nonummy aliquip accumsan velit, ipsum praesent accumsan dolore delenit in amet at enim dolor in qui.

Commodo euismod minim adipiscing esse dolor autem, tation consequat duis lorem, ut quis zzril te laoreet duis, iriure eu commodo et dolore vel vel. Volutpat, lorem, vel augue in nisl commodo feugait ex iusto feugait facilisis ad at ut sit. Enim lobortis illum quis nulla et, praesent ullamcorper dignissim aliquam.

Confused?  Welcome to the energy industry.  Forbes is just doing the best they can.

Newspapers' Websites

Everyone knows that newspapers have websites but will anyone read them, and will they profit from them, or will people simply read Drudge, blogs, and Google News?  My gut would say 'yes', and that for local content (news, classified ads, help-wanteds, movie listings, obituaries, dating sites) they'll be popular destinations for readers.  The more sophisticated set might get all this information from a variety of sources all delivered to their RSS aggregator, but most people won't be for quite some time.  A new study suggests that these newspaper websites are doing ok:

Are local readers turning to the web sites of their top local papers when they go online for news? A new report from Nielsen//NetRatings indicates that they are.

The study found that readers in almost every city in the top 10 local markets have been loyal to their top hometown paper. Local newspapers claimed an average of 19% of the local Internet readership, and held the top spot among the city's online readers for online newspaper sites. The exception was Philadelphia, in which online readers favored USA Today over the Philadelphia Inquirer. USAToday.com had a local market reach of 9.6%, compared with 9.2% for Philly.com, a Knight Ridder site featuring content from the Philadelphia Inquirer and the Philadelphia Daily News.

Ok, but this doesn't really tell us a whole lot because they don't talk about who else has marketshare in this localities.  Are the rest of the people reading GoogleNews?  Are they reading other newspapers?  Or are they not reading their news online?  The wording is that "Local newspapers claimed an average of 19% of the local Internet readership" but I want to know what percent of news-related readership they're getting.  Overall, this study leaves more questions than answers. 

You can download it here.

Explaining the Trade Deficit #3984739

While businesses and workers in China keep working obsessively to sell things cheaper and for better quality, U.S. companies have a slightly different focus.  Here's some nuggets of business advice from WOMMA (The Word of Mouth Marketing Association).  Warning, Jack Welch this isn't.  From The Basement:

"Put your brand second. Story first. Brand second."
"In summary, chocolate covered crickets are good..."
"URUE – You are the User Experience."
"Apple is not a computer company, they're a fashion company."  (Ed note:  Really?  I don't think anyone's ever had that insight before)

Oh yeah...would you be shocked if I told you Seth Godin was there?   Speaking of whom, in a recent entry he did us the favor of defining "Web 2.0"

Web 2, in my opinion is the junction of:
1. large scale audiences with high bandwidth
2. no need to explain what you're doing
3. lots of tools you can use to build your app so you don't need a big team
4. user generated content
5. platform orientation

Thanks Seth, thanks for clearing it up.  Now that business has your wisdom, quality products can't be far behind, and then profits are bound to follow.

Finding the Money in Healthcare

It's not a political argument, the U.S. healthcare system is a mess.  Costs are spiraling, more and more are uninsured, and the burden on the federal government over the coming years will be enormous.  It appears to be all gloom and all bad.  Of course, all these problems mean that there's some mad money to be made by any companies that can help sort out this mess.  I'd like to think that is the thinking behind the wild opening day pop in shares of WebMD (NASD: WBMD) whose shares shot up nearly 40% on it's first day of trading.  This is despite the fact that the company is a money losing operation, and has no prospects of turning a profit.  Even the Motley Fool got this one right with their article WebMD Makes Me Sick.  On second thought, if the Motley Fool hates it, perhaps it's worth taking a look.  (In reality the IPO's jump is probably just a return to the days when IPOs just jumped a lot, and companies left a lot of money on the table...oh and investment bankers and their friends took all that money that was left on the table).

The other big healthcare news of the day was that General Electric (NYSE: GE) bought out healthcare IT concern IDX Corp. (NASD: IDXC) sending that company's shares up over 20%.  You'll recall we spotlighted healthcare IT a few months ago suggesting it may be an intriguing space.  At the time we made note of IMS health (NYSE: RX), which then became a buyout subject itself, as it waits to get swallowed by VNU.  Here's what HIStalk (a fine blog on Healthcare IT) has to say about the IDX buyout:

The conference call just ended. IDX says that "some months ago" it realized it couldn't scale to meet the available opportunities and looked extensively for a partner. IDX states that the product lines of the two companies fit "hand in glove." They think the UK relationship will be enhanced because GE Healthcare is headquartered in the UK. They will live up to the Allscripts agreement, which is a ten-year strategic alliance in which IDX markets the Allscripts product and Allscripts markets the IDX practice management product. GE will not be able to sell their product in an IDX account for which IDX was obligated to bring in Allscripts, so that's still an exclusive deal.

Synergies seen: (1) revenue cycle for physician offices; (2) GE lacks a core CDR; (3) workflow in radiology that links to GE PACS. They admit some conflict with their ten-year agreement with Philips-Stentor and GE PACS. The CDR (CareCast) application was barely mentioned.

At this point, The Stalwart isn't terribly optimistic that any of these moves will have much of a meaningful impact on the industry or costs.  Despite the tremendous amount of R&D in the space, it's probably stuff like MinuteClinic which we discussed that could have the biggest impact on the industry, since much of the cost is due to regulation and poor institutional structures.  Still, there's gotta be some huge profits somewhere that someone's not taking, it's just doubtful that WebMD, which was once thought to be a healthcare revolutionary, is gonna be it.

Strike in India

We typically like to spotlight articles demonstrating strife and difficulties and terrorism in China as part of our message that India is relatively unheralded in comparison. But, to be fair, and useful to our readers we thought that stuff like a national strike crippling the nations major industries on the sub-continent was probably a worthwhile story to pass along:

The nationwide strike called by over 50 million workers from banks, insurance sector, PSUs, post, etc, and nearly 20,000 airports employees that began on Thursday has disrupted banking and air services and affecting normal life across the country.

The 12-hour strike called by Airports Authority Employees Joint Forum started at 0700 hours and will end at 1900 hours. Late Wednesday night, the forum had scaled down the 24-hour strike to 12 hours.

Several international and domestic flights took off from Delhi before the strike began. However, during the first 40 minutes of the strike, only two flights took off, including one of Air-India.

Read the whole thing, it reads like something from a summer-blockbuster natural disaster movie...BANKS SHUT DOWN IN TAMIL NADU...NO AIRPLANES IN BENGAL REGION...MOST FACTORIES IN GARGAON SHUT DOWN. 

Yes, investing in emerging markets has unique pitfalls.

ClicheWatch

Wired News: Podcasting Gold Rush Is On

Let me guess...something about how the people who make the money are the ones who sell the picks and pans.

On the Vonage IPO

The blog alarm:clock asks:

Lightreading gets some of the bankers to acknowledge that they think M&A is a better route than IPO. They think they could get a $1.5B sale. Why so much less than Skype at $2.6B plus much more in incentives?

Perhaps because Skype already makes the Vonage model obsolete.  Question, answered.

Here's a previous post about some customer retention problems facing Vonage.