stock price

Holy, Netflix!

Source: http://www.businessinsider.com/holy-netflix-2013-9

Reed Hastings

Netflix’s stock just hit an all-time high of $313 a share.

This wouldn’t be so remarkable except for what happened two years ago.

Two years ago, after a remarkable multi-year run on the strength of a new video streaming business, Netflix stock blew through $300 a share for the first time.

Netflix, everyone was convinced, had discovered the Next Big Thing.

Netflix was on its way to becoming The Next HBO.

Netflix was going to disrupt and revolutionize the television business and make anyone who bet on it fabulously rich.

But then Netflix made a significant mistake.

Netflix announced that it was going to split itself into two different companies. One company would contain Netflix’s original DVDs-by-mail business. The other company would be the streaming business. Netflix was going to split into two companies, it explained, because the DVDs-by-mail business was a dying business, and the future was the streaming business.

Well, the market hated that idea.

Despite the fact that absolutely nothing at Netflix’s businesses had changed, the market destroyed Netflix’s stock price. The stock crashed by 75% in three months, to $65 a share. The company, some people said, was obviously going out of business.

Why did Netflix make this mistake?

Because Netflix is run by humans.

Extraordinarily talented, brilliant humans, but humans. And humans occasionally make mistakes.

But did the market conclude that the extraordinarily talented, brilliant humans who ran Netflix had just made a relatively rare mistake?

Nope.

The market concluded that the humans who ran Netflix were so unfathomably stupid that Netflix was obviously screwed.

That Netflix founder and CEO who had been lionized as a genius on the cover of all those magazines, for example?

!

Obvio usly an idiot.

Netflix was a terrible company, the market agreed. No price was too low for the company’s stock.

But now, a mere two years later, Netflix is up 400% from the low and setting a new all-time high.

How?

Did Netflix pull off some magic recovery?

Did Netflix introduce some revolutionary new product that no one saw coming?

Nope.

Netflix just did its thing–the same thing it was doing when the market threw up in disgust and pulverized Netflix’s stock price.

Netflix just kept investing in its streaming business.

And, just as many long-term Netflix investors had hoped, the streaming business has turned out to be a pretty good thing.

So, what’s the moral of the Netflix story?

The same moral as the story of Amazon, Facebook, Google, and many other excellent companies:

Ignore Wall Street.

Wall Street is so hyperactive and bi-polar, and so obsessed with meaningless short-term results, that Wall Street causes countless pretty good managers and companies to worry about all the wrong things.

Want to create the most possible value for shareholders?

Then start by creating the most possible value for your customers.

Put your customers first, and, over the long haul, your stock price will take care of itself.

Well done, Netflix!

 



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Tuesday, September 10th, 2013 news No Comments

This Chart Is Why A Lot Of People Think HP Is Totally Screwed (HPQ)

Source: http://www.businessinsider.com/hps-rd-spending-2012-11

This week, we ran a chart showing HP’s crashing stock price since Mark Hurd was forced out of the company.

After we published the chart, a friend emailed to say, “Hurd destroyed the company. Gutted R&D, which was the cardinal sin. It was always an engineer’s company. He financialized it. And in so doing, set in motion the wheels of doom.”

From 2010, here’s a look at how R&D as a percentage of revenue fell under Hurd’s watch.

chart of the day, hp r&d expenses, 2005-2010

But, is the R&D budget really why HP is hosed? Probably not. Look at this chart, also from 2010:

chart of the day, r&d for tech companies, 2009

Anything jump out in that chart?

Apple spent less on R&D than HP, Google, and Microsoft in 2009. No one is going to accuse Apple of not producing great innovative products, despite a small R&D budget.

When Hurd was pushed out, an ex-HP engineer told Joe Nocera slashes in the R&D department was, “why H.P. had no response to the iPad! . ” Apple managed to make the iPad while spending less on R&D, so we’re not sure that totally adds up.

It’s not how much you spend on R&D, it’s what comes of it.

As for the charge that Hurd “financialized” HP, well, that may be true. But, he seemed to be at least somewhat in control of where the company was going. The two CEOs since Hurd have no clue, it seems, about what to do with HP.

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Sunday, November 25th, 2012 news No Comments

Facebook Is Going To Build Its Own Search Engine! (FB, GOOG)

Source: http://www.businessinsider.com/facebook-search-engine-2012-9

Facebook sponsored results search

Mark Zuckerberg was refreshingly candid speaking today at TechCrunch Disrupt.

One part of his talk that’s going to draw a lot of scrutiny was when he was talking about the company’s search efforts.

Zuckerberg said that Facebook has one billion queries on a daily basis and it’s basically doing that without trying.

He then hinted that Facebook is going to start trying.

He said that search is increasingly headed towards answering people’s questions. Facebook, which has a trove of data on users, is “uniquely positioned” to deliver answers for users.

Facebook has a team of engineers working on improving the search engine.

He said, “At some point, we’ll do it.”

Google’s highly lucrative business is built on search. If Facebook could capture even a fraction of the revenue Google captures it would be a huge boon for the company’s top and bottom lines.

Don’t Miss: DEAR FACEBOOK: Jump Into Search And Triple Your Stock Price

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Tuesday, September 11th, 2012 news No Comments

Dr. Augustine Fou is Digital Consigliere to marketing executives, advising them on digital strategy and Unified Marketing(tm). Dr Fou has over 17 years of in-the-trenches, hands-on experience, which enables him to provide objective, in-depth assessments of their current marketing programs and recommendations for improving business impact and ROI using digital insights.

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