Microsoft buys LinkedIn. 26 Billion. Cash.

Short Blog, Big news today.


Microsoft is buying LinkedIn.

26 Billion usd. All cash. 

It's a huge deal and brings Microsoft into Social as well as their core software business. LinkedIn shares are soaring today.

Extraordinary. 

Nokia. It's gone. A victim to innovation.

Most of us probably grew up with Nokia.

The Finnish cutting-edge mobile phone manufacturer that was first to market. And that eventually dominated the market globally.

I remember staying at an upscale Helsinki Hotel with a person from Nokia and they paid the bill with their business card. In other words, the Hotel would simply invoice Nokia, no questions asked.

It was a tech giant.
Like Microsoft or Apple.

It was the brand of reliability.

And it's no more.
Bought by Microsoft who announced last week, they'd be dropping the 'Nokia' brand on devices.

And what happened?
Well we all have Samsung or Iphone devices now.

So the reason for that was that Samsung and Apple built better phones and Nokia customers switched - so there was no real brand loyalty to Nokia. It was just a phone (compared to say Apple, who's customers are product devotees).

But the real reason was innovation.
Or lack of it.

You can even be the 80% market dominant player and in a few short years be gone. They simply didn't innovate as quickly as they could and sat a bit on their laurels.

Stand still and you're dead.
Remember Nokia.

Apple launch Ipad Air. Much ado about nothing?

So much ado about nothing. Or is it?

Apple's long awaited, over excited, highly pumped PR launch of the new Ipad (the first launch was in 2010), the 'Ipad Air', just didn't seem worth the 'long-awaited' wait.

Okay it's much lighter and slimmer, about 20% less, which MD Tim Cook said took "years" to develop and heralded it as a big "leap forward", a new generation but then there was little else to say. 

It replaces the IPad 4.

It comes with a better HD camera for 'Facetime' and dual microphones but regrettably, the same battery life. Don't know about you but speed has not been an issue with my IPad, nor camera, nor microphones - but battery life has. As the Ipad moves into movies, extended battery life will be key and that hasn't been fixed.

Innovation has to solve a problem, rather than just for the sake of it.

The Ipad Air is much, much faster too (A7 chip) and it comes with free Mac software, although costing £739 stg for the 128 gig, Wifi enabled version, it's not cheap. The entry level 16 gig version, will be about £399 stg when it's available on November 1st. But 16 gigs, is really of little use in my view.

It's an increasingly competitive market too with Samsung and Nokia "phablets", although Apple's is guessed to have a 32% market share having sold 170 million Ipads. 

Nokia of course, have just been bought by Microsoft for over 5 billion usd and launched their new Windows 8 tablet this week too. Microsoft's own 'Surface2' went on sale yesterday but nobody seemed to care. They were watching Apple.

So it's a hot space to be in.

One of the great criticisms after Steve Jobs (I know, yawn) is that Tim Cook's leadership hasn't brought real innovation to Apple since.

If this is a sign of it, I'm inclined to agree.

A lighter, faster, more expensive, Ipad might be good and useful but it's hardly, earth shattering. 

And earth shattering was how Apple used to be.

Microsoft CEO Steve Ballmer says goodbye emotionally and with his favourite song. And it's not, "On the good ship, Lollipop".

'Crazy' Steve Ballmer, the food of many a blog and mine included, departs Microsoft as CEO. He says goodbye to 13,000 Microsoft employees in Seattle after 13 years at the helm but 33 years at the business.

'Crazy' because of his style of presentation and if you search him on this blog, you'll get the drift. This goodbye one, is actually tame in comparison.

Fairly emotionally he says it too and it's hard not to feel for the man. Despite it all, it's a tear jerker until that is, he ends with a song. A song of his choosing that says it all up for him. His favourite song.

Jennifer Warnes "Time of my life" from 'Dirty Dancing'. Jesus. But that kind of sums him up.

Wonder what Movie song will Bill Gates choose when he goes? Answers on a postcard but I'm guessing..... "Working 9 to 5".

Delta Airlines 11,000 pilots to get Microsoft Surface tablets instead of flight bags. Ad Campaign crying out to be done....

Delta Airlines have announced that they're to replace Pilot's flight bags with Surface 2 Tablets. That's 11,000 of an order for Microsoft Surface where Pilots will now board without the iconic, but 35 pound heavy, flight kit.

The saving in weight is one good reason as well as reducing paper (and therefore, CO2) but flying lighter saves fuel, saves money. Also, one would think that it's more efficient and that the tablet will have better, up-to-the-minute graphics and information such as weather detail.

The Microsoft Surface has had a poor first year - 900m usd in write downs and a price slash to attract customers and only about 1.5 million Surface tablets sold. How many Ipads sold in the same period you ask? About 60 million.

So there was some surprise at Delta's decision to opt for the Microsoft Surface. However, it does bring Microsoft a gift in marketing terms, if they're smart to it. A whole Ad campaign about what tablet do pilots trust? After all, your life might depend on it....that sort of thing. 

The Tablet that's trusted because it's reliable; it works under all conditions; it's accurate; it's light - all the stuff that a pilot might need it for.

An Ad campaign crying out to be done.
Hello? Anybody?

Blackberry sells today. 4.7 Billion Dollars. OMG.

So Wow, they were able to sell Blackberry..for a 9 dollar a share price bringing in 4.7 billion us dollars. Extraordinary.

The buyer is Fairfax financial, a Canadian Insurance fund (Blackberry is Canadian too) who were also Blackberry's largest shareholder. Blackberry was, Canada's greatest star.

It has come after a weekend of speculation, notably by the excellent UK 'Telegraph', when Blackberry announced losses of almost 1 billion usd in Q2 and planned to slash 4,500 jobs with shares slumping by -24% on Friday last. 

Shares were trading at circa 8 dollars and I remember them at 138 dollars. 

It had officially put itself up for sale last month having hired PWC to help. 

Amazon and Microsoft had considered buying it previously but Microsoft's Nokia deal put paid to that. The BBM (Blackberry messaging service) is the golden egg with 60 million users although the once dominant company has really struggled against Apple, HTC and Samsung since 2007. 

Blackberry once controlled half of the US market (!), now that's under 3%.

The BBM service had one great advantage - as London rioters and drug dealers knew - it was hard to intercept. Hence it became popular with drug sellers and became known as 'Crackberry'.

It only shipped 2.7m of its latest Z10 phones out of a planned 6.8m although it sold 5.9m smartphones in Q2, well below expectations. Apple, for example, sold 37m and the Iphone 5S sold out online.... in 5 minutes.

Blackberry had slashed phone prices so effectively, they couldn't give them away. Its losses reflected a big write-down on this stock of unsold phones.

The story of the downfall of Blackberry (if you call a sale of billions a downfall) is that they stuck with a corporate market and a keyboard, largely ignoring connectivity to the internet as having value. When they realised their mistake, it was too little, too late.

Keyboards had their day, internet connectivity was king and the corporate market became a personal market. Executives choose their own phone for business and personal use, rather than a company bought phone.

It's a sad story in one way but ultimately a good story in that they've done well to attain a good price now. Or lucky to have a shareholder like Fairfax, prepared to protect their investment and obviously being cash-rich enough to do so.

Still. A once dominant brand like Nokia, bit the dust. Or has it?

Microsoft pays 7 Billion for Nokia. It feels like 1997.

In one of his last great acts, 'Crazy' Steve Ballmer, the Microsoft CEO has agreed to buy Nokia, for about 4.6 billion stg/7 billion us dollars. 

Nokia, the one time Finnish world leader in mobile phones, has worked with Microsoft since 2011 on the Lumia phone. More importantly perhaps, former Microsoft executive, Stephen Elop and current Nokia CEO, was tipped to replace Ballmer.

So is this case of getting a new Microsoft CEO with the company? Buy one, get one free?

It's yet another Microsoft deal that seems on the surface, "bizarre". They all do at first and then when you reflect....well, they all still do.

Firstly Microsoft already has working relationships with other hardware manufacturers, notably Samsung, who'll see this as competitive. A huge conflict of interest anyway.

Secondly a price tag of nearly 7 billion usd seems high for a company that had its stock recently at 'junk status' and frankly, that has little brand status remaining in the smartphone market. All to be paid in cash.

Thirdly, 32,000 employees come with it. That's a big, huge ongoing cost and basically increases the Microsoft workforce by a third.

As one blogger put it, "This would be the deal of the year....if it was 1997" Another suggesting they should buy AOL and Betamax next. In other words, it's all a bit late and a surprising concept for Microsoft to tackle Apple/Samsung mobile dominance, now. That game, one would have thought, is well and truly over.

And you know what? Microsoft just do things and leave them there. Perhaps like the Skype acquisition, there just isn't, a plan.

Here's Ballmer note to staff about the Nokia buy;

From: Steve Ballmer
To: MS FTEs
Date: Sep. 2, 8:00 PM PDT (Sep. 3, 6:00 AM EET)
Subject: Accelerating Growth

We announced some exciting news today: We have entered into an agreement to purchase Nokia’s Devices & Services business, which includes their smartphone and mobile phone businesses, their award-winning design team, manufacturing and assembly facilities around the world, and teams devoted to operations, sales, marketing and support.

For Microsoft, this is a bold step into the future and the next big phase of the transformation we announced on July 11.

We are very excited about the proposal to bring the best mobile device efforts of Microsoft and Nokia together. Our Windows Phone partnership over the past two and half years has yielded incredible work - the stunning Lumia 1020 is a great example. Our partnership has also yielded incredible growth. In fact, Nokia Windows Phones are the fastest-growing phones in the smartphone market.

Now is the time to build on this momentum and accelerate our share and profits in phones. Clearly, greater success with phones will strengthen the overall opportunity for us and our partners to deliver on our strategy to create a family of devices and services for individuals and businesses that empower people around the globe at home, at work and on the go, for the activities they value most. 

We have laid out Microsoft’s strategic rationale for this transaction in a presentation that I encourage you to read.

This is a smart acquisition for Microsoft, and a good deal for both companies. We are receiving incredible talent, technology and IP. We’ve all seen the amazing work that Nokia and Microsoft have done together. 

Given our long partnership with Nokia and the many key Nokia leaders that are joining Microsoft, we expect a smooth transition and great execution. 

As is always the case with an acquisition, the first priority is to keep driving through close, which we expect in the first quarter of 2014, following approval by Nokia’s shareholders, regulatory approvals, and other closing conditions. 

But I also know people will have some questions about what happens post-close. While details aren’t final, here is what we know, and how we’re generally approaching integration:

1. Stephen Elop will be coming back to Microsoft, and he will lead an expanded Devices team, which includes all of our current Devices and Studios work and most of the teams coming over from Nokia, reporting to me.
2. Julie Larson-Green will continue to run the Devices and Studios team, and will be focused on the big launches this fall including Xbox One and our Surface enhancements. Julie will be joining Stephen’s team once the acquisition closes, and will work with him to shape the new organization.
3. As part of the acquisition, a number of key engineering leaders will be joining Microsoft from Nokia, reporting to Stephen in his new capacity:
	· Jo Harlow, who will continue to lead the Smart Devices team
	· Timo Toikkanen, who will continue to lead the Mobile Phones team
	· Stefan Pannenbecker, who will lead Design
	· Juha Putkiranta, who will lead the integration effort on Nokia’s behalf
4. Regarding the sales team, we plan to keep the Nokia field team, led by Chris Weber, intact and as the nexus of the devices sales effort, so that we can continue to build sales momentum. After the deal closes, Chris and his team will be placed under Kevin Turner. We will develop a single integrated team that is selling to operators, and there may be other integration opportunities that we can pursue. Kevin will work with Chris Weber and Chris Capossela to make those plans.
5. Our operating system team under Terry Myerson will continue unchanged, with a mission of supporting both first-party and third-party hardware innovation. We are committed to working with partners, helping them build great products and great businesses on our platform, and we believe this deal will increase our partner value proposition over time. The established rhythms and ways of working between Terry and his team and the incoming Nokia team will serve us well to ensure that we do not disrupt our building momentum.
6. We are planning to integrate all global marketing under Tami Reller and Mark Penn. It is very important that we pursue a unified brand and advertising strategy as soon as possible.
7. Finance, Legal, HR, Communications, DX / Evangelism, Customer Care and Business Development will integrate functionally at Microsoft. Sourcing, customer logistics and supply chain will be part of Stephen’s Devices organization. ICM / IT will also integrate functionally for traditional IT roles. We will need to work through the implications for factory systems given the differing manufacturing processes and systems at both Nokia and Microsoft.
8. We plan to pursue a single set of supporting services for our devices, and we will figure out how to combine the great Nokia efforts into our Microsoft services as we go through the integration process.
9. There are no significant plans to shift where work is done in the world as we integrate, so we expect the Nokia teams to stay largely in place, geographically.
10. Tom Gibbons will lead the integration work for Microsoft.

While today’s announcement is big news, we have to stay heavily focused on running the current business. We have a huge fall and holiday season ahead of us, so we need to execute flawlessly and continue to drive our business forward. I have no doubt we will.

Steve

Microsoft's 'Crazy Steve' to retire. Here's the video that explains why he's called crazy.

Want to know why he's called Crazy Steve Ballmer? Have a look at the video above. If it's not playing, you'll find it here http://www.youtube.com/watch?v=wvsboPUjrGc

So there you have it, the CEO who gave me more blog space than any other, is about to retire at 57 and "within 12 months" or, "when a successor is found". Whichever is quicker. 

Microsoft's "transition" (according to them) to "a device and service company", meant if he didn't go now, they wouldn't have a CEO longer term to oversee this "new direction" (their words).

"Crazy" Steve Ballmer.

I wrote about the awful practices at Microsoft on his watch exposed by Vanity Fair here http://streamabout.blogspot.ie/2012/07/vanity-fairs-expose-of-microsoft-and.html and again here http://streamabout.blogspot.ie/2012/07/vanity-fair-august-article-to-add-to.html

The poor performances and launches here http://streamabout.blogspot.ie/2012/07/microsoft-launches-office-2013-and.html

And at the time that he slammed the Iphone never mind, as you'll see in my blog, his dismissing of the Android. If it's not playing it's here http://www.youtube.com/watch?v=eywi0h_Y5_U

Still, as you'll see from the top video on this blog, he'll be missed in his own way. Seemingly though, perhaps not by the markets.

Following the announcement today, shares have jumped. 
Up 9%.

Samsung has it problems. It has sold too many mobile phones.

You would think that of all the smartphone makers, Samsung is the one with the least problems on its mind. And it's not.

Since March, about 20 billion usd has been wiped off its value and recent warnings that profits will be lower than expected are causing market issues. That warning is, I kid you not, 8.3 billion usd profit in the second quarter and up a staggering +47% on last year. But it's not enough. Shares have declined circa -18% in the last month.

It has a 33% market dominant mobile phone share and smartphones account for about 74% of profit.

The main issue here is market saturation. Mobile phone sales are slowing - well, doesn't everyone have one - and more and more they need bigger advertising/marketing pushes which cost more and more money. So the investor confidence and outlook in the mobile phone sector is declining. Blackberry's problems typify this and HTC profits declined over -80% year on year.

Samsung are now reliant on mobile phones with their household entertainment products under more threat through reductions in consumer spending (recession) and major price competition.

Samsung have been and continue to be a hugely successful, massively profitable company. Their new Galaxy phone recently sold 10m units within a month of launch and yet, their faced with a serious decline.

Purely and simply because they're now in a market which has reached saturation and they can't show that they're able to move it along. Very reminiscent of Microsoft - a great company once that dominated the wrong space.

Interesting. Inspiration and Innovation required. Remember Nokia.

Obama 'Prism' Spying now extends to UK Government.

It would seem that the US Government citizen spying programme called 'Prism', has been used by the British Government as a 'back door' to getting intelligence bypassing British law.

William Hague, the UK Foreign Secretary and former leader of The Conservative Party, will today make a Statement to The House of Commons. A forthright man (we've interviewed him in Streamabout) and generally decent, fair-minded man, gave a dodgy performance on The Andrew Marr show yesterday. Uncharacteristically dodgy, in so far that he was unusually trying to dodge questions, which is not his style.

Indeed, he could easily have asked Theresa May to deal with The House of Commons today but has chosen not to - probably in order to kill the controversy at birth - which he won't be able to.

GCHQ, the UK's listening post has been gathering information through co-operation with The US National Security Agency since 2010 and The Guardian says they've generated at least 197 reports from Prism last year alone. They're circumventing UK legislation. Their work, in their own words, should be carried out "in accordance with a strict legal and policy framework" and it looks like it's not. 

Meanwhile Obama, in accepting that Prism exists and goes on, said that his Government "had struck the right balance" in collecting this data in the fight against terrorism. There's nobody doubting that terrorism data needs to be collected however, under a Court order in order to protect the rights of citizens. 

It's ironic too given Obama's criticisms of the Bush administration doing something similar (although to a far lesser extent) and on the same day when he is meeting China's President to discuss their spying and their anti-democratic controls. 

Ironic too that Obama has called his administration, "the most transparent administration in history". 3 months ago, Senator Ron Wyden a member of The Senate Intelligence Committee no less, asked James Clapper, Director of National Intelligence, "Does the NSA collect any type of data at all on millions of Americans?". "No sir" came Clappers reply which we now know to be a lie. 

Last night the same James Clapper said the Prism programme was "important and valuable". So if your Director of National Intelligence is prepared to lie to an Intelligence Committee Senator, what does that tell you?

Prism collects data on US citizen phone calls (time, length, location on every phone call made in America) and there still remains the controversy about access to internet servers. 

Facebook released a statement under Zuckerberg's name, to say "we do not provide any Government with direct access to Facebook servers". Indeed. The key word there is direct access.

But what seems to transpire, according to informed sources, is that they do provide the information through a "drop box" scenario. So the Facebook language revolves around "direct access" when it does seem they do supply it, but just in a different way.

A reported NSA slide show also shows that Microsoft were the first to comply in 2007 and Apple complied last year. It also noted the compliance of Google and Yahoo. We hear too of compliance by Skype, YouTube, PalTalk and AOL. 

Twitter does not feature and has come out clearly and strongly of its refusal to take part.

This story is only starting. The difficulty Obama has, is the deceit and furthermore, the manner in which a scheme like Prism has been set up to get around the law. There's never been any problem getting data, just the safeguard is that you do it with a court order.

The British government are starting to get into trouble too for using Prism secretly and again, bypassing law. 

But perhaps more pointedly is the use of the data. Whilst the cries of anti-terrorism might have some bearing now, if that data was used politically, it will cause problems. In others words, to identify leaks to media or activities of politicians who are not pro-Obama. It's just the same as breaking into a Watergate building.

It will also cause huge problems to the Internet companies who provide data on you and me, globally and yet feigned privacy. 

This is the sort of story that brings down Governments. And rightly so. The whole thing is rotten. 

HMV and Xtra-Vision. Who's next? Skype announces a cracking idea from Monday with Microsoft's outlook.com. So could it be telephony?

Given recent collapses of HMV and in Ireland this week, the Xtra-vision chain which went into receivership (like a 'Blockbuster' chain of retail DVD rental), it's clear that online played a major part in their demise.

Video and music downloads (legal in the main) through the likes of ITunes and Netflix which is surging ahead, meant that traditional retail DVD/Album sales went into spiralling decline. The point however should be made, that brands like HMV and Xtra-vision should have got into the online space but didn't.

They were, at one time, the dominant brands with the power to win online. Anyway.

One now has to ask, what's the next category or market segment that's now faced with the same challenges? And it's telephony.

Apart from "ordinary" threats of email, tweeting, texting and messaging which avoids the need for a quick (costly) telephone call, mobile operators continue to compete on price to woo subscribers. That in itself, is reducing margins and profitability.

It's a death spiral.

But apart from that, online operators are starting to each their lunch - exactly what happened in music and video.

Skype, the best known player (but there's hundreds) have just announced a roll-out of audio and video calling, with outlook.com in the UK from Monday and then the US and Germany this month.

All you need do is download a plug-in and login with your Microsoft account and you're integrated into the Microsoft email service. So that call, has just got a lot easier - it's part of your email. Merging the accounts will automatically merge contacts so connecting with friends will be easy as well.

It's phone calls at your fingertips.

Skype is part of Microsoft so furthering usage will also be pretty easy for Microsoft as Skype replaces their 'instant messenger' service. It previously partnered with ComCast bringing Skype to HDTV sets and Skype generates about 130 billion minutes of call a quarter - growing by 30%+. Microsoft also of course know mobile telephony with android phones.

It's hard to see the big global mobile brands compete with this and especially when we've seen so little sign of it to date. Perhaps they have had it too good for too long? like HMV and Xtra-Vision?

Unthinkable? Nope.

Apple Valuation dips below 400 Billion Dollars Shock!

Apple's market cap has dropped below 400 Billion usd, Shock! 
That's right....Billion.

Or at least, that's how it's being reported - as a shocker.

This week's decline in share value comes after a court judge has cut back, by 450 million usd, their award against Samsung for copyright infringement of 1 billion usd. 

Other uncertainty about profit margins on products (notably in China) and a lack of innovation, has reduced the market cap from 650 Billion in September (when the new Iphone 5 launch was impending).

It's still a staggering, unbelievable, valuation.

Google is worth a mere 270 Billion and Microsoft, only a tiny 230 Billion. So Apple is still way, way ahead.

And the ongoing coverage of CEO Tim Cook is generally pretty negative. It seems that if Apple sneezes, commentators get a cold, because their talk of Apple ("in decline", "losing confidence") seems to be deliberate for a company so strong.

And we know Apple is sitting on a pile of cash (which in turn, becomes a criticism that "Apple doesn't know what to do next with its cash").

It seems to me that few can ever get their head around Apple being without Steve Jobs. He seems to have been so pivotal, that his death has really damaged the company even still.

Always an issue for companies that are inexorably linked to people. When something happens to the person, it reflects entirely on the company. But he left it strong and so it is.

Talk of Apple's demise are unfounded. 
Worse than that, with a 400 Billion valuation.... they're silly.

Hotmail is a gonner. It's now Outlook.com. There's money in mail.

Hotmail, the world's largest web-based email service, is no longer and is now Outlook.com

Microsoft who bought Hotmail in 1997, have had Outlook.com in beta testing for the past 7 months and now the takeover is complete. The changeover will take place gradually and users won't be forced to switch their Hotmail address to an outlook one, but new users will. So there will no disruption in service to existing users.

I have often wondered why the world's postal services brands, never got into online mail? Another example of big companies watching their business go by online? I think so.....

60 million people are using Outlook mail with 350 million using Hotmail and the new service will have many advanced features. The layout looks brighter and breezier with much more simplified tasks - so it has been designed with the user in mind.

It also allows easy interaction and integration with Social Media.

Hotmail was launched in 1996 and probably one of the first email addresses. Advertising overloaded then, the Ads have been streamlined to more direct, relevant text "google" style ads so they're less intrusive.

Generally, outlook.com is being viewed as "better" than Gmail but at the end of the day, mail is mail. However, it's interesting in that email services with large users who use it regularly daily, has not yet had the real business push? It seems to me a cool, good email brand is a winner and perhaps this is what Microsoft see too. There's no doubt too, that if me or you were asked to pay only a dollar or a euro a month for a mail service, we would.

In the case of Hotmail, that would bring in 350 million...a month. Even at 10 cents a month, it would rocket! So there's opportunity here.

But goodbye Hotmail. 
A founding Internet brand bites the dust.
As the Post Office watches it all happen.

Google to open retail stores. Just in time for Google Glasses?

Rumours abound, strong rumours, of Google opening its own high-street retail stores, starting in the US main cities this year.

As Apple know, having shops, can bring customers into contact with your brand in a real personal, helpful way. Especially when you're a Google and largely only known for Search. It's interesting too, a company moving from Web into retail stores - kind of like Amazon opening book stores - but this could be a plan just in time for Google Glass (or "Google Goggles" as most of us know them).

In retail you can touch, see, hold, demo the product and for something so new, it could be a great sales channel for glasses. Or indeed, a new world of wearable computing which is ahead of us.

They're likely too to come at the end of the year, "coincidentally" in time for the launch of Google Glass. They could also sell Chrome computing and of course, Nexus smartphones and tablets moving perceptions of Google from software to hardware. Google also owns the Motorola handset business.

Indeed following in the footsteps of both Apple and Microsoft who have their own retail operations, this would bring the Google brand into a new arena and reaching out to new consumers. High street, high profile retail, is a great Ad for a brand. Google already has a "sort of a" retail presence in the 'Best Buy' stores.

It may not be just about money short-term, but building a real brand long-term. Shops are one good way to do that.

Microsoft under constant pressure. New commercial here, focuses on nostalgia, the Microsoft of old. Will marketing like this work?

Microsoft are under pressure. Basically they found themselves the leaders, in the wrong market - PC's - and having a dominant position didn't help as PC sales tumbled. So they've tried to re-invent themselves without a product innovator (a Gates or a Jobs) at the helm and rather have the most peculiar salesman, Crazy Steve Ballmer, instead.

Search him on this blog and you'll see the videos and you'll see what I mean. Enough said.

Their foray into Windows 8 recently doesn't seem exactly to have set the world on fire and their 'Surface Tablet' has contributed to strong revenue in the last quarter to December no doubt. But what of the future and where they're going?

They plead for their relevance today by promoting their past. In other words, use nostalgia.

"We're the brand that's always been here", "We're the brand of establishment, of trust", Remember us? That kinda' thing and in that way, hope to jolt happy memories from former Microsoft users (which we all were) into thinking, you know what...they were there at the start for me. Aaaahh. 

But it will work too. The commercial is nice and clean with viral potential as we all do a "do ya remember that!" and pass it onto our friends.

It's very brand rather than substance and targets children of the 90's. The endline, "you grew up...so did we" is a direct plea.

The final copyline "Reconnect with the new Internet Explorer" establishes trust around a thing we all knew - IE.

What it will do is to help 'trial' and get people to take another fond look at Microsoft but that has to be followed by substance - by relevant, useful product. And that's the problem. 

Advertising can get people to try a product again, but only once. The worry is, that it's exactly because Microsoft has nothing to say, that they chose this route. When you've nothing say, talk about past glories.

And they'll be found out.

Facebook, Zynga, The Cayman Islands and Ireland. Another great day for ethics.

On foot of my blog about the ongoing tax avoidance issues yesterday (which follows below), I was amazed to read the very brilliant Colm Keena's story in today's Irish Times newspaper - http://www.irishtimes.com/newspaper/finance/2013/0102/1224328327411.html

I'm actually getting tired of blogging about what has become a tax avoidance issue but for some reason, the information just keeps coming to me. There's that much of it about. Shocking.

So it was interesting to see changes at Facebook and Zynga's Irish operation. I'm sure they're completely unrelated to the tax avoidance issue.....

Colm reports that Facebook are moving all its non-US revenues to a new Irish subsidiary. 

Facebook Payments International Limited, a new Irish company, will now take on the billing from Facebook Ireland Limited, which showed revenue of 1 billion euro in 2011 - up from 229 million in 2010.

What's interesting too is that it lost 18.7 million on that revenue of 1 billion and why you might ask?  Because largely, of payments it made to its parent Facebook Ireland Holdings Limited owned by Facebook entities in the Cayman Islands.

These are exactly the same type of controversial charges by parent companies to create losses (and thereby, meaning they pay little or no tax) and are very similar to the devices used by Starbucks and others - so highly criticised. 

What's also stunning is that Facebook has a registered company in The Cayman Islands ultimately - one of the great tax shelters of our time after Ireland. Interesting still, is that it's an unlimited company, meaning it can avoid prying eyes from journalists and not be subject to the usual company rigours.

Which is really quite shocking for a PLc.
In fact the whole thing just stinks.

One of the ways Facebook generates these revenues is by way of "game credits" from gaming company Zynga.

And it would seem, Znyga is another Irish company success! 

Zynga Game Ireland Limited (I kid you not) reported a pre-tax profit of a meagre 4.8 million on revenues of 369 million. This small, poor profit is because of.... yes you've guessed it.... payments to other Zynga companies.

Exactly as Facebook/Starbucks and them all, are accused of, in order to avoid tax. By making payments to parent companies elsewhere, they avoid tax when those payments either exceed the income or practically wipe out any profit.

So for example, of that 369 million revenue, a stunning 191 million for example, was paid in "royalties" to another Zynga company with registered offices at Solicitors in Dublin. 

That very company in turn, despite revenues of 191 million and no employees, reported a loss of 35 million! Get the pattern? Because....wait for it....it paid 50 million to its parent company in "royalties" and a further contribution of 174 million in R&D which is 224 million paid out after only generating 191 million.

Funny too that only in November, Znyga's finance chief, David Wehner, left to join...Facebook as vice-president of corporate finance. Doesn't surprise me anyway....

Avoiding tax isn't illegal, just immoral.

And it seems it's widespread. In fact with Google, Facebook, Zynga, Amazon, Starbucks, Microsoft all getting a mention already and so many previously "respected" names, it's hard to imagine that it's just not common practice.

However, it would seem that a lot of other companies with a lot of advisers, are involved in this style of doing business despite being sheltered by an appearance of integrity. On the scale of billions, which these activities are, would require the active involvement of a myriad of professionals.

And yet again, they all have one thing in common, one thing that's bringing these stories to light.

Ireland.

Brand Index Top brands 2012 just out. Google not in top 10 because of tax issue. Europe's "biggest tax haven", Ireland, is going to suffer too.

Well welcome back and indeed I hope your 2013 is as good as I plan mine to be! I think the great thing about Christmastime is that everyone else is off so you don't come back to lots of emails and messages.

Social media and Business shuts down too - I think this year more than most because things have been so tough, everyone needed the break from it. Equally of course, there was little point in staying open given the general lack of activity.

So although I was keeping an eye, not a lot happened during the break you can be assured....although the march over The Fiscal Cliff in the USA, is pretty scary in itself.

One of the more major issues that I blogged many times towards the end of 2012 was the tax avoidance issue and where Ireland now facilitates widespread European tax avoidance. 

The Google Story is here http://streamabout.blogspot.ie/2012/12/the-tax-controversy-continues-now.html.

Microsoft's shameful governance and use of Luxembourg and Ireland's help in doing it is here http://streamabout.blogspot.ie/2012/12/starbucks-try-to-sort-it-microsoft-now.html

Starbucks story here  http://streamabout.blogspot.ie/2012/12/starbucks-are-we-seeing-death-of-brand.html

US senate view of Ireland as a tax haven along with Costa Rica/Belize is here 
http://streamabout.blogspot.ie/2012/12/now-dropbox-comes-to-dublin-for-greatly.html

Amazon, WPP and others appalling tax behaviour is here http://streamabout.blogspot.ie/2012/12/starbucks-amazon-google-microsoft-wpp.html 

In particular, Ireland has become Europe's "biggest tax haven" in the view of the US Government no less and gets mentioned in the same breath as Costa Rica and Belize. Imagine.

Although this tax avoidance controversy was sparked by the poor corporate behaviour of Starbucks, it quickly extended to Facebook, Amazon, Dropbox, LinkedIn and most notably Google with most having their European HQ in Dublin - largely to facilitate the tax avoidance through the infamous "transfer pricing". It's a story that is so bad it's not going away any day soon and I did wonder if the bad publicity would reflect on the brands themselves. 

And it has.

Clearly it has nearly destroyed Starbucks and no bad thing either. They behaved badly in doing what they did but worse following a "faux" PR attempt to make amends by offering to pay tax. And in doing so, cut into their staff incomes to achieve it. A company that's being exposed for what it really is rather than what we thought it was.

Google has also come out thus far, as being pretty poor too and therefore I was interested to see the annual 'Brandindex Table' by YouGov in the UK which asks 2,000 different people a day about good/bad things about brands, that Google has itself fallen off a brand cliff. Google have dropped out of the top 10 altogether. It has dropped from a 26.7 rating to 11.7 which is about as dramatic it can be in the short time and largely, according to BrandIndex, because of the tax issue.

Another avoider to also feel the wrath on the same issue is Amazon. 

Amazon dropped from first to third - 32.1 rating down to 24.1 and again it's been late to the controversy so it will suffer more.

Here is the Top 10-

The top brand was The BBC Iplayer (remember this is a UK survey); John Lewis (big Department store with terrific advertising); Amazon; Money Saving expert; Marks & Spencer; Ipad/Apple; Sainsburys (retail grocery); BBC.co.uk; Samsung and lastly, Cathedral City (a cheese I think).

So there's no doubt, brands that have been involved (and there's a lot) in this tax avoidance 2012 issue, will see damage in 2013 unless they put it right. However, countries that are associated with it and that actually contribute to it, will feel the damage too. 

Most notably those countries that terrorise their citizens into paying tax and at the same duplicitous time, help large corporates shamefully avoid it.

Ireland beware.

Starbucks try to sort it, Microsoft now in the Tax avoidance headlights. Ireland is facilitating widespread European tax avoidance. Shocking.

Actually that's a TV commercial that was used around the world in 2009 for IDA Ireland. I was on the team that did it and were terribly proud of it then. Now, I'm not, in what's developing as being more clear that Irish investment policy is a sham and simply facilitating widespread tax evasion.

Ireland, it is becoming clear, is at the centre of facilitating widespread European tax avoidance along with countries like Luxembourg and Bermuda. Our investment policy in attracting high-profile US dot coms, is nothing to do with innovation or a "great workforce" that draws US multinationals here - it's because of our tax breaks, pure and simple. It allows them to divert other european revenue to Ireland, declare it here and pay low tax. Rather than declare it where it's generated and pay it there.

The premise that big multinationals invest in Ireland because of something other than tax, is a lie. You can see previous blogs on this issue here;

- On Starbucks UK http://streamabout.blogspot.ie/2012/12/starbucks-are-we-seeing-death-of-brand.html  

- On last weeks Dropbox announcement to base in Dublin http://streamabout.blogspot.ie/2012/12/now-dropbox-comes-to-dublin-for-greatly.html 

- And general tax avoidance http://streamabout.blogspot.ie/2012/12/starbucks-amazon-google-microsoft-wpp.html

Starbucks, following a series of protests against them in the UK Saturday, by 'UKUncut' after the dreadful revelations regarding their low, low, UK tax, have made efforts to settle. However, the whole tax avoidance story against Facebook, Amazon, Starbucks and others emerging, threw Ireland into the headlights. It's their stories that's unravelling ours.

Vodafone now are starting to get a mention and they too have a major Irish presence.

Starbucks attempted settlement with UK Revenue by offering to pay 10 million a year tax, for two years. Big deal. Their chief executive, gets 16 million a year alone. Their brand is damaged for ever and they'll not recover from it.

Being mentioned too, by the US Government as Europe's "biggest tax haven" and, mentioned in the same breath as countries like Belize and The Cayman Islands, Is good old Ireland. Ireland's investment policy, it's becoming obvious, seems to be driven by helping major companies avoid tax elsewhere. In fact, 50% of Irish government income revenue tax comes from US Multinationals. Clearly, they don't generate that tax and revenue in Ireland.

At a meeting I attended with US Secretary of State Hillary Clinton last Thursday, she talked about US companies investment in Ireland. At nearly 2 billion usd, it's more than US companies invest in India, Brazil, China, and Russia....COMBINED. Now we know why.

The reason? Nice climate? Nah. Great workforce? nope. Super tax incentives? Absolutely. And for most, call that, tax avoidance.

And this is an Irish Government, knowingly complicit in widespread tax avoidance, that persecutes its own citizens to pay their tax. 

And a new brand to take over the Irish story as a tax avoider (taking the mantle from Starbucks), is our good friends, Microsoft.

Microsoft is channelling Windows 8 online sales to Luxembourg in order to avoid tax in the UK of over 2 billion euro. According to The Sunday Times, Microsoft keeps a small office in a Luxembourg business park with 6 staff that handles millions of pounds in European online sales.

The bulk of that money is then transferred elsewhere. Any ideas? Yep to its European headquarters in Dublin, Ireland. Profits are then routed to Bermuda without UK corporation tax being paid.

Bermuda? Luxembourg? Dublin? And this is Microsoft. Dear oh dear. Ireland's role in this is truly appalling.

Luxembourg is a long practitioner of these black arts and is now the highest GDP per head of the population in the world, largely because of these sham transactions. Its tax rate of 21% can be reduced through negotiation and other royalty taxes can be as low as 6% to even 1%. 

(Indeed, it's right bang in the middle of the new, and coming to a screen near you, JP Morgan tax avoidance scheme - 200 million? JP Morgan? THE brand of trust??? Jesus).

One of the most profitable companies in Luxembourg is Amazon who has their European headquarters there. European Headquarters in Luxembourg??? ...jeez. Amazon therefore avoids UK tax on about 2.9 billion sterling of revenue generated by British consumers.

Apple is at it too. Its sales of UK Itunes goes straight to its HQ in Luxembourg. With a turnover of 836 million sterling, it employs 16 staff. For a company turning over near a billion, 16 people. A sham!!!

Microsoft's online store in the UK references the fact that if you buy online you are in fact dealing with Microsoft Luxembourg and ultimately, as we all know now, Ireland. 

One Microsoft Ireland company accounts reveal it receives about 1.7 billion sterling in UK revenue and no corporation tax is paid on any of that money. Another Microsoft Ireland company - Microsoft Ireland research - reported 4.3 billion usd in profits for licensing rights in 2011 (so clearly not generated in Ireland) which presumably paid the super Irish tax avoidance rate of 12.5% or lower.

Profits from this Irish company are paid to another Irish company - Round Island One - which pays its dividends to Round Island Holdings based in....Bermuda. Shocking. 

I am Irish. 

A country that has put its citizens into poverty in order to pretend that it was "honourable" and honouring promises to bank investors (bondholders). One wonders was pressure put on by these multinationals?

When in fact it was at the same time dishonouring its European partners by facilitating enormous tax avoidance. IDA need to explain it all now.

This needs disclosure because if we don't that, our European partners will demand it. We should act before they start to crucify us over this. 
And they will.

We're looking like the con merchants of Europe.

Now Dropbox comes to Dublin. For the greatly talented workforce or the highly imaginative tax rates?

 

 

My blog of yesterday, regarding the use of Ireland as basically a tax haven and allowing web companies to repatriate profits to Ireland, caused a bit of a stir. 

In essence, big companies such as Microsoft, Google, Amazon and others such as Facebook and Twitter, have been accused as using Ireland for "tax avoidance". US lawmakers recently compared us to Belize and Costa Rica.

My blog of yesterday follows this blog below, but it's also here  http://streamabout.blogspot.ie/2012/12/starbucks-amazon-google-microsoft-wpp.html


And then, irony of ironies, on the same day, Taoiseach Enda Kenny (Prime Minister) announces that 'Dropbox' are to be the newest tech company to set up in Dublin. He made it clear that Dropbox's decision was based on the old line about a talented workforce blah blah blah and not tax. Here's what The Irish Independent reported his words as;

"Ireland has many advantages to offer international companies, including our young, passionate and talented workforce, all of which will be a great asset to Dropbox as they make their new home in Dublin."

Not a mention of Tax. 

The Irish Independent also reports that "The Government was on alert last night after US lawmakers described the country as a "tax haven" and accused American technology companies operating here of using Ireland to avoid paying corporation tax at home.The US Senate's Permanent Subcommittee on Investigations has begun a probe into how American companies funnel international profits through countries such as Ireland with lower corporation tax rates than the US.Using Microsoft and Hewlett Packard as case studies, the committee chairman Carl Levin said "the tax practices and gimmicks range from egregious to dubious validity".If the US does prevent companies from using Ireland for tax purposes it could have a dire effect on the economy. Numerous companies, including Google, Facebook and Microsoft, who between them employ more than 4,000 people here, are believed to use Ireland for its tax efficiencies.A government spokesman declined to comment, while a spokesman for the IDA, which has attracted most of the firms here, said the agency was studying the report but declined to comment further."

Interesting then to turn onto Techcrunch, which I think it's fair to say, one of the most highly regarded technology publishers to see their take on the Dropbox announcement. Guess what? They reckon it's about Tax. I've reproduced it here. 

 

Dropbox Follows The Tech Crowd, Opens Dublin Office — Says First European Office Will Be Hub For International Ops

Natasha Lomas

Dropbox has become the latest tech company to open an office in Dublin — land of Guinness and low corporate tax rates. Dropbox’s Drew Houston, co-founder and CEO of what is now a 100 million+-user strong service, clearly wasn’t watching the grilling the U.K.’s Public Accounts Select Committee gave Amazon and Google on the issue of corporate tax avoidance last month. Of course it’s the tax rates, not the Guinness, which lure so many tech companies to Ireland’s green and pleasant lands. Last year we reported that setting up a European HQ in Dublin would enable Twitter to lower its tax rate by 16 percentage points — reducing its tax payments by more than 60 percent.
Obviously Dropbox doesn’t make any mention of corporate tax rates in its Dublin announcement. Its release talks effusively about the local talent pool it will be tapping into in Dublin. “We’re delighted to be closer to millions of our European customers. By opening our international headquarters in Dublin and tapping into the large talent pool that exists there, we’re better positioned to serve even more people locally while we continue to grow,” enthused Houston in a canned statement. Ireland’s Taoiseach also chips in a few supporting words, flagging up the country’s “young, passionate and talented workforce”.
Dropbox said the new Dublin office, its first in Europe, will serve as the center of the its international operations — enabling it “to better provide technical support and product acumen” to Dropbox’s millions of European users, and presumably customers in other international markets such as Asia"


In other words, it's about tax. 

Interesting too that Techcrunch reckon that Twitter by being "based" in Ireland reduced their tax by 60% - an incentive indeed and yesterday I said that nearly 50% of Irish tax revenues, comes from US multinationals "based" in Ireland.

As Europe's largest tax haven, Ireland is coming more and more under the spotlight for facilitating what is, tax avoidance, technically legal as that might be.

This is going to be damaging as Governments across Europe, notably the UK, are beginning to decide that they won't stand for it anymore. And our friends in the US are onto us too.

And it's wrong that an Irish Government should be facilitating what is, lousy corporate behaviour - legal or not.

Whilst at the same time, terrorising its citizens to pay more tax.

Starbucks, Amazon, Google, Microsoft, WPP all in the news about tax avoidance through Ireland. And now they know it.

The British Government is to explore an internationally co-ordinated new tax designed to capture the earnings of companies like Amazon, Google but also Starbucks, according to The Telegraph. The particular focus is to force online companies pay more tax on sales they generate in the UK. Some use a variety of legitimate, but certainly questionable, ways of avoiding tax. In the case of Starbucks, for example, they apply fees from their Dutch parent to minimise their local UK tax.

And it's causing an outrage against the brand. 
And rightly so.

Activist Group, 'UKUncut' has announced a day of action (Saturday Dec 8) against Starbucks and these protests are aimed at bringing Starbucks to their senses or to put them out of business. One way or the other. 

The UK Government wants to close the loop that allows web companies avoid millions of pounds on tax and in fact, repatriate a lot of it to Ireland, the lowest corporation tax economy in Europe (12.5%), to avoid paying it locally. 

There can be little doubt at all now, that the heralded Irish Government investment plan is little more than a sham, based purely on tax incentives for multi-nationals locating here. In fact, it could be said that it's based on facilitating widespread tax avoidance across Europe, technically legal as that might be. But this is why Ireland's 12.5% tax rate is under European pressure.

Up to 50% of Irish corporate tax revenue may relate to taxes paid on income earned by US multinationals outside Ireland.

I once looked after The Industrial Development Authority (IDA) Advertising so I have a good understanding of their level of expertise.....and although, applauded by Government, the truth is beginning to come out. It's all about tax.

It has been often thought as bizarre, that for a country the size of Greater Manchester, Ireland is the European HQ for Google, Facebook, LinkedIn and others. It is becoming more clearer that when companies locate here, it facilitates their tax avoidance elsewhere, such as in the UK. Tax avoidance is of course, not illegal.

Indeed, even the very British Ad Group, Martin Sorrells's WPP (part owners of Dublin Ad Agency DDFH&B and Group M), had based itself in Ireland for tax reasons and shockingly, the company is now discovered to be actually Jersey registered. One wonders why it needs to registered in a small, tiny island like Jersey known really only for its "special" tax facilitation? Good reasons, no doubt.

Amazon is also shockingly, actually registered in Luxembourg, another famed principality for its tax shelters and discreet facilities. Amazon? THE American retail success? It had used Luxembourg VAT laws to its own competitive advantage for example, charging only 3% on an ebook sold in Britain whereas other booksellers had to charge 20%. That loop is now being closed and I've been a fan of Amazon, but it's just worn thin.

Google, with a staff in the UK of 1,300 books most of its revenue to surprise, surprise, Ireland. So it earns money in the UK but funnels it through Ireland. That's Ireland's great tax regime I mean that attracts companies like these in the first place.

Actually Google's "Irish" revenue is recorded as 12.4 billion. How ridiculous is that? Gross profit in Ireland in 2011 was recorded at 9 billion!! It's truly ridiculous. 

The whole tax avoidance is unravelling and more and more are beginning to understand the tax avoidance which Ireland has been facilitating against its European partners, and most notably, our biggest trading partner, The UK. So much of these investment decisions have been PR spun as being based on attracting business to what is said, a better educated workforce in Ireland, when in fact, they are simply decisions based on tax "incentives".

And the UK are not happy about it.

For example, Amazon, last year in the UK, earned 3 billion sterling in sales. But only declared 207 million of those as being from the UK and consequently, over the last three years has only paid UK tax of 2.3 million on total sales of 7.1 billion. Shocking undoubtedly, but it's being called immoral by many, albeit utilising legal tax manoeuvres.

Microsoft in 2005 were commented on in The WSJ for routing profits from Germany into Ireland. I mean it's actually funny that one Microsoft subsidiary called 'Round Island One Ltd', is actually based in a solicitors office and turns out to be one of Ireland's greatest companies. It has 9 billion in profits in 2004 and no staff. Not bad eh? And nobody has ever heard of it.

Google, paid UK tax of a tiny 6 million on UK revenues last year of 2.5 billion. Wow.

Ireland is helping them do that through "phantom" services.
Ireland is Europe's biggest Tax haven, followed by Switzerland.
And Ireland's tax schemes are now coming under the spotlight as it starts its European presidency from January 1st.

But more importantly, it's making the lie told by successive Irish Governments that Ireland was somehow an attractive base because of its workforce, its green fields, its beautiful scenery.

And it's wrong.
And we need to say it's wrong even if it's to our own detriment.