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“It looks like a much smaller generic private company completely outmaneuvered two of the giants of the pharmaceutical industry,” said Gbola Amusa, European pharmaceutical analyst for Sanford C. Bernstein & Company. “It’s not clear how or why that happened. The reaction from investors and analysts has ranged from shock to outright anger.” —New York Times Thus says one of Wall Street’s Finest in reaction to this week’s news that Barry Sherman, the CEO of a no-name company (named Apotex), had figured out a way to blow the doors off one of Big Pharma’s most profitable franchises five years ahead of nearly everybody’s estimates by using a deal he negotiated with Bristol-Myers that was subsequently nixed by the government. Here’s how he described his coup: Mr. Sherman, in a telephone interview, all but ridiculed his two big rivals, saying they had naïvely agreed to conditions that allowed his company to bring its product to market even though the deal was rejected by regulators. “I think they acted foolishly in a number of ways,” said Mr. Sherman, a Toronto billionaire who amassed his fortune in the generic drug business. Mr. Sherman said that he had never expected the American government to approve the deal, but that he had conducted the negotiations in a way to let him push the Apotex drug onto the market. Mr. Sherman said Apotex was engaged in an “all-out launch” and has already shipped most of its inventory while manufacturing continues. Now, I could have spared the Sanford Bernstein analyst quoted at the top—and any other of Wall Street’s Finest—all that “shock” and “outright anger” at the latest in a long string of bad news from Bristol-Myers, if anybody had asked, by pointing out that there is a reason bad things keep happening to Bristol-Myers: look at the track record of the man in charge. Oh, sure, I know the latest spin—the company has a amassed a great cancer drug pipeline under its CEO, the MBA-trained Peter Dolan, who has to his credit been working feverishly to bring the company back from the brink of a channel-stuffing disaster that resulted in an SEC investigation, a fine, and subsequent earnings restatements. But Mr. Dolan was—and I merely point this out as a fact—President of Bristol-Myers during the time period (“from the first quarter 2000 through the fourth quarter 2001” according to the SEC) that it was found by the SEC to have been doing what was described by the SEC as follows: …improperly recognizing revenue from $1.5 billion of such sales[“excessive” amounts “ahead of demand”] to its two largest wholesalers and using “cookie jar” reserves to meet its internal sales and earnings targets and analysts’ earnings estimates. Mr. Dolan was—and I merely point this out as a fact—both Chairman and CEO of Bristol-Myers in 2004 when the company settled with the SEC and paid a $150 million fine for the above. Mr. Dolan was also—and I merely point this out as a fact—President of Bristol-Myers in 2001 when the company spun off its orthopedics business, Zimmer, in order to ‘focus on its pharmaceutical business’ (the one with the channel-stuffing problem), thereby freeing Bristol-Myers from the distraction of owning one of the great growth businesses in medical device history. Likewise, Mr. Dolan was—and I merely point this out as a fact—Chief Executive Officer in 2001 when the company spent $7.8 billion to buy DuPont’s drug business, which left most of Wall Street’s Finest scratching their heads at the time, and still does. And he was also—and I merely point this out as a fact—Chief Executive Officer when the company paid $70 a share for 20% of the about-to-become-scandal-embroiled biotech company Imclone in 2001 (Imclone trades under the ticker IMCL, and is currently $32.78 bid, $33.11 offered). And here is how the Times described the situation by which Mr. Sherman has apparently outfoxed Mr. Dolan, Bristol-Myers, and its Plavix partner, Sanofi: As part of the federal investigation, the F.B.I. recently searched the offices of Mr. Dolan and Dr. Andrew Bodnar, his close adviser. Dr. Bodnar visited Mr. Sherman’s Toronto office twice to personally negotiate part of the deal, according to Mr. Sherman. The Justice Department is believed to be investigating whether Bristol and Sanofi tried to conceal a so-called side deal with Apotex that would not have passed regulatory muster. Both companies have denied doing anything improper. “Bodnar kept saying that he was in contact with Peter Dolan and Dolan was 100 percent behind whatever he was negotiating,” Mr. Sherman said yesterday. “Whatever he was doing, whether or not there were side deals that were not reported to the F.T.C, I cannot comment on.”… In the telephone interview yesterday, Mr. Sherman declined to comment on what Apotex had or had not told the government. But he said he never expected the deal to clear regulatory review and went along with it simply to position his company to enter the market with its generic. Mr. Sherman said he viewed efforts by brand-name companies to extend monopolies through settlement negotiations as “outrageous.” “Our focus was to get the concession that would enable us to launch, when the F.T.C. turned us down,’’ Mr. Sherman said. Now, somebody please explain to me why Wall Street is “shocked” that Bristol-Myers was, as today’s New York Times article says, “completely outmaneuvered” by a no-name generic drug maker? Jeff Matthews I Am Not Making This Up © 2006 Jeff Matthews The content contained in this blog represents the opinions of Mr. Matthews. Mr. Matthews also acts as an advisor and clients advised by Mr. Matthews may hold either long or short positions in securities of various companies discussed in the blog based upon Mr. Matthews’ recommendations. This commentary in no way constitutes a solicitation of business or investment advice. It is intended solely for the entertainment of the reader, and the author.

“As you know, we’re in the middle of a transition in search advertising business, moving from Yahoo’s platform to our own proprietary ad platform called MSN adCenter, which we began testing in the US during the quarter.” When you hear somebody start a discussion with the qualifier “As you know,” you brace yourself for news that is not-so-great, and that’s how Microsoft began its discussion of search results at Microsoft Network on last night’s call. The bad, though not-necessarily-unexpected, news came in the next sentence: “The ramp-up of a new ad platform requires significant investment from Microsoft, both in development costs as well as in reduced revenues related to fewer numbers of overall advertisers and the resulting lower keyword pricing.” In other words, Microsoft’s online search business, in the midst of the biggest boom in the history of the world, was down year-over-year and flat sequentially. Readers should keep in mind that Google is expected to show 100% year-over-year and 20-25% sequential growth when it reports earnings next week. After a company like Microsoft, with so many hopeful investors eager for a hint of past glory, drops that kind of news, you should expect some positive spin in order to leave the masses feeling more upbeat—after all, Yahoo! got smashed last week after reporting “only” 13% sequential search growth. Microsoft obliged as follows: “The good news is that in response to our platform has been great, and we are ramping up deployment by rapidly on-boarding advertisers and moving more search traffic to the platform.” Microsoft may be ramping up advertisers, but that doesn’t mean it is ramping up the customers that actually use Microsoft Network. I know one individual who has shifted his entire email business away from Microsoft Network to Google’s Mail product; and based on the increasing numbers of emails I receive from “gmail.com” addresses, it appears I am not alone. For that reason, and because of the fact that Microsoft’s entire reason for existing is not to create the greatest search product but to drive people to buy Microsoft operating system software, I doubt Microsoft will win the search war, no matter how much money it throws at the business. Now, Google may or may not be a good investment, stock-wise. I have been a fan of the company for some time, but reasonable people can disagree on the company’s prospects and the stock’s valuation. In any case, much ink, both real and digital, will be spilled in the next few days trying to game the company’s fourth quarter earnings report, due out next Tuesday after the close. A few weeks ago I highlighted a press release (“The Most Interesting Press Release You Didn’t See”) from FTD Group, the flower-delivery organization that utilizes internet search advertising to generating a significant portion of its business. In the release, FTD said that online search costs had “increased significantly,” causing the company to curtail its use of the medium and ponder “a more diversified marketing portfolio.” It looked like search—for FTD, at least—had reached the limits of its marginal utility. In response, I received a number of comments, some agreeing with the FTD experience and others disagreeing entirely. Feedback from friends whose businesses utilize search for a significant portion of their customer acquisition were likewise mixed, although more indicated that the bills they paid to Google were still increasing than not. Just yesterday, however, another data point emerged in the search-cost conundrum, squarely on the side of Google. 1-800 Flowers.com (yes, that’s the actual name of the company) reported 21% revenue growth, as well as continued dependence on, and effectiveness of, search-based advertising: “During the quarter we attracted more than 1.3 million new customers with 57% of them coming to us online, up from approximately 1.2 million and 54% in the second quarter of last year…. “Certainly search is an expensive yet effective marketing vehicle for us, one of our overall marketing channels. We did not see any spike in costs this holiday season. Actually, this past holiday season, search costs were comparable to last year’s holiday season.” I hesitate to extrapolate from this any firm conclusion about next Tuesday’s earnings report from Google. However, I suspect—to use one of Wall Street’s Finests’ favorite, most clichéd, and least informative old sayings, “Our thesis is still intact.” Jeff Matthews I Am Not Making This Up © 2005 Jeff Matthews The content contained in this blog represents the opinions of Mr. Matthews. Mr. Matthews also acts as an advisor and clients advised by Mr. Matthews may hold either long or short positions in securities of various companies discussed in the blog based upon Mr. Matthews’ recommendations.

Bob Ney is a Congressman, described in today’s New York Times as “until recently…an obscure, sometimes eccentric, lawmaker from Ohio.” He also—judging by the color headshot of the Congressman in the paper just below the fold—wears a wig. I point this out not to make fun of the Congressman in question, who has enough troubles as it is, being identified as “Representative No. 1” in court documents filed as part of the Jack Abramoff bribery scandal. Indeed, the Congressman, whose contribution to toppling Saddam and supporting American troops around the world was—I am not making this up—enforcing use of the term “Freedom Fries” in place of “French Fries” at the House cafeteria, may be a very decent guy. Or, he might be as bad as they come. I don’t have any idea. But why would a Congressman—a guy who gets photographed every day of his life, shaking hands at breakfast, speachifying at lunch, walking across the wind-whipped steps of the Capital building to some immediately forgettable news conference about, well, calling them “Freedom Fries” instead of “French Fries”—wear a toupee? Especially a toupee that, in the old expression of comedian Robert Klein, looks pretty much like a giant piece of lettuce, even in the not-exactly-high-resolution photo on the front page of the New York Times? Perhaps it’s the self-deluding nature of politicians in general and Congresspeople in particular, who think—like that ex-Vietnam Vet from California who resigned last year—they can take bribes in return for votes, and nobody will ever find out. And maybe they’re right. Perhaps the average American voter does not share the common feeling among friends of mine on Wall Street that you “Never trust a CEO who wears a toupee.” This may sound heartless, trite, or absurdly simplistic, but, at the core of the matter is Warren Buffett’s old dictum that “a CEO who misleads others in public may eventually mislead himself in private.” For example, I always suspected Tyco CFO Mark Swartz of wearing an unusually good rug of very curly fake hair. I thought that the first time I saw him face to face at the ballroom of the Plaza Hotel when he and Dennis announced the breakup plan that led to their downfall, and I thought it every time I saw his picture in the papers heading into or out of the court room over the next couple of years. Sure enough, when Swartz showed up for his sentencing in September, the curls were no longer visible, having been replaced by a baseball cap. Now, I may still be wrong about him wearing a rug, but after his conviction, one of the jurors who voted to convict said many of the jurors had concluded Mark Swartz was “an extremely good liar”—quote/unquote. I could be wrong about Congressman Ney, both rug-wise and what-else-is-he-hiding-wise. Only his wife, and his hairdresser, knows for sure. Jeff Matthews I Am Not Making This Up © 2005 Jeff Matthews The content contained in this blog represents the opinions of Mr. Matthews. Mr. Matthews also acts as an advisor and clients advised by Mr. Matthews may hold either long or short positions in securities of various companies discussed in the blog based upon Mr. Matthews’ recommendations.

Carl Icahn @I_Make_Money_You_Have_A_Problem_With_That? Have taken large position in APPLE. See BIG GAINS soon. Bill Ackman @Never_Shorting_Again. You don’t use ALL CAPS, Carl. This is Twitter, not Facebook. And we have taken a bigger position in Air Products than you have in Apple. Icahn: My Apple is bigger than your Air Products. Ackman: Show me. Icahn: I don’t have to show YOU, punk. Ackman: What’s your thesis on Apple, Carl? Icahn: Talked to Tim Cook. Very nice chat. Says they are coming out with a “smart” phone in September. Ackman: They already make a smartphone. Like, their fifth iteration. Icahn: Oh, Mr. Big Words. Tim Cook says it will read fingerprints. That would save police time doing stop & frisk. IT WILL BE BIG. Ackman: Fingerprints? It’s biometric, Carl, not for fingerprinting. Icahn: It’s biotech, too! A “smart” phone AND biotech drug. APPLE WILL BE BIG. Ackman: There’s those caps again. Who types for you, old man? Your great-great-great grandson? Icahn: Punk. Your mother was a camp-follower. Ackman: Don’t know what that means. Translate. Icahn: Look it up in the dictionary. Ackman: Dictionary! Okay Carl, getting my Webster’s down from the shelf right now… Icahn: You are a punk. A snotty, wise-guy punk. Ackman: Is that the only adjective you know? I’ll give you my thesaurus, too. You can put it on your bookshelf next to the Encyclopedia Britannica collection. Icahn: A wise-guy punk. Ackman: Anyway, “punk” is good. The Ramones were punk, Carl. But you were probably more a Vic Damone guy, right? Icahn: A spoon-fed, daddy’s boy punk. Ackman: ‘Danke Schoen,’ was that your song, Carl? Icahn: Wayne Newton sang that, not Vic Damone. Ackman: Sorry, Carl. I was trading stock options between classes in junior high while you were out there bankrupting airlines. Icahn: I didn’t bankrupt any airline! Ackman: Ever hear of TWA? Icahn: I rescued TWA! Ackman: Like the Godfather rescued Moe Green. Icahn: [Very bad language] Punk! So today you’re bankrupting department stores. Give me a break. Ackman: Ever been in a Penney’s? They needed all the help they could get. We tried. Icahn: I shop at TJ Maxx. I never pay retail, Bill. You know that. Ackman: You paid retail for DELL. How’s that working out for ya? Icahn: Better than Penney’s for you. Think I’ll short Penney. Right now. Ackman: Go ahead. I’ll loan you my stock. Icahn: Serve you right, you punk. Better yet, gonna buy more Herbalife right now. George Soros @George_Swings: Good idea Carl, I’m going to buy more HLF too. Ackman: Hi George, didn’t know you were on this thread Soros: No, I’m not on the treadmill. Ackman: I said, “thread.” That’s what this is called. Icahn: He’s a little deaf, Ackman: Give him some respect. Soros: I just had sex with a very pretty young supermodel from Belarus. I met her in Davos shopping with my 5th ex-wife. Thought I would say that. Ackman: Save it for Facebook, George. This is Twitter. Soros: My assistant is putting the video up on YouTube. Then she will leak it to the New York Post. Icahn: You might not want to do that, George. Ackman: Are we done here, gentlemen? Icahn: Not with you, punk. I’m buying more Herbalife right now. Ackman: Go ahead. I’ll sell you mine. Icahn: ??? Thought U were short HLF. Soros: #$%@#$%@ I thought so too. Carl, you told me Ackman was short $1B HLF. Icahn: That’s what he told everybody at that stupid conference, George. So I went long. Soros: My face is not as wrinkly as it appears in the New York Post. Icahn: George, what are you talking about? Soros: I am watching the video in my private nightclub. It’s midnight in Switzerland. Or St. Barts. Wherever we are. Ackman: Sorry to tell you guys, but we actually covered the HLF last week. Went long. Icahn: U r such a kidder. Am buying 1mm right now, market not held. Ackman: I am not kidding. We’re long. 1 million shares of HLF, sold to you. Soros: This HLF is going down now, Carl. What did you do? Icahn: I just bought 1mm and it hasn’t had an uptick yet. Soros: I can’t concentrate on the video. What is happening, Carl? Icahn: [Bad word] This [very bad word] punk [bad word] us. Soros: I fired my pilot for less, Carl. Icahn: U can’t fire me, George, I don’t work for U. Soros: U will if Herbalife keeps going down. Can’t U twit something? Ackman: It’s ‘tweet,’ George. You want Carl to ‘tweet’ something. Icahn: I’ll tweet U right in the East River, U punk. Ackman: You and what army, Carl? Soros: I want no armies involved. I am devoted to peace. And sex. Sex and peace. Mary Jo White @Better_Late_Than_Never: Excuse me, gentleman, good afternoon. We at the SEC have been monitoring these conversations. Ackman: I was wondering when you would get around to it. Icahn: Holy [bad word]. Ms. White. What are you doing on this thread? Soros: Is that a woman who joined us? White. We are monitoring all these conversations. Icahn: How the $$#@ do you do that? White: Ever hear of an agency called the NSA? Soros: She’s from the agency? I wasn’t expecting her so soon. Let her in, fellows. Ackman: Not that kind of agency, George. White: We are getting worried that unscrupulous billionaires may be using social media to promote their stocks after they build a position. Soros: Position? Icahn: Not that kind of position, George. Keep quiet. Ackman: You’re in trouble, Carl. Icahn: What’s the difference between me tweeting I buy Apple and you telling a conference you’re short Herbalife? Ackman: I laid out the facts as I saw them. You promoted a stock price. Icahn: This HLF keeps going down. Why didn’t you tweet that you covered your Herbalife and went long? Ackman: It was my way of saying ‘Danke Shoen’ Carl. Icahn: Punk. White: Mr. Icahn, we need to get together. You too, Mr. Soros Soros: A three-way! I will send the jet to pick you all up… Jeff Matthews Author “Secrets in Plain Sight: Business and Investing Secrets of Warren Buffett” (eBooks on Investing, 2013) $4.99 Kindle Version at Amazon.com © 2013 NotMakingThisUp, LLC The content contained in this blog represents only the opinions of Mr. Matthews. Mr. Matthews also acts as an advisor and clients advised by Mr. Matthews may hold either long or short positions in securities of various companies discussed in the blog based upon Mr. Matthews’ recommendations. This commentary in no way constitutes investment advice, and should never be relied on in making an investment decision, ever. Also, this blog is not a solicitation of business by Mr. Matthews: all inquiries will be ignored. And if you think Mr. Matthews is kidding about that, he is not. The content herein is intended solely for the entertainment of the reader, and the author.

Poor Scott Thompson. The world’s (currently) most famous accused-resume-inflator is gone from the C-Suite at Yahoo. Oh, and he has thyroid cancer to boot. Meanwhile, Wall Street’s Finest are gearing up for next week’s earnings from Hewlett-Packard, and based on our perusals of various so-called research reports—not to mention a puff-piece on the company in this week’s Barron’s—all signs point to an “in-line” quarter from HP, although one analyst is suggesting “yet another restructuring plan/charge of about $1billion.” [Editor’s Note: Tuesday morning, another of Wall Street’s Finest came forth with an expected non-recurring-recurring-like-clockwork restructuring charge as high as $2 billion for HP. Let the Palo Alto “non-GAAP” earnings games begin!] [This just in on Thursday afternoon: news is breaking that HP will lay off as many as 25,000 workers. In the perverse logic of one Wall Streeter, this “would enable investments in strategic, higher growth areas,” as if HP has not been able to make those investments with its $3 billion R&D budget (perhaps the $10 billion share buy-back authorization has something to do with it). Faulty logic aside, expect earnings estimates to start being ratcheted upwards… ] Now, we have, more than once, commented on the low quality of HP’s reported earnings. You can read about it here and here, if you like. Suffice it to say, HP does what portfolio managers can only dream of getting away with: it reports “non-GAAP” earnings that include the good stuff from acquired companies (revenue and gross profit, for example) and excludes the bad stuff from those same companies (amortization and restructuring charges, for example), which serves to a) point out what silly prices HP pays for acquisitions in the first place and b) explain how such a theoretically profitable enterprise as HP came to possess a tangible book value of minus $7.84 per share, according to my Bloomberg. (Yes, that’s negative, not positive, $7.84.) Nevertheless, Wall Street’s Finest dutifully record those “non-GAAP” earnings from HP and set their clocks by them. Imagine if portfolio managers tried to report “non-GAAP” investment returns, booking only their winners. Or if baseball players tried to report “non-GAAP” batting averages. Or, most relevant of all, if Jamie Dimon had tried to call that $2 billion trading loss from his London Whale a “non-recurring” loss… Hey, HP does that stuff every year, and for some reason, Wall Street’s Finest buy HP’s “non-GAAP” earnings presentation lock, stock and barrel. We’re not sure why they buy it—after all, GAAP earnings surely exist for a pretty good reason, as investors discovered a decade ago when the tech bubble collapsed—but they do. Thus we have the strange contrast of Mr. Thompson being ridiculed and then run out of town for a modest (and still unexplained) bit of resume inflation, while just down 101 from Yahoo the folks at HP prepare to report yet another quarter of “non-GAAP” earnings, even though HP’s non-GAAP earnings appear to have less relationship to their GAAP earnings than Mr. Thompson’s “non-GAAP” resume had with the “GAAP” version that Dan Loeb’s detectives uncovered. The HP folks ought to hope Dan doesn’t get his detectives to start asking questions about that… Jeff Matthews Author “Secrets in Plain Sight: Business and Investing Secrets of Warren Buffett” (eBooks on Investing, 2012) Available now at Amazon.com © 2012 NotMakingThisUp, LLC The content contained in this blog represents only the opinions of Mr. Matthews. Mr. Matthews also acts as an advisor and clients advised by Mr. Matthews may hold either long or short positions in securities of various companies discussed in the blog based upon Mr. Matthews’ recommendations. This commentary in no way constitutes investment advice, and should never be relied on in making an investment decision, ever. Also, this blog is not a solicitation of business by Mr. Matthews: all inquiries will be ignored. And if you think Mr. Matthews is kidding about that, he is not. The content herein is intended solely for the entertainment of the reader, and the author.

“It is warm inside the herd…but then, of course, you go off the cliff.” —Jean-Marie Eveillard, First Eagle Funds What the heck: we’ve written an open letter to Ben Bernanke, the most powerful central banker in the world, so why not write a memo to the most powerful CEO in America? The genesis of today’s virtual memo is the recent spate of articles in financial publications revolving around the topic of what Mr. Jobs’ company—Apple—ought to do with the growing cash hoard on which that company now sits. The articles stem from the fact that everybody outside the actual company that created the cash hoard has an opinion on what to do with that cash. And what everyone is recommending is this: Apple should spend the cash—and sooner rather than later. Here’s how a recent Bloomberg story led off the discussion: Apple Piggybank Earns 0.75% Return as Investors Ask for Payback Apple Inc.’s piggybank, stuffed with $51 billion in cash and investments, is earning a lower return than a typical U.S. savings account. Some investors say Steve Jobs should put that money to better use…. Apple got a 0.75 percent return on the investments in the past fiscal year, according to a regulatory filing last week. The gain pales next to the roughly 10 percent investors would have earned from the Standard & Poor’s 500 Index and the Dow Jones Industrial Average over that time. Apple’s stock itself also was a much better investment, rising 60 percent…. —Adam Satariano, Bloomberg, 11/2/10. For the record, the cash hoard that seems to be burning a hole through the pockets of everyone except the folks at Apple is mainly the result of two facts, both of which have nothing to do with the outside observers now indignantly calling for it to be put to ‘better’ use: Fact One is the outsourced manufacturing model Apple began implementing a decade or so ago when the first iPod was launched. Under the careful watch of Fred Anderson, the CFO at the time, Apple abandoned the asset-intensive, factory-owning high-tech business model common to Silicon Valley, farmed out production to low-cost Asian companies, and so began turning inventory into cash in a way that forever changed the way Silicon Valley looked at where value was really added. Fact Two is the success of those products themselves, starting with the lowly iPod—a mere music player that morphed into the all-purpose “internet in your pocket” iPhone, which itself begat the notebook-threatening iPad, whose “instant on” capability is something Intel hoped to do with PCs for at least a decade and never got close. Combined, those two facts have created a business model from Nirvana that requires none of Apple’s capital dollars—none—to be tied up in chips, circuit boards and manufacturing lines, thus allowing Apple to generate gross profit margins that are half-again higher than commodity box builders such as Dell and HP, and gross profit dollars that don’t need to be plowed back into plant and equipment. Instead, they can be plowed into R&D, sales and marketing, with the leftovers sent to the bank. So successful is this model that Apple, as has been widely noted, now finds itself with the aforementioned $51 billion worth of leftover cash sitting in the bank. And that $51 billion, as those same articles point out, is earning almost nothing, thanks to Apple’s conservative investment policy and the low interest rate environment of the moment. Here’s how the Bloomberg story continued the critique: For some shareholders, the cash hoard is overkill, especially considering Apple added about $17 billion to its balance sheet last year, though they don’t want a big, overpriced acquisition either. “That amount of cash is way above what’s needed to have a prudent war chest,” said Keith Goddard, CEO of Tulsa, Oklahoma-based Capital Advisors Inc., which has $822 million under management, including Apple shares. “It would be a real shame for them to do an acquisition to get into another line of business or dilute something they already have going on.” Now, it is true Apple’s cash return of 0.75% has significantly lagged the broad stock market, and Apple’s own shares, in the last twelve months. It is also true, however, that Apple’s cash earned significantly more than the stock market, and Apple’s own shares, in calendar 2008, when all those years of Americans living dangerously came home to roost, and investors sweated out a 37% market decline and a near-death experience for the world’s financial system. Have those investors already forgotten about 2008 and early 2009? Did the “Flash-Crash” never happen last spring? Will there never be another Asian crisis, as in 1997-8? Another Internet Bubble, as in 2000? Another “Black Monday”…or “Black Tuesday,” for that matter? Indeed, we suspect that Apple investors—including, we would bet, all those quoted to the effect that Apple’s $51 billion cash hoard violates some sort of hidden magic cash figure learned in Financial Analysis 101—took immense comfort in the company’s $25 billion September 2008 cash cushion during the panic-stricken days of 2008 and early 2009, when Apple’s market capitalization plummeted to under $100 billion and investors around the world were wondering whether anyone would have enough money to cough up lunch money, let alone enough cash for an iPod or iPhone. More to the point, we also suspect that some of those same voices also once applauded similar “return value to shareholders” exercises that other companies pursued to their ultimate detriment. Exhibit A in this category is Dean Foods, purveyor of milk and other dairy-related products, which in early 2007—that’s three and a half short years ago—decided to “return value to shareholders” by paying a whopping big dividend to shareholders. Now, Dean Foods didn’t have the balance sheet Apple does, but that didn’t stop the company from listening to the siren song of its investment bankers and other “return value to shareholders” mavens. Here’s how the company justified its actions on a conference call with Wall Street’s Finest: We announced this morning that we will return approximately $2 billion in capital to our shareholders through a special dividend of $15.00 per share. Before Jack walks you through the details of the recap and the dividend, I would like to discuss with you the factors that make this transaction the right step for Dean Foods’ shareholders at this time. Given our internal focus, our strong cash flows, and the incredible liquidity and flexibility of today’s debt capital markets, the appropriate finance decision for Dean Foods today is to increase our utilization of the debt markets and return equity capital to our shareholders. We believe we can do so without diminishing our capacity to grow or foregoing appropriately-priced, strategically-sound acquisitions. Our robust growing cash flow should allow us to de-lever our balance sheet over the next few years…. But clearly from our perspective it was an opportunity that it would have been, in our view, a significant mistake in judgment not to take advantage of the markets that present themselves today. These are extraordinarily liquid markets; they are extraordinarily flexible; and they’re extraordinarily well priced. —Gregg Engles, Dean Foods Chairman and CEO, March 2, 2007 Readers can imagine the huzzahs such a “shareholder-friendly” announcement generated at the time—and, indeed, the analyst from Bear Stearns said “Congratulations…obviously a good announcement” on the triumphant conference call. (We will pause while readers digest the irony of an analyst with a firm that didn’t survive the financial crisis congratulating a company in a low-margin, highly cyclical business leveraging up just months before the crisis hit.) Alas, Dean Foods’ shareholders are nowadays wondering all what the congratulations were about. The ‘significant mistake in judgment’ turned out to be the dividend itself. Dean Foods’ balance sheet has not been de-levered since that balance-sheet-destroying event, and the shares, which closed at $34.50 that day ($19.50 adjusted for the $15 a share dividend), traded at $8.50 the day after the company announced yet another in a string of disappointing earnings reports last month. Oh, and the “Jack,” the Dean Foods CFO referenced by Mr. Engles in the 2007 call touting the special dividend has resigned. All that said, what, you might wonder, does Steve Jobs say about Apple’s cash? Again, from Bloomberg: Jobs, Apple’s chief executive officer, said last month that the company has a good track record of using cash, saying it’s holding money for one or more “strategic opportunities,” rather than a dividend or stock buyback. Indeed, Steve Jobs and the Apple management team do have a good track record of using cash, if the iPod, the iPhone and the iPad are any indication of what they have been doing with it. So why not let them worry about the cash hoard? And if, for some bizarre reason, Steve Jobs ever feels himself moved by the writings of various individuals who have never met payroll, let alone created a product like the iPhone that literally changed lives, to blow all that cash on some special dividend or massive share buyback or some otherwise cash-dispensing activity euphemistically labeled “shareholder-friendly,” we would urge him and his board to consider the examples of other company CEOs who have likewise been so moved. It is, indeed, as investment genius Jean-Marie Eveillard warned a group of students at a recent San Francisco State FAME investment conference, “warm inside the herd.” But that is cold comfort when, as he said, the herd goes off the cliff. Jeff Matthews I Am Not Making This Up © 2010 NotMakingThisUp, LLC The content contained in this blog represents only the opinions of Mr. Matthews. Mr. Matthews also acts as an advisor and clients advised by Mr. Matthews may hold either long or short positions in securities of various companies discussed in the blog based upon Mr. Matthews’ recommendations. This commentary in no way constitutes investment advice, and should never be relied on in making an investment decision, ever. Also, this blog is not a solicitation of business by Mr. Matthews: all inquiries will be ignored. The content herein is intended solely for the entertainment of the reader, and the author.

“The only nonnegotiable principle here is success. Everything else is negotiable.” —Rahm Emanuel, The New York Times, June 7, 2009 The CBO said Wednesday that the Senate Finance Committee’s health bill would cost $829 billion over a decade and reduce the federal budget deficit by $81 billion over that period. That helped dispel concerns among moderate Democrats, and committee leaders set a vote on the bill for Tuesday. “This resolves one of the big unknowns,” said Sen. Evan Bayh. “It does create momentum.” –The Wall Street Journal, October 9, 2009 Well the impending train wreck that is national healthcare so-called-reform looks to be pulling out of the station shortly: it has, we are told, “momentum.” Not “logic,” or “rationality,” or “elegance,” or “demonstrable worth.” It has “momentum.” Now, momentum is a fine and wonderful thing when it is applied to something good—like, say, an upturn in the business cycle. Business cycles start, always, as a rally in credit markets—i.e. cheap money. The availability of such cheap money then spreads from Wall Street to Main Street, encouraging spending for goods and services, which, in turn encourages new production…which creates rising employment, higher demand, and even higher employment. That’s good “momentum.” Momentum is not so fine or wonderful, however, when it is applied to something bad, like a downturn in the business cycle. Lower spending causes production cuts and layoffs, which leads to lower spending which results in further layoffs, etc. That’s bad “momentum.” Momentum, in and of itself, is therefore absolutely meaningless: what matters are the facts of the case to which the term is applied. And in this case, the facts of the so-called healthcare reform plan recently drafted by the Senator Finance Committee are this: it is in no way, shape, or form, “reform.” It is, rather, a crude political construct fostered by extortion, to the benefit of both the politicians who can claim victory while accomplishing nothing good for taxpayers, and the special interests who will never claim victory in public but will sleep easy at night knowing they have, in fact, accomplished a great deal of good for themselves. Lest we be accused of pointing political fingers—our interests are strictly mercenary, what with running a hedge fund and all—let us look at what, exactly, constitute the facts of this $829 billion bill, recently blessed by the Congressional Budget Office as a reform vehicle and deficit reducer. Big picture, the Senate bill will, we are told, insure an additional 29 million “nonelderly” Americans ten years from now, thus raising the percentage of insured Americans from 83% to 94% in 10 years. (For you home-gamers, that’s a cost of $28,586 a person over 10 years, or $2,859 a year.) We are also told that the plan will still leave 25 million Americans without insurance in 2019. That’s right: according to the Bill itself, there will be 29 million Americans newly insured, and 25 million Americans still using hospital emergency rooms as their primary form of healthcare, in 2019. How it is that the insuring of 29 million individuals at a cost of $829 billion, while leaving 25 million out in the cold, amounts to “reform,” we here at NotMakingThisUp don’t have a clue. But we’ll leave the labels for others to defend or decry while we look at how this Clearly Non-Universal Healthcare Plan gets paid for. The first way it gets paid for is this: Americans will be required to have health insurance, and if they don’t get it, they’ll pay a penalty of up to $750 a year. (It’s just like a tax, only it’s not called a tax, because the plan is not supposed to raise taxes. Go figure.) So the government, as we pointed out above, will spend $2,859 a year per person for ten years to insure 29 million people, but will only fine/tax an uninsured person $750. Furthermore, there are exemptions to the fine/tax based on income levels and “hardship situations.” The second major revenue source will be stiff new taxes on “Cadillac” insurance plans—so long as they aren’t in the name of a union member. You can see the wheels coming off the track even before the train has left the station! Now, how does the Senate bill make up the obvious funding gap? Well, it assumes cost cuts. In particular, the bill postulates that Medicare will stiff doctors by slashing payments 25%…even though this will never happen. Medicare cuts to docs get proposed every year, and every time they come up in Congress, they get blocked—as they will be blocked this year, too. Nevertheless, the Congressional Budget Office analysis which gave this Senate bill “momentum” assumes the Medicare cuts will happen. All in all, the CBO report is about as meaningful as one of those 50 page company reports produced by Wall Street’s Finest, in which the target price of that company’s shares happens to amount to a few dollars above the current share price, as it always does. Which is to say, the CBO report is not meaningful at all. Garbage in, garbage out, as we say on Wall Street. Still, you may ask—as did Marlon Brando in “The Godfather”—how did things ever get this far? How did an obvious farce of a bill, which doesn’t do the two things that it’s supposed to do—i.e. “reform” healthcare and provide “universal” coverage—get through the most influential Senate panel with what Washington calls “momentum”? Simple: it was paid for by the very same special interests that all politicians promise to banish from the decision-making process when they arrive in Washington: Big Pharma, Big Hospitals, and Big Ambulance Chasers, to name just a few. Let’s start with Big Pharma, which was the first special interest to buy off the White House, when it negotiated—directly inside that White House—an $80 billion maximum cut in drug prices over ten years. $80 billion may sound like a lot of money, but it is not: $80 billion amounts to all of two years’ worth of Pfizer’s gross profits. And that is a pittance when compared to the benefit Pfizer and the rest of Big Pharma will see under Healthcare So-Called Reform. After all, those extra 29 million newly insured American lives will mean more 29 million more mouths to swallow billions of extra pills every year. Gosh, if each one of those 29 million newly insured mouths spends just $275.80 a year on pills from Big Pharma (less than the cost of a year’s worth of generic Lipitor), that’ll be $80 billion extra cash going to Big Pharma right there. Not even George Bush would have tried to call this healthcare “reform” with a straight face. How, you may ask, did such a thing happen under Barack Obama? Not being politically inclined—we’re in business to make money, whoever happens to run the place—we think all signs point to Rahm Emanuel, the President’s Chief of Staff. He is, after all, the same Rahm Emanuel who in June told the New York Times: “The only nonnegotiable principle here is success. Everything else is negotiable.” Even, apparently, Obama’s populist principles. Whatever the reason—and for the purpose of full disclosure—we have purchased shares of Big Pharma precisely because Obama’s “reform” should make that business better than anything George Bush could have envisioned in his wildest dreams. Next up in the White House extortion caper was Big Hospital, which pledged $155 billion in cost savings in return for avoiding onerous cuts elsewhere. Medical device makers, on the other hand, were apparently asleep at the switch during the negotiations. While Big Pharma and Big Hospital were promising a combined $235 billion to push the reform ax out of their way, the medical device companies were being targeted for $4 billion in cost cuts by the Senate Finance Committee. (Don’t expect this cut to stand, however: it seems that the erstwhile populist Senators Al Franken and John Kerry—whose states are loaded with medical device makers and their employees—are now squawking at this particular aspect of healthcare “reform.”) Big Labor, naturally, never needed to negotiate with the White House, thanks to its pre-election payoffs to the Obama campaign. Despite the Senate bill’s plan to impose stiff taxes on “Cadillac” healthcare plans, union jobs will be exempt, which is fortunate for Big Labor, since its members frequently get “Cadillac” healthcare coverage. All in all, the so-called “healthcare reform” plan looks to have been put together by and for special interests, without a single actual “reform” in the bill—tort reform being the most obvious missing ingredient, for the obvious reason that Big Ambulance Chasers were on board Team Obama from Day One. Say what you like about healthcare reform—say that it is necessary, or it is unnecessary; say that it is just another government program bound to fail, or that it is an important government duty to pick up where the private sector has failed; say that it is a manufactured crisis or that it is the most serious political issue of our time—but you can’t say this bill is rational, well-considered, and logical. It is political, it is pay-for-play, and it is not reform. Indeed, it is Chicago politics at the National level. How did our most populist modern President since Jimmy Carter come to allow such a state of affairs? Well, apparently, everything—even principle—is negotiable. Still, we leave the political name-calling for others who care about such stuff. Our business is to make money. And unless something goes terribly wrong in subsequent legislative maneuvering, we think so-called “healthcare reform” provides the best opportunity for profitable investment in Big Pharma in decades. The “Audacity of Hope”? Not that we can see. More like, the Audacity of Extortion. Jeff Matthews I Am Not Making This Up © 2009 NotMakingThisUp, LLC The content contained in this blog represents only the opinions of Mr. Matthews. Mr. Matthews also acts as an advisor and clients advised by Mr. Matthews may hold either long or short positions in securities of various companies discussed in the blog based upon Mr. Matthews’ recommendations. This commentary in no way constitutes investment advice, and should never be relied on in making an investment decision, ever. Also, this blog is not a solicitation of business by Mr. Matthews: all inquiries will be ignored. The content herein is intended solely for the entertainment of the reader, and the author.

La-Z-Boy…today announced that one of its key suppliers of polyurethane foam has put its customers, including La-Z-Boy, on notice of allocation, due to the lack of availability of TDI (toluene diisocyanate), a key chemical component of polyurethane foam which is used throughout the upholstery and bedding industry. —Company press release. La-Z-Boy is not what it used to be. The former champ of America’s den has been floundering for years, the result of a let’s-try-what-everyone-else-is-doing diversification outside the beer-drinking-and-football-game-watching demographic it once owned, and the rise of better run competitors such as Ethan Allen. The company also said that this situation, coupled with the continued soft retail environment and damage to one of its plants by a tornado spawned from Hurricane Rita, will have a significant adverse impact on its results for the fiscal 2006 second quarter and potentially beyond. The “soft retail environment” is understandable, what with the rise in the Fed Funds rate from 1% a year ago June to 3.75% today. But you wouldn’t think one little chemical compound could have such a huge impact on a company as this. Kurt Darrow, President and CEO of La-Z-Boy said, “Several TDI suppliers have communicated that because of the effects of Hurricanes Katrina and Rita they have had to declare Force Majeure, a condition which allows companies to depart from the strict terms of a contract because of an event that cannot be reasonably controlled. As a result they will be limiting the amount of TDI they will be supplying which will limit the amount of polyurethane that can be produced. We have been advised by one of our significant polyurethane suppliers to the La-Z-Boy® branded product of their industry-wide notice of an allocation of 50% of normal polyurethane supply. This situation will have a greater impact on us relative to the rest of the furniture industry given the higher percentage of upholstery in our overall product mix.” Just two short weeks ago the bond market was screaming higher on jubilation (the bond market is a very dark beast, delighting as it does in horrendous economic news such as corporate layoffs and high oil prices and such) that the back-to-back hurricanes would surely cause the Fed to ease up on the interest rate pedal. But to no avail. Greenspan went ahead and raised rates for the 11th time in a row, and the two year treasury, which had dropped from a 4.15% yield pre-Katrina to a 3.75% yield post-Katrina, now stands at 4.18%. Darrow noted, “Polyurethane foam, because of the volume of storage space it requires, is shipped on a just in time inventory basis and therefore our inventories of this raw material are very minimal. Each of our divisions has a different mix of polyurethane suppliers and finished goods inventories and thus will be individually impacted. “We anticipate that the price of polyurethane will increase and that our production schedules at various plants will also be modified according to availability of supply. We will therefore work judiciously to minimize the potential interruption to our customers in all effected divisions by closely communicating with them to assess and balance their product needs to the degree possible.” A friend of mine who runs a small consumer products company tells me how difficult it can be to run a “just-in-time” operation: a single supplier can screw up the entire operation—as it has in the case of La-Z-Boy. It will be interesting to see who else is being hurt by lingering supply disruptions from two hurricanes which, according to the bond market, were going to diminish economic activity and, therefore, keep inflation at bay. Just today somebody downgraded Lear, the large auto-seat supplier, on the same polyurethane concerns affecting couch potatoes around America. Somebody should tell the bond market. This non-inflationary inflation could really start to snowball. Jeff Matthews I Am Not Making This Up © 2005 Jeff Matthews The content contained in this blog represents the opinions of Mr. Matthews. Mr. Matthews also acts as an advisor and clients advised by Mr. Matthews may hold either long or short positions in securities of various companies discussed in the blog based upon Mr. Matthews’ recommendations.

The most interesting thing I heard this week at a conference with a broad range of companies as boring as Home Depot and as comical as TurboChef Technologies was the blunt assessment of the Russian situation by Wal-Mart’s CFO, the sharp, knowledgeable and quick-witted Jay Fitzsimmons. Jay, like all Wal-Mart higher-ups, has a very broad knowledge of a very large slice of the world’s economies, and he always has something interesting to say about topics far beyond the usual why-were-comps-below-plan-last-week? nonsense that most retailers end up getting asked on their conference calls. To put Wal-Mart in perspective, sales will top one-third of a trillion dollars this year. It’s adding $30 billion to sales each year—almost two JC Penneys. And for the typical U.S. consumer products companies ranging from giants like P&G and Colgate to little guys like Acme United and Jarden, Wal-Mart is 20-25% of sales. So whatever Wal-Mart has to say about the world at large, it’s always worthwhile. For one thing Jay takes the PIMCO side of the bond trade, saying “there’s not much” inflation in the Wal-Mart shopping cart. In the food category, which is important to Wal-Mart given the successful roll-out of the company’s huge food/merchandise “Supercenters” over the last decade, inflation is running 1.8-1.9%. General merchandise prices, however, are deflating at a 1.3% clip. Summing up inflation on the one-third of a trillion dollars that Wal-Mart handles, Jay says “it’s flat on average.” That was interesting, but not as interesting to me as the discussion about Russia. It is impossible to talk about the future of Wal-Mart without talking international—particularly the opportunities in China, which are, of course, huge; as well the two other large and under-developed countries: India and Russia. Turns out India does not allow direct foreign investment in their retail sector, so Wal-Mart is not going to participate in that country’s growth any time soon. But Russia is wide open, and Wal-Mart looked closely there, and was about ready to go…but pulled back following Putin’s hostile takeover of Yukos, the country’s largest oil producer. As Jay summed up the Russian government’s hostile attitude toward capitalism: “they see a good business—they want to nationalize it.” Putin might get away with taking whatever he wants to take—a couple of weeks ago it was a newspaper; before that it was a TV station and an oil company. He’ll certainly get even more rich and more powerful than he already is. Meanwhile, great companies like Wal-Mart with the cash and human capital that could have provided an invaluable engine of growth for the poor shlubs who live under Putin (male life expectancy: 59 years) are investing their money and their knowledge elsewhere. The Russian Crisis of 200X approaches. Jeff Matthews I Am Not Making This Up The content contained in this blog represents the opinions of Mr. Matthews. Mr. Matthews also acts as an advisor and clients advised by Mr. Matthews may hold either long or short positions in securities of various companies discussed in the blog based upon Mr. Matthews’ recommendations.

Today’s New York Post–which despite its lowly pedigree does in fact have a must-read business section that occasionally scoops even the Giants of Journalism (mostly in matters of corporate takeovers)–reports today that certain U.S. newspaper chains are planning to go head-to-head, or, at least, toe-to-toe, with Google. That’s right: as Google moves into local search (if you haven’t tried Google for local search, you should, because its mapping product is so superior to Mapquest…put it this way: Google Maps is to Mapquest as broadband is to dial-up internet access) the newspapers are getting worried about losing their local advertising base to the Google monster. So what’s the newspapers’ solution? Their “solution,” according to the Post, is to opt out of Google Adsense and keep their local ads “in-house.” So when you do a Google search for lunch delivery in Greenwich, Connecticut, you would no longer, as I interpret this, find “The Plaza Diner” in Greenwich because the Plaza Diner would be advertising in the Greenwich paper, which would not be part of Google Adsense. So you’ll get all the other diners delivering lunch to businesses in Greenwich, Connecticut that use Adsense. This reminds me of the early days of Microsoft Windows, when the boys at Lotus Development Corp (makers of the Lotus 1-2-3 spreadsheet program–remember that, kids?) decided to fight Microsoft’s shift from a DOS operating system to a Windows operating system. Which, it turned out, was the functional equivalent of a 98-pound Little League batter digging his cleats into the dirt, crowding the plate, and daring Roger Clemens to throw the high, hard stuff. Microsoft obliged–as would Clemens if given the chance–and Lotus was carried out on a stretcher, into the waiting arms of IBM. Anybody used Lotus 1-2-3 lately? Will the newspapers’ plan work? Not bloody likely. Jeff Matthews I Am Not Making This Up

Poor David Stockman. One day Standard and Poor’s changes its mind about something, and a week later the former Budget Director of the entire United States loses his job. Here’s how the linkage worked, as outlined in a brief, insightful article in today’s Wall Street Journal, with background from my own experience following Collins & Aikman, the auto-parts supplier over which Stockman had presided as Chairman and CEO until S&P changed its mind about something. Dating back to a window-shade manufacturer in 1843 (no kidding), Collins & Aikman makes floors and roofs and door panels for DaimlerChrysler, GM and Ford, in about 100 plants around the world. GM and Ford are, unfortunately, around 50% of C&A’s revenue. The current incarnation of C&A was shmooshed together by Heartland Industrial Partners, following ownership changes in the 80’s and 90’s that did nothing so well as remove value from the company, for the benefit of private equity partnerships. Consequently, C&S is a highly leveraged company—not a great capital structure for an auto parts supplier—and depends on the kindness of banks as well as on more esoteric forms of debt to keep the lights turned on, not to mention the plants humming. And one of those forms of debt involves borrowing against the money its customers owe it for the products its plants are producing, i.e. receivables. Since C&A was already maxed out on its senior credit facility, the company needed to be able to access those receivables—sort of like borrowing against your future hoped-for income tax refund from H&R Block to buy tonight’s dinner for the kids. Then, S&P changed its mind about something. Specifically, about GM and Ford credit-worthiness. S&P cut its debt ratings for both companies to junk, which triggered a reduction in the amount C&A could draw on its receivables facility with GM and Ford, which triggered violations in C&A’s own capital structure, for which it had to get waivers to keep buying the groceries. Hence, the Chairman and CEO of C&A, David Stockman—whose main credentials for those job titles appear to be that he is a founder of Heartland, which still owns a big chunk of C&A stock and had the bright idea of loading up a capital-intensive, highly cyclical company with debt—resigned his positions after the company disclosed that it faces major liquidity issues following the S&P downgrades. And what about Standard & Poor’s, which triggered the whole mudslide when it downgraded GM and Ford debt? Well, yesterday S&P helpfully warned that Collins & Aikman itself might have to seek bankruptcy protection, “in the near term.” In the grand scheme of things, the travails of a relatively small auto parts supplier in Troy, Michigan, do not mean a whole heck of a lot outside the terrible consequences for the employees who are going to get screwed thanks to the short-sighted machinations of the private equity groups that drained the company of whatever liquidity they could find. But the next time the Fed raises the Fed Funds rate and a talking head on CNBC says “rates don’t matter…”—remember how David Stockman lost his job. Jeff Matthews I Am Not Making This Up The content contained in this blog represents the opinions of Mr. Matthews. Mr. Matthews also acts as an advisor and clients advised by Mr. Matthews may hold either long or short positions in securities of various companies discussed in the blog based upon Mr. Matthews’ recommendations.

I suppose you can make a case that Google is a low value-add search provider ready to get its clock cleaned when Microsoft wakes up and does whatever it wants to do to wipe Google off the map. Personally, I’m not sure how Microsoft will ever get its act together, given an operating system under perpetual virus attack, and a founder who spends two weeks a year sitting by a lake in a cabin Thinking Big Thoughts About Technology (see “Bill’s Hideaway” from March 28, 2005) while anonymous engineers in Mountain View are dreaming up slick and useful new technology like Google Maps. Besides, as I have pointed out here before, Microsoft’s M.O. is to give away something—like a database or a spreadsheet or a web browser—along with its operating system in order to undercut the Borlands and Lotuses and Netscapes of the world. But, since Google doesn’t charge the user for search, Microsoft can’t undercut free. Yahoo, meanwhile, appears to want to be the Warner Brothers of the web—owning and charging for content—which makes sense given its CEO’s previous gig at Warner Brothers. I’d argue Google could eventually displace Microsoft as the most important, and profitable, technology-based company. Before you spit out your coffee at that, consider this: it took Microsoft 15 years from inception to reach $1 billion in sales. It took Google 5. And it took Microsoft 18 years to reach $3 billion in sales; Google 8. Unlike the early internet companies during the dot-com boom that generated fake sales via non-cash swapping of services, Google’s business is cash-based, quite real, and being taken from newspaper, radio and television advertising media of all stripes. For example, in the first quarter of 2005, Google’s revenues hit $1.256 billion, versus $249 million the same quarter of 2003. Meanwhile, at the New York Times, revenues in the like period jumped a non-whopping $21 million, from $784 million to $805 million. For Dow Jones, the increase during the same period of time was a modest $54 million, including acquisitions. The thing I admire most about Google is that everything the company does is intended to drive more traffic on its highway. That single-mindedness—which is perceived as a weakness by skeptics of Google’s business model—is, in my opinion, management’s best quality. It reminds me of Wal-Mart, which has one mission in its corporate life: to get customers into the stores. And it leads me to believe Google will succeed in fending off perceived threats to its dominant position, whether from the Evil Empire in Redmond or the Yahooligans in Sunnyvale. One group that poses no threat to Google are the Overstockians based in Salt Lake City, and tomorrow we will see how many of those steal-of-a-lifetime diamonds Patrick and the crew sold this quarter. Jeff Matthews I Am Not Making This Up The content contained in this blog represents the opinions of Mr. Matthews. Mr. Matthews also acts as an advisor and clients advised by Mr. Matthews may hold either long or short positions in securities of various companies discussed in the blog based upon Mr. Matthews’ recommendations.