I Create Nothing. I Own.

One private equity and one management story about ailing companies and the people who profit from them from the NYT today: The first is an exposé from the NYT about Simmons mattress company, having been bought and sold several times over is now filing for bankruptcy. Their previous owner, Thomas H. Lee Partners of Boston, have made over “$77 million in profit” from the filing. The second, about Tribune Corporation and how Sam Zell has loaded the company up with debt, filed for bankruptcy and is now asking for large bonuses from their bankruptcy court.

Both stories showcase how a few people are fleecing giant companies before they are about to sink – an age old story in American business but one that seems even more revolting in a time of 10% unemployment rates.

At the risk of sounding naive, I wonder if American business isn’t eating themselves to death? It seems that the companies who produce – in this case a bed-maker and a newspaper – are looked upon as nothing more than a host with assets and money for the taking. In the case of Simmons, I am reminded of a parasite who lives off of its victim until it finally dies.

So What’s Next for American Companies That Produce?

With the understanding that Tribune is facing problems going far beyond just its management (dying newspapers, for one)
This story is all too familiar. Did not Gordon Gecko say himself “I create nothing. I own.”? It seems to be the mantra of corporate governance – particularly in the case of management and private equity.

What will help the US in the long term is divesting itself from companies that are being syphoned dry and spiraling into debt because of the their managers and owners. Instead, investing in companies that are nimble enough to stay ahead of predatory management techniques and PE buyouts and (that can turn a profit without being squeezed because of massive debt) is the key to longevity in American businesses.

Where are some American manufacturers and content producers that exist not just because they are ripe for the taking? What producers are leading in production and innovation? It is companies like these who who willl help the US economy – both from an employment perspective, as well as from an investment perspective – as they find ways to profit from their own innovation.

As as this site finds them, it will be sure to point them out.

Filed under: Bankruptcy, Business, Management

How Much For a Tweet?

With social-networking phenomenon Twitter “valued” at 1 billion dollars there’s a few fundamental questions I ask myself about said valuation. First of all, what is Twitter’s business model for future revenue? The access to millions of users, at 140 characters per person, is a start. Companies such as FedEx, Microsoft and other major players have used twitter to advertise new products through the service with updates given to the “followers” of their twitter feed. This form of advertising is indeed a novel way to access the millions of users who have the service.

But 1 billion dollars worth of twitter ads? Is that a lot or a little? One way to find out is how much a comparable service makes in advertisements – but there aren’t any. Twitter is category-killer in a category that it made up on its own. Which begs the question. How, exactly, is this business being valued when there are no previous models for something like it. With all due respect to Twitter’s investors, they probably know something I do not. But I sure would like to know what that is.

More worrisome is Twitters lack of any business model that they are willing to show the public. They have ruled out advertisements embedded in the site, which leaves me scratching my head as to how advertisements will be delivered to users in any way other than by “tweets” from advertisers. Other forms of revenue have not been elaborated upon other than that they are forthcoming.

So what does this mean for the regular investor? Well nothing right now. Twitter is a privately held company and as such are not answerable to people like me who would really like to know how they have been valued.

But here’s a little hunch I have:Twitter’s revenue model is nothing more than preparing itself to be sold to a larger company. That’s it. For a company like Google, a billion dollars is probably not very much. And for the investors who are putting there money into Twitter, they stand to make a good profit should Google or another public company – always in need for expansion – open up their purse strings and buy it.

Much like Rupert Murdoch’s blockbuster purchase of Myspace.com, a purchase of Twitter could prove to be a very expensive proposition with what would amount to be unclear returns. Does Google know that? Perhaps it’s a risk they are willing to take.

Filed under: Business, Tech , social networking, technology, twitter

Migrant Workers in Beijing

From Shanghaiist.com

Current TV: The Big Move

You must have heard it many times by now that China is currently witnessing the biggest mass migration the world has ever known. The government says there are about 120 million migrant workers on the move, while some experts contend that there are over 200 million. They are building the apartments that you live in, the offices that you work in, and the malls that you shop in. What is life like for them? Current TV’s Laura Ling tells us.

Other episodes in this excellent three-part series relate to Mexican workers in the US and Iraqi refugees living in Syria.

Filed under: China, Misc

Brits Get Rich In China

Yes, there’s a lot of hype surrounding business in China. I have a feeling it is not going to be smooth sailing for any man who wants to make a buck (pound) out there, and I fear that – as what happened in the dotcom and real estate booms – the party is going to end sometime not too far off. That said, this program shows some of the insights into English businessmen making inroads to setup shop in China, much like many have before them. Insightful at the very least…

Part 1:

Part 2:

Part 3:

Part 4:

Part 5:

Part 6:

Part 7:

Filed under: Business, China