Friday, January 31, 2014

Google's sale of Motorola -- profit or loss?

There's a flurry of articles about Google's sale of Motorola. For example:
this report gives the broad details on the deal with Lenovo.

Most articles are negative, concluding with a "buy high, sell low" message.

In contrast, I think the deal was good for Google. My calculations:
  •  purchase = $12.5B
  •  Motorola cash+investments = $5B
  •  sale of Motorola set-top division = $2.4B
  •  sale of Motorola handset division = $2.9B
That equates to: 12.5 - (5+2.4+2.9) = $2.2B total cost

This columnist came to a similar conclusion but estimates a total cost of $3.2B.

There were probably other tax-loss benefits and some R&D credits to help Google.  They might be offset by about $1B in losses for running the money-losing company for about two years.  Motorola lost $100-200M/quarter on the handset business.

If the patent portfolio is worth over $2-3 billion, then Google comes out ahead on the whole deal.

Google may even show a profit if tax losses from Motorola are realized.
These might be worth $6.5B spread over the next half-decade.

Tuesday, January 14, 2014

resident vs citizen

Will a two-tier citizen system emerge?
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With the current Congressional debate over aliens living in the US, will the notion of citizenship change?
For example, could a person legally live in the US without being a citizen?  Today that is allowed with "green cards", student visas, guest worker permits, and other exemptions.
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But there are many people -- maybe as many as 10 million -- that reside in the US illegally without having a legal permit.  What should be done with them?
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Maybe Congress will move to a two level system.  Citizens have all rights and protections. Residents have the protections of living in the country but do not have all privileges.
<p>
If such a 2-class system is established, what happens to citizens that lose privileges or rights?  For example, convicted criminals lose the right to own firearms, vote,  the right to live in certain locations, or the right to hold certain jobs. Are these people still citizens?

Thursday, January 2, 2014

Abenomics after 1 year

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It's the end of the first year of Abenomics.  Prime Minister Shinzo Abe won election in December, 2012.
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Abe introduced several measures to help Japan's poor economy and battle deflation.  Under Abe, the Bank of Japan in January set its inflation target to 2%.
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So far the results are mixed.  While the risk of deflation looks lower, the main effect has been in the value of its currency.  The yen has weakened against the dollar by about 20% in 2013 and is likely to continue weakening in 2014.  Japan may be fixing its deflation internally by exporting deflation.
<p>
There are many unanswered questions about Japan:
  • what effect will its shrinking population have on the economy?
  • how coupled is Japan's economy with China's?
  • will Japan's economy grow?
  • how will Japan's huge debt level (over 200% of GDP) be resolved?