SiliconBeat

Twitter is getting all sort of high-fives and hosanna’s from techland for its new patent policy.  In essence, the company vowed to cede control of patents to the employees who created them and only to use them for defensive purposes. Though both of those policies turn out to be a bit squishier than at first glance.

Whatever happens in actual practice, this move is more symbolic than practical. Yes, it’s a wonderful gesture. And it’s a way of trying to make a statement that Silicon Valley’s patent wars have gotten completely out of hand. But beyond that it’s wishful thinking if you believe many companies are going to follow suit.

Simply put, any public company that made such a move would be crucified by its shareholders. Indeed, it’s quite likely that even a private company like Twitter probably shaved a bit off its valuation today. And should it ever get serious about an IPO, you can bet it will be grilled on this topic by institutional investors.

It’s not that I don’t applaud Twitter for doing what it did. The escalation of litigation surrounding patents among Silicon Valley companies is sickening. Whatever feelings we once attached to the word “patent” have now been completely obliterated. There’s no getting around the fact that patent is one of the dirtiest words in Silicon Valley. Read the rest of this entry »

Timed to our delayed tax day, the Greenlining Institute has released a report called: “UNTAXED: Tax Avoidance in Silicon Valley and How America’s Richest Company Pays a Lower Tax Rate than You Do.” (PDF) The report focuses on the 30 largest tech companies in the Fortune 500, and discovers to no one’s surprise that the effective tax rate they’re paying has continued to decline.

Before I continue, a note: Greenlining acknowledges that its data is imprecise. Greenling uses a company’s “cash taxes paid,” which includes money paid from taxes for past years but also doesn’t include taxes that might be owed but are deferred from the current year. As Greenlining says:

“While imperfect, this is the best estimate of how much a company actually pays in taxes in a given year. Until the government or the Financial Accounting Standards Board requires companies to report more, this is the best figure available.”

With that in mind, the Greenlining report notes:

• “The tax rate paid by these companies has plunged – from 23.6 percent in 2009 to 19.9 percent in 2010 and 16 percent in 2011. The hypothetical top corporate tax rate of 35 percent is almost entirely a fiction.”
• “The amount of cash held overseas by these companies shot up by 21 percent from 2010 to 2011,
  to just under $430 billion. Apple and Microsoft had the biggest increases in cash held offshore.”
• Regarding Apple: “With profits soaring
  past $34 billion last year, the company’s tax rate fell from 24.8 percent in 2009 to 14.7 percent in
  2010 and 9.8 percent in 2011.”

So how are they cutting their tax bills?

Read the rest of this entry »

In May 2010, I wrote a critical column with the headline: “Start-ups still don’t know the way to San Jose.”

The key points:

“Among the region’s municipalities, San Jose ranked 11th in venture capital invested in startups in 2009, behind not just Palo Alto but also San Carlos.”

And:

“First, let’s look at the numbers. According to PricewaterhouseCoopers, 43 companies in San Jose received $262.5 million in venture funding last year.
Compare that to San Francisco, which sits at the top of the list with $1.01 billion invested in 173 companies in 2009, and Sunnyvale, which was No. 2 with $662.9 million. It’s even less than the $290.8 million for San Carlos and the $266.5 million raised in Menlo Park.”

For a city that fancies itself the “capitol” of Silicon Valley, this seemed like a shocking deficiency. I disagreed with Mayor Chuck Reid’s assessment that this wasn’t such a big deal, that San Jose has traditionally been more focused on luring companies down the Peninsula as they grow.

In any case, while putting together a column about San Francisco’s reputation for being hostile to start-ups for this past weekend, I found some good news for San Jose. Read the rest of this entry »

In early January, I started a column with this snarky take:

“New Yahoo CEO Scott Thompson is not a man with a plan.”

And later, I wrote:

“He needs to make clear he has a sense of urgency, which I did not detect. Yahoo’s various stakeholders are not going to sit on their hands waiting for a plan.”

On this much, it turns out I was wrong. Since taking the helm at the start of the year, Thompson has been a whirlwind of activity. He’s announced 2,000 layoffs. He unveiled a major reorganization today. And, of course, he launched a major patent lawsuit against Facebook.

So he has a plan. And he’s moving fast. Fine. But the real question reamains: Is there any reason to believe Thompson has a plan that will turn Yahoo around? If there is, I’m still not seeing it.

Read the rest of this entry »

It doesn’t take much to start an insta-campaign these days against someone or something thanks to social media. So when an editor emailed a link to a story about Netflix creating a new SuperPAC to support SOPA, I could see this would be a story that was going to prompt a strong backlash against a company that doesn’t really need another one at this point.

Sure enough, it appeared Anonymous seemed to be making some waves with an anti-Netflix campaign at: #OpBoycottNetflix .

So, I decided to look for the offending document, and found instead a generic registration for a Political Action Committee filed on April 5 that seemed pretty benign. No mention of taking any positions on SOPA or any other insues.

Then I emailed the company. Noting that the original report about the PAC came from the “Russian News Agency,” a Netflix spokesman said:

“PACs are commonplace for companies that lead a big, growing market and Netflix is no exception. Our PAC is a way for our employees to support candidates that understand our business and technology.  It was not set up for the purpose of supporting SOPA or PIPA.  Instead, Netflix has engaged on other issues including network neutrality, bandwidth caps, usage based billing and reforming the Video Privacy Protection Act.”

Read the rest of this entry »

Thrilled to see two companies near and dear to my heart joining forces! Congrats @instagram @facebook @kevin @mikeyk blog.instagram.com/post/207850138…

— Matt Cohler (@mattcohler) April 9, 2012

Matt Cohler

If there is a second happiest person in this whole Instagram Facebook $1 billion deal, it has to be Matt Cohler. Last February, Cohler, 35, led a $7 million venture round into Instagram, which had only four employees and had just launched its app four months earlier.

At that point, Instagram was enjoying meteoric growth. And yet, the founders seemed intent on taking things slow. By comparison, a month later, Color raised $41 million for a photo-sharing social app that had yet to launch. Let’s just say the first effort fizzled, and Color is trying to pivot.

So it was a coup for Cohler to get his, and Benchmark’s, feet in the door at such an early stage. Read the rest of this entry »

The news that Facebook has bought Instagram makes perfect sense. Mobile is the future, and Facebook’s own app efforts have been the subject of much criticism. And more problematic, it remains a vulnerability going forward because of the lack of mobile revenue.

Instagram won’t provide any revenue, not any time soon. Maybe not ever. But it does provide a great mobile experience the meshes well with Facebook. You don’t share Instagram photos on an Instagram Web site, after all, you share them on the app, on Facebook and on Twitter.

But paying $1 billion? Well, that’s crazy money. Even if Instagram was raising money at a $500 million valuation last week, saying Instagram, after 18 months, is worth 1 percent of Facebook’s reported $100 billion valuation is simply insane. And this comes just a couple weeks after Zynga paid $180 million for OMGPOP just six weeks after that company released the white hot app Draw Something.

To put that $1 billion in perspective, Google paid $1.65 billion for YouTube in 2006. Yahoo reportedly paid $35 million for Flickr in 2005.

Clearly, the $1 billion was either a pre-emptive move, an offer Instagram couldn’t refuse, or there were multiple bidders in the game, driving up the price. I’ll be curious to see how much Facebook is required to disclose about the history of the transaction when it updates its S-1.

But I also wonder if this will now trigger a larger bidding war for the most popular mobile apps out there?

Read the rest of this entry »

Anti-Nokia poster from Iran

All those demonstrators in the Middle East using mobile technologies to connect and shoot video and organize had to be getting their phones from somewhere, right? One of the sources is Nokia, which has also provided networking equipment to several countries on the U.S. State Deparment’s list of so-called “terrorist states,” according to filings with the U.S. Securities and Exchange Commission.

To be clear: None of this is necessarily illegal. But still, after facing a bit of backlash, Nokia seems to be beating a hasty retreat from one these countries (Iran) even while defending the sales of mobile-related phones and networking equipment as providing a social benefit. And that raises an interesting dilemma.

Nokia and others have faced criticism for providing technology that such countries use against their citizens. But if telecom companies abandon such countries, how will it impact citizens’ ability to get and use mobile technology? If these countries can’t get equipment, how will they maintain their networks? And if citizens can’t get new phones, what happens when their current ones go kaput?

There are no clear answers, of course. And it’s likely other overseas telecom providers would step in to fill the void. But Nokia’s recent filings got me thinking about how to set the right balance between arming activists with valuable tech tools while making sure hostile governments aren’t using them against their people. Read the rest of this entry »

Late Monday, the Wall Street Journal reported that Groupon was under scrutiny by the U.S. Securities and Exchange Commission regarding its plans to restate its earnings.

No surprise, because it seems that Groupon has been under the SEC’s microscope since the moment it filed its first prospectus last summer. As has been well reported, Groupon had to revise its IPO filings several times in response to SEC questions.

But after the Journal story, I went back to read the exchange of correspondance letters between the SEC (here) and Groupon (here) to see just how rough the process was. Turns out: Pretty contentious. Read the rest of this entry »