No need. The Digital Divide has now been bridged by smartphones - the most advanced personal computing devices ever. While personal computers were disproportionally used by the rich, the white and the male, smartphones are more likely to be used by Blacks and Hispanics than Whites, and by girls as equally as boys.

Whites Trail In Smartphone Ownership

According to a Pew research survey conducted last year, 49% of Hispanics and 47% of Blacks own a smartphone, compared to only 42% of Whites. The survey also revealed than men and women were about evenly split (46% to 45%, respectively) in smartphone ownership, as were suburban and urban residents (49% to 48%, respectively).

Only The Income Gap Remains

Mobile computing is a fast-moving revolution that is spreading online access to all who welcome it. In fact, the majority of adult Americans and more than a third of teens now own a smartphone. That said, household income remains a differentiator - there is still a clear gap in smartphone ownership between rich and poor.

Expect this too to disappear very soon as prices continue to fall.

Android smartphones and the latest Nokia Asha devices, for example, are available for less than $100 (no contract needed) all around the world. In the U.S., many smartphones now come free with a carrier voice and data plan. Prices for devices and services will almost certainly continue to drop.

In an interview with Bloomberg last month, venture capitalist Marc Andreessen noted that "$50 Android smartphones" would be available this year.  Carriers that demand fees that millions cannot afford are likely to be routed around - by Google fiber as likely as legislation. Fewer and fewer people, particularly in the United States and other rich countries, will be denied always-on, any-place connectivity to the global Web.

The Smartphone Is The Computer

Naysayers like to retort that smartphones don't fully erase the Digital Divide because, even more than tablets,they are primarily "consumption" devices. While "real" computers, the argument goes, can be used to create things and do real work, smartphones are all about downloading content and chatting on Facebook. 

Work is changing, however, in many cases to take advantage of the spread of smartphones.  Such changes may, in fact, disproportionately favor minorities. A separate Pew study last year revealed that Blacks and Hispanics are more likely to use their mobile devices for a wider range of activities than do Whites. 

(See also Teenagers & Smartphones: How They're Already Changing The World.)

Further, some have called the notion that smartphones are not designed for "real work" an elitist view: 

To discount identity performance, socialization and other activities on social media as not productive, not educational, not meaningful, pure entertainment and a waste of time offensively reduces less privileged folks as “an other,” less worthy and less human.

Productivity Divide?

If smartphones connect an increasing number of Americans to knowledge resources, job opportunities and cultural amenities, are they  delivering a clear and calculable economic benefit equivalent to that provided by PCs? 

It seems that economic analysis has simply not yet caught up with the impact smartphones are having on work and the economy. The Wall Street Journal reported recently that already today's smartphones possess the computing power of a "desktop" in 2005 and that "at heart [smartphones] are like all computers before them. They are efficiency engines, a means of saving time, bridging distance, reducing cost."

Nonetheless, the Journal acknowledges that proving smartphones' aggregate economic value remains difficult: 

Yet there's something bizarre going on. Even as an estimated 130 million smartphones roam the U.S. streets, economists can't quite find them.

Still, as the Journal also states: "Can you find an area of life and business not being affected by the devices?" 

Global Phenomenon

The situation may be even clearer overseas. Already, 89% of the developing world has a mobile device. It's a solid assumption that these mobile phone users will soon transition to smartphones. Indeed, smartphone sales now eclipse traditional mobile phone sales. According to the International Telecommunication Union, "mobile broadband" subscriptions have grown from 278 million in 2007 - when the iPhone was first introduced - to 2.1 billion this year.

These numbers continue to grow - and researchers say the trend is already making a big difference:

• Bridging The Digital Divide In Developing Nations Through Mobile Phone Transaction Systems - University of West Georgia
• Mobile Finance Options Changing Lives In Developing Countries - Bankless Times
• Mobile Technology's Role In Combating Global Poverty And Enabling Entrepreneurship - Brookings Institution
• Alleviating Poverty: Mobile Communications, Microfinance And Small Business Development Around The World - Brookings Institution

As smartphones continue to spread to every demographic group in every corner of the world, there's just no more room for the Digital Divide. That's a big deal, and likely to bring significant economic, social and cultural effects over the coming months, years and decades.

(See also The Numbers Are Clear: Mobile is Taking Over the World.) 

Lead image courtesy of Shutterstock.

So we asked seven young founders from the Young Entrepreneur Council (YEC) - many of whom have been through the acquisition process - to share reasons why an early-stage exit might not work out, along with their best advice for making sure things do go as planned:

1. Prepare Records And Documents

When there are different perspectives on how a company should be valued, it’s hard to reach a price agreement. Different visions about where the marketplace is headed can impact perceived value. And investors who want an unrealistic return on their investment can prevent deals from getting done. Practical and personal issues can also bring an acquisition to a halt, including technology differences that make integration difficult and key team members who don’t want to work for the acquiring company.

Proper acquisition preparation can help. All your accounting records should be in order, prepared in accordance with generally accepted accounting principles (GAAP). Your corporate governance, legal records, HR and employee documentation should also be in order and easily shareable. - David Ehrenberg, Early Growth Financial Services

2. Avoid A Funding Gap

Often, venture capitalists don't get involved with a startup until a larger amount of capital is needed, and this can create a funding gap.

The best piece of advice for founders preparing for an acquisition is to get ready for change. What used to be yours isn't anymore, and you need to deal with these changes in order to make the acquisition successful. - Andrew Schrage, Money Crashers Personal Finance

3. Build Cash

One big reason early-stage exits go south is that as part of the due diligence process, there is an intense focus on the company financials. The debt you have and the cash you have in the bank matters. Oftentimes, entrepreneurs try to focus on keeping their tax burdens down by minimizing their taxable profits. While this strategy may make sense early in your business life, when you begin thinking about exiting, you want to have at least two years of higher profits. Get ready to write big checks to the IRS if you are thinking about exiting.

Second, investors want the company to have cash in the bank and debt to be low; this shows great company health. It makes it easier to justify getting a valuation at three to five times annual revenue. - Raoul Davis, Ascendant Group

4. Align Expectations

I've sold two companies, and both have had different outcomes. The main thing I would suggest is ensuring that your expectations and theirs are aligned. Many times, founders are so eager to get the deal done that they fail to consider "life after acquisition," and how this change will affect their happiness. The top three things to consider:

1. Operational roles, responsibilities, and expectations: Will you maintain your freedom to create?
2. Product road map: Where does your product fit into the acquiring company's overall strategy, and what happens if things change?:
3. Earn-outs and changes to the company What happens if the earn-out is tied to a result that you don't have any power to affect? What if the acquiring company gets acquired? It happens.

5. Practice Due Diligence

Whether a startup or Fortune 500 company, people looking to sell should practice due diligence on their own companies before handing things over to a prospective acquirer. Mistakes and oversights can be corrected, and if they cannot, the damage can be minimized. It will be very bad for your asking price if you are sitting at a negotiating table and your prospective buyer informs you that the contract for your biggest customer cannot be assigned, and that contract will have to be renegotiated. It will be even worse if doubts about your IP ownership arise as you are looking to sign the deal.

These sort of issues, and many others, are going to come to light one way or another. Make sure that when they do, you are the one in control of the situation by doing your homework ahead of time. - Peter Minton, Minton Law Group, P.C.

6. Avoid Under-Valuations And Mismanagement

Your company could be undervalued. If you wait a few more years and continue to grow your revenues, you will get closer to your maximum valuation. Keep in mind that acquisitions are often mismanaged, or the new leadership falls apart and hurts the brand. All the hard work you put into building your business could go down the drain. - Peter Nguyen, Literati Institute

7. Find A Culture Fit

Most important is culture fit. Whether you're getting acquired or merging with another company, it's equally important. We've acquired another company, and getting both teams to integrate and act as one under a mutual value set was crucial to the transition. We walked away from an acquisition opportunity because the cultures were not aligned.

Things to discuss and look for in action at a company are values, beliefs, outlooks and expectations. Other things I've found to be important are the company's risk tolerance, as well as its ability to change and adapt. As entrepreneurs, sometimes we forget not all companies are comfortable testing and pivoting. - Lauren Perkins, Perks Consulting

Pinterest is a three-year-old start-up with what is rumored to be no revenue to date. Zero. In fact, by all accounts, it hasn’t even attempted to generate revenue yet. In three years! Hard to fathom in this day and age, isn’t it?

And, yet, some of the sharpest minds in the venture capital community are so confident in Pinterest’s team and business that they recently invested in the company at an eye-popping valuation of $2.5 billion. Yes, billion!

If you were involved in the Internet economy of the late-1990s, as was I, you may be rolling your eyes right about now and muttering to yourself about Pets.com, Kozmo, Webvan, theGlobe.com, govWorks, Boo.com, eToys and all the other so-called-companies that were, for one brief moment in time, valued as if they had discovered the cure to cancer, only to be out of business a few short quarters later. Ahh... the memories.

Assuming that Pinterest’s investors share many of the same recent memories (or, more aptly, nightmares), what could be so compelling about the company and opportunity that would justify their support of such a lofty valuation this time around?

Passion At Scale

In short, I believe it is the economics of passion at scale.

Pinterest, in its own words, is “a tool for collecting and organizing things you love).” (Italics mine.) By pinning images from around the Web to their own board(s) or browsing others’ pinboards for images (which can then be “liked” or “re-pinned” to their own board(s)), users are able to create, manage, share and discover highly personalized image collections that define their passions.

Vintage fashion. Wind surfing. Gourmet cooking. Disneyana. Digital photography. Wedding gowns. Home decor. Camping. Italian design. Rolex watches. Travel planning. Architecture. Mid-century furniture. Urban farming. Knitting. Cross-Fit... The list of people’s passions is literally endless; and, Pinterest helps its users collect, organize and maintain all of them. On their own (or, with the help of the broader community). In granular, image- and/or SKU-specific detail.

Self-identified passionistas on a product-by-product basis — are you kidding? I’m not sure a marketer or merchant could dream of more fertile ground among a set of unknown people, short of seeing a prospective customer standing directly in front of items on a shelf, with cash already in hand. And, I’m not even convinced that would be more compelling on a long-term basis.

What could possibly be better? How about having that level of insight into the interests and intents and aspirations of not hundreds of thousands, but tens of millions, of people per month! According to press reports, Pinterest is already doing just that, hosting roughly 30 million unique monthly visitors who are generating more than 2.5 billion page views, the majority of which are likely coming through little more than domestic word-of-mouth promotion.

Fast forward three years and I think it’s entirely reasonable to assume that Pinterest is successful at growing its user base and traffic flows by 5 times, fueled by existing users continuing to build out their identities, waves of more mainstream domestic users finally catching on and contributions from millions of new pinners (their word, not mine) in overseas markets. That’s a lot of passion under one roof!

Passion Pays

On the business side of the house, passion pays. Extremely well.

Advertising, alone, could generate several hundred million dollars of revenue per year. Let’s say, hypothetically, that Pinterest follows in the footsteps of virtually every sizable media company on the planet, by introducing advertisements of some sort across its pages in the next few years. With marketers across every vertical likely salivating at the prospect of reaching into the company’s massive, impassioned and finely segmentable audience, it seems more than plausible that advertising rates across the company’s site could be at least 50% higher (if not considerably more) than the current industry average. Accordingly, with 12.5 billion page views per month (three years from now) and a site-wide CPM of, say, $4, Pinterest would generate advertising revenue of roughly $50 million per month, or about $600 million per year.

And yet, despite this sum, Pinterests more intriguing revenue opportunity at Pinterest lay in its role as a direct facilitator of online commerce.

Passions, as we all know, cost money — lots of it, over extended periods of time; and, it is money that we are, on some level, actually excited to spend. So, whether it’s a weekend warrior who pins a Burton snowboard, or a hobbyist portrait photographer pinning a Zeiss lens, or a budding interior decorator who pins the perfect accent table on Fab, Pinterest has the potential to become an economic kingmaker when these enthusiasts transition into consumers looking to purchase the goods/services that bring their passions to life.

Projecting Pinterest's Numbers

To appreciate the financial implications of Pinterest’s role in the transaction cycle, think of the service as a massive affiliate that gets paid for delivering customers to online merchants. If just ~3% of its 150 million+ users (three years from now) decide to indulge in their passions by clicking from a "want-to-have" product image on one of their own Pinterest boards to a relevant online merchant, the company could claim a direct role in driving 4.5 million transactions per month. Assuming an average transaction size of $200 (remember, people are buying their passions, not everyday staples), Pinterest’s users would account for ~$900 million worth of monthly purchases. Were the company to receive a 7% affiliate “take”/lead fee/commission on these sales, it would generate transactional revenue of about $60 million per month, or $720 million per year.

As if annual revenue of $1.3 billion (from just two sources) weren’t enough, the company’s margin profile has the potential to be the envy of most. Based on my 15+ years of experience evaluating a wide variety of online marketplace business models, it wouldn’t surprise me if Pinterest were able to sustain gross margins of 90% or more and adjusted EBITDA margins comfortably in excess of 25% (even while continuing to invest heavily in future growth). At these levels, the company would generate adjusted EBITDA of approximately $325 million per year.

Worth It? Or Not?

So... were Pinterest’s investors ultimately wise to value the company at $2.5 billion? No comment.

Will the company generate any annual revenue, let alone $1.3 billion, and adjusted EBITDA of $325 million in a few short years? I don't know.

Will Pinterest eventually be worth $5 million or $50 billion? I can’t wait to find out.

Those purposeful vagaries aside, though, I clearly see the underpinnings of a company with tremendous potential and, if I squint just enough, a business that could be the driver of billions of dollars of passion-fueled online commerce each year — and that’s a position that few companies ever even have the chance to dream about.

Facebook's stance: before going public last May 18, "...it had no obligation to publicly disclose internal projections on how increased mobile usage and product decisions might affect future revenue," reports Reuters. In other words, Facebook thinks the investors collectively suing it are trying to enforce an SEC rule that has been ignored for decades - just because the stock ended up tanking after the IPO. The lawyer representing the plaintiffs has not responded. 

(See also Bitcoins... What Are Those Again? [Video])

Once thought of as no more than a fringe Web fascination, the currency has rocketed into to the mainstream conciousness. A catastrophic valuation dropoff last week made headlines around the world, often highlighting topics like the Winkelvoss twin's huge bitcoin stash and the Reddit user who invested his entire life savings in Bitcoins - and cashed out at an enormous profit. 

Despite the turmoil, or perhaps because of it, some real businesses have begun accepting Bitcoins. Last Tuesday, for example, online-dating site OkCupid announced it would take Bitcoins as payment for its "A-list subscription features." Some of these businesses could be positioning themselves for a day when the currency actually catches on, but most seem to be looking for some of Bitcoins' cool factor to rub off on them. (Businesses can limit their Bitcoin risk by clearing out their transactions daily using services like Coinbase.) 

The Benefits Of Bitcoins

In simple terms, Bitcoins are a way to turn recognized currency like U.S. dollars into a digital equivalent that can be used to buy products. Bitcoins can also be stored digital wallets for later use. The exchange rate fluctuates constantly, set by a collective belief in what people will pay for them. The value of a Bitcoin sat at $119 as of Friday afternoon (down from an all-time high of $266). 

The benefits of using Bitcoins come in two basic flavors: anonymity and the ability to operate outside the traditional monetary system. No surprise, Bitcoins are a primary method of online payment for illegal drugs and weapons on online black markets. But Bitcoins are also a way to avoid dealing with PayPal, Amazon and other online payment methods that many Web users dislike. The fees are reportedly lower, and the transactions are instantaneous because they don't have to move through a bank.

Buying Stuff With Bitcoins

So what can you actually buy with Bitcoins? It turns out that enough different companies accept Bitcoins that you could use them to buy almost everything you might need. Want to buy clothing, homemade cosmetics or train tickets? Bitcoins can do all that, and more. 

But Bitcoins remain very much a niche payment method. In accepting the currency, OKCupid joined the ranks of a very small circle of large Internet companies particpating in the system. Others include WordPress, which will sell you everything from Web hosting to CSS packages in exchange for Bitcoins. WikiLeaks and 4chan, meanwhile, are part of a growing list of online organizations that accept Bitcoin donations. 

OkCupid could pave the way for more large-scale Web companies to explore alternative payment schemes. "One of the reasons why we want to be early in the mix is so we can learn," said OkCupid co-founder Sam Yagen in an interview with Ars Technica. 

Will Trade Bitcoins For Food

Living off Bitcoin transactions alone might still be difficult, but at least you won't starve. Last week Foodler became the first food-ordering and delivery service to accept Bitcoins. (Other sites like PizzaForCoins.com let you pay the site in Bitcoins and then place your order for you in U.S. dollars, charging a 0.02BTC fee.) 

"We're helping the community and want to support that community and it seems like a natural progression," said Christian Dumontet, a co-founder of Foodler. In as little as six minutes after initating the transaction through Foodler's website - which uses a Bitcoin deposit address and QR code to handle the exchange - hungry users get an email confirming the rate in U.S. dollars at which they were charged. Bitcoins can be fractioned down, so you don't have to order $119 worth of dinner at a time. 

Dumontet acknowledged that using Bitcoins for food delivery is of interest largely to core enthusiasts of the currency; "It's a small fraction of our online orders," he said, about 20 orders a day. "But that's how it starts," he added. "Every day since we've launched it, we've seeing an increase in usage." 

Top image courtesy of Shutterstock. 

With the ongoing budget crisis, pressure for the IRS to recover lost revenue has never been higher. Conveniently enough, the agency has made massive investments in its computing power and tools for crunching big data, allowing for more automation and rapid analysis. That means a greater capacity for robo-audits and less room for honest mistakes.

It's not just the tools that have improved. The data itself is richer and more varied than ever, drawing increasingly from whatever details about our digital lives the IRS can get its hands on, including information that isn't publicly accessible. We don't know the full extent of the IRS's data-mining capabilities, but recent reporting has revealed new details. 

1. Analyzing Your Social Media Updates 

The social Web has been a boon for IRS investigators, who can use updates from Facebook, Twitter and other services to bolster its cases against alleged tax cheats. Information about work history, one's physical whereabouts and even purchases can be gleaned from social networks. Some of it, like tweets and certain details from Facebook, are public. But should the IRS want to take a closer look, it supposedly has the means to do so, with or without a warrant. 

According to recent reports, the IRS cross-references data from social networks with Social Security numbers and then works in a host of other private data to look for suspicious patterns. 

2. Monitoring Digital Payments and Credit Card Activity 

The rise of commerce and digital payments have also given the IRS new sets of data to mine and analyze. The agency has long looked at taxpayers' activity on ecommerce sites like Ebay, but are now going deeper and getting a look at credit card transactions and other online payments. 

The agency looks for potential auditing targets "by matching tax filings to social media or electronic payments," according to MSN Money. The exact mechanism of this monitoring isn't known, but MSN Money indicates that it includes examining credit card transactions "for the first time ever." 

It's not clear how detailed or widespread this monitoring is, and the IRS isn't likely to spill the beans (lest they tip off tax cheats), but suffice it to say that if the agency feels it has cause to take a peek at your online payment data, it won't have a problem doing so. 

3. Peeking At Your Email Usage 

Exactly when and how the IRS looks at email usage isn't entirely clear. The MSN Money report says the agency's big data analysis tools are used in part for "tracking individual Internet addresses and emailing patterns." That's pretty vague. In theory, the IRS could glean some details about email usage simply by looking at browsing activity, whether that insight comes from an ISP or email service provider. 

Does that mean that the IRS has blanket access to everybody's Gmail account for the purpose of feeding its data-crunching behemoth? That seems pretty unlikely. Instead, what it likely does is request access to individual accounts for people who are already suspected of wrongdoing. The American Civil Liberties Union recently uncovered documents that suggest the IRS doesn't feel a warrant is necessary to get such access. Good to know!

Yesterday, Bloomberg quoted fund managers at Gamco and Capital Advisors, both of which own Apple shares, saying they expect the company to announce new plans for deploying more of its $137 billion cash hoard in support of investors. Today, Quartz reported that Apple might buy back stock, hike the regular dividend or issue a special dividend as early as this spring, and has retained Goldman Sachs to review its options.

The loudest such investor in recent months, of course, has been David Einhorn of Greenlight Capital. In February, Einhorn proposed that Apple begin issuing what he called "iPrefs" — preferred shares that would pay a guaranteed dividend of 4%. Earlier that month, Einhorn had filed suit against Apple to block a proxy measure that would have complicated the issuance of preferred stock — an apparent slap at his plan.

Einhorn's lawsuit got people a bit riled up, leading Apple CEO Tim Cook to call it "a waste of money for all involved" and "a silly sideshow" — which slapped the word "silly" all over Einhorn's advocacy plan for news cycles to come. Quartz's unnamed sources, however, claim Apple actually found the idea "interesting," and Einhorn apparently got what he wanted when Apple dropped its proxy measure on the order of a federal judge. In turn, Einhorn dropped his lawsuit against Apple shortly thereafter.

Hedge fund drama aside, Apple has been increasingly public about its plans to spread its mounting wealth, including an initiative to return $45 billion to shareholders over three years. "As of next week we will have executed $10 billion of that plan," the company announced last month. Einhorn's suit didn't plant this seed, but it certainly seems to have accelerated its growth.

Lead image courtesy of user 1000 Words at Shutterstock

According to Elmer-DeWitt:

I've heard directly from 37 former Bullish Cross members who tell me that they lost anywhere from $15,000 to $50 million apiece.

• Total losses for these 37 investors: $94.5 million
• Average loss: $2.5 million

Given that at its peak Bullish Cross had 700 members, it's quite likely that Andy Zaky's followers — many of whom had put their savings and retirement accounts into Apple call spreads — lost hundreds of millions of dollars. If the members I haven't heard from were large investors, total losses could reach into the billions.

Zaky's bio on Seeking Alpha lays bare his Apple-centric investment focus (emphasis added):

We only care about the best in breed and nothing less. On the Apple research side of the offering, Bullish Cross will be putting out a mix of public and exclusive Apple content.  

Members will also get to participate in an open forum for questions regarding Apple’s short and long-term direction. There will also be a lot of discussion regarding positioning and hedging ahead of major events. The Apple research will give the average Apple investor a distinct advantage over the market as we head into the future. There is a tremendous amount of money to be made on Apple, it’s a matter of how to properly capitalize on it. 

What Goes Up...

Apple's stock was on a tear over the past couple years, and briefly topped $700 a share. During the run-up, Zaky had no shortage of admirers. But as Business Insider pointed out, the people who subscribed to Zaky's newsletter "were not sophisticated investors who understood the risk of listening to Zaky."

Among the loudest of Zaky's fans was John Gruber, whose Daring Fireball tech blog has become hugely influential among Apple fans. (That's Gruber pictured above.) Daring Fireball receives more than 4 million monthly page views and has over 400,000 RSS subscribers.

Business Insider calls Daring Fireball "a must-read blog for Apple shareholders, employees, and the many, many `fans' of the company." Readers visit Gruber's site to learn the latest about Apple products, speculate on the latest Apple rumors and get Gruber's thoughts on all things Apple. 

Gruber, 40, has a BS in computer science from Drexel University. He has spent his career in tech. He makes no claims about giving investment advice. He does, however, claim to have sources close to Apple and frequently addresses rumors about the latest Apple products.

For years, Gruber praised Zaky (pictured at right), holding him up as a wizard who understood Apple better than big-name Wall Street analysts.

A Zaky Fan

In a July 21, 2008, post (Apple Shares Fall in After Hours Trading) Gruber linked to a MarketWatch report noting that Apple shares had fallen short of Wall Street expectations, then added:

Now’s a good time to re-read the piece I linked to over the weekend from Andy Zaky on Wall Street’s misguided obsession with Apple’s conservative guidance numbers.

On Oct. 28, 2008, Gruber again linked to Zaky and his Bullish Cross newsletter, and included this quote from Zaky (emphasis again added):

Right away, one ought to notice the staggering growth rate in both revenue and earnings that Apple displayed in 2008. Apple’s real revenue grew 54.5% from $24.637 billion in FYE 2007 to $38.041 billion in FYE 2008 — a full $13.4 billion growth in revenues. Even more impressive is Apple’s 81.2% growth rate in adjusted net income. For a company that is trading at 12 times 2008 earnings, it doesn’t take a genius to conclude that Apple is severely undervalued. Especially since Apple currently trades at about 3.37 times its cash position — which is objectively and significantly lower than every other large cap tech company.

GOOG trades at 7.18 times its cash position, RIMM at 15.51 times cash, AMZN at 9.15 times cash, MSFT at 9.13 times cash, CSCO at 3.62 times cash, IBM at 10.96 times cash, INTC at 6.54 times cash, and HPQ at 5.15 times cash. What is more, only GOOG, AAPL and MSFT have no debt of the companies mentioned above. Apple has the largest net cash position than any of those companies and Apple has more net cash than RIMM, GOOG, AMZN and IBM combined.

On Jan. 20, 2009, Gruber wrote the post Andy M. Zaky on Apple and Subscription-Based Accounting, in which he stated: "Zaky argues that Apple's use of subscription-based accounting for iPhone revenue has significantly hurt its share price — casual investors who are only looking at Apple’s GAAP results don’t realize how much revenue they’ve deferred."

On April 19, 2011, Gruber posted Andy Zaky: 'Why Apple Shares Are Dirt Cheap' and wrote, "Sharp piece by Andy Zaky on Apple’s finances and stock price. He expects a big move."

In a Nov. 30, 2011 piece titled Apple: The most undervalued large-cap stock in America, Gruber wrote that "Zaky makes a compelling, data-backed case that Apple's stock price is severely undervalued."

On that same day, in a different post, Gruber wrote that, "A few readers have asked whether I personally own Apple stock. Good question. I do not. I don't own stock in any companies that I cover regularly here on DF. I do own shares of an S&P 500 mutual fund."

A few weeks later, Gruber posted How to Properly Use Apple's Guidance to Accurately Forecast Earnings, and linked to an article where Zaky "explains in painstaking detail how to do what almost no professional Wall Street analysts actually do: accurately predict Apple's finances." Gruber said Zaky's piece was a "tremendously detailed article," and that "Zaky continues to impress." 

This was followed up three days later, on Dec. 16, 2011, with  Zaky on Apple's Next Quarter: The Biggest Earnings Blowout in History, which contained nothing more than a short Zaky quote: "The largest company in America is about to grow its earnings by a whopping 84% this quarter, and Wall Street is asleep at the wheel."

On May 17, 2012, when Apple shares were trading at $530.12, Gruber wrote Bullish Cross initiates rare buy rating on Apple. He linked directly to the Bullish Cross newsletter, and also quoted Zaky:

Now here are the reasons why we believe it's time to buy Apple and why we feel the valuation is incredibly attractive today. At $533.52 a share, Apple trades at 13x last year’s earnings and at only 10.56x our expect October earnings. Those are incredibly low valuations even for Apple. At the November 25, 2011 lows, Apple traded at a 13.13 P/E ratio. So today, Apple is trading at a lower valuation than it was at the November lows. At the June 2011 lows, Apple was trading near a 15 P/E trailing P/E ratio.

Gruber closed with: "This is only the fifth time Zaky has issued a buy on Apple. He’s four-for-four."

Zaky was right. By Sept. 17, Apple's stock had climbed to $699.78. 

The Tide Turns

But then Apple shares started to slide. By Oct. 17 the stock had fallen to $644.61. Instead of urging caution, Zaky issued a call to arms, declaring that Apple had hit bottom, and that "History has taught us that the best time to buy Apple is when the bearish sentiment in the stock has reached the pinnacle of extreme pessimism."

Gruber linked to that Zaky post and quoted that line about this being the time to buy. Gruber titled his post: Bullish Cross: ‘Apple $1000: Why It’s Time to Buy,' and wrote:

I don’t offer investment advice, but Andy Zaky does — and those who listen to him have done pretty well. 

But this time Zaky was wrong. Instead of rebounding, Apple stock went into a free fall. Shares are now at $432.

Gruber's Role

Did some of those Zaky fans find him through Gruber? Probably. Gruber himself proudly showcases those sites that have been "fireballed" — that is, sites that have been overwhelmed with traffic after Gruber links to them. No doubt each time Gruber linked to Bullish Cross, thousands clicked.

This has happened a lot. In addition to the posts mentioned above, there are numerous others where Gruber directly mentions Andy Zaky and Bullish Cross in a generally positive light, including these:

• 2010: The Year Apple Enters a New Golden Age (July 9, 2010)
• Zaky: Apple to Surpass Microsoft in Revenue This Quarter (July 22, 2010)
• Andy Zaky: Why Apple Shares are Dirt Cheap (April 19, 2011)
• Zaky: Apple’s Cash to Exceed $300 Billion by 2015 (May 31, 2011)
• A Brief Look at Apple's Stock Seasonality (July 5, 2011)

If Gruber touted Zaky, should he share some of the blame for the losses when Zaky led investors astray? That's hard to say. But it seems that Gruber's knowledge of Apple products didn't give him special insight into Apple's stock price.

The real lesson? Be careful where you get your advice.

Note: Gruber requested questions by email, but had not responded more than 72 hours later. Zaky did not respond to our requests for an interview.

Top image of John Gruber from the Daring Fireball website. Image of Andy Zaky from his Seeking Alpha profile.

(See also: Michael Dell Goes To Hell.)

What The Deal Looks Like

Michael Dell and a collection of financial partners, including Silver Lake and MSD Capital, will buy up Dell's outstanding shares at $13.65 apiece, representing a 25% premium over Dell's closing price on Jan. 11., the day before the rumors of Dell going private surfaced. (A company like Dell that goes private must buy up all the company's outstanding shares, which means offering shareholders an incentive - a better price on their shares then they could otherwise get.)

The deal also includes a $2 billion loan from Microsoft, which is not a permanent investment. Terms of the loan were not disclosed. In addition, debt financing was provided by a number of Wall Street banks. Dell Inc. also said that a Special Committee in charge of the deal would be open to alternative proposals during a 45-day "go shop" period, although the person or group that proposed an alternative deal could be subject to termination fees of between $180 million to $450 million.

Michael Dell will retain his title as CEO and chairman, and will contribute his 14% stake in the company; which means that the company will buy up his shares, paying him a very large sum in return. Dell approached Silver Lake last August to take the company private, and the company formed a special committee at the time to evaluate its options.

What The Deal Means For Dell

“I believe this transaction will open an exciting new chapter for Dell, our customers and team members,"  Michael Dell said in a statement.

For Dell, going private means that the company can invest in new technologies and otherwise pursue risky strategies that shareholders could otherwise criticize. With the buyout, Dell Inc. answers to no one, save for the banks and Microsoft, who are funding the deal. It also gives Michael Dell himself an exit strategy, should he wish to step down or if the banks choose to replace him.

"We can deliver immediate value to stockholders, while we continue the execution of our long-term strategy and focus on delivering best-in-class solutions to our customers as a private enterprise," Dell added. "Dell has made solid progress executing this strategy over the past four years, but we recognize that it will still take more time, investment and patience, and I believe our efforts will be better supported by partnering with Silver Lake in our shared vision. I am committed to this journey and I have put a substantial amount of my own capital at risk together with Silver Lake, a world-class investor with an outstanding reputation. We are committed to delivering an unmatched customer experience and excited to pursue the path ahead.”

Microsoft: A Window into Dell's Finances

It's possible, however, that Dell won't go completely private. For the period of time that Microsoft's loan is active, Microsoft's shareholders are going to want to know how its investment is doing. Microsoft accounts for its investments on its income statement, and could break out the Dell investment as a separate line item. That number won't offer much insight into how profitable the newly private Dell is, or what revenues it will have pulled in, but it will indicate whether Dell's business is going in a positive or negative direction. 

“Microsoft has provided a $2 billion loan to the group that has proposed to take Dell private," Microsoft said in a statement. "Microsoft is committed to the long term success of the entire PC ecosystem and invests heavily in a variety of ways to build that ecosystem for the future.

“We're in an industry that is constantly evolving," the company added. "As always, we will continue to look for opportunities to support partners who are committed to innovating and driving business for their devices and services built on the Microsoft platform.”

So why Dell? Influence.

"Microsoft, with a $3 billion investment, would get a certain amount of control and influence over Dell," wrote Patrick Moorhead, a former corporate fellow with AMD and now principal of his own analyst firm, Moor Insights, in an email earlier this month. "Dell has pulled back from the PC business as of late and that is not good for Microsoft as its cash cow is Windows. An investment of this size could guarantee a longer term Windows customer."

Besides the consumer market, Microsoft could steer Dell toward being more focused on the Windows platform for the data center, rather than "trying to do everything for everybody," said David Johnson, analyst for Forrester Research, in an earlier interview with ReadWrite's Antone Gonsalves. In addition, Microsoft could get access to Dell's enterprise sales force and could provide a "converged infrastructure" that unifies the silicon, the hardware, the operating system platform and the management and operation tools.

The deal is expected to be completed by the end of the second quarter. Dell's future will become a bit more shadowed then, by its own choice.

I didn't get a chance to speak with him before he pulled the trigger; My nephew got in at $510 per share or thereabouts. But if I had, I would have shared these 10 good reasons not to buy Apple stock - and they're just as true after that post-earnings collapse.

(Disclosure: I'm a long-time Apple fanboy, I currently have four MacBooks, an iMac, an iPad, 2 iPhones and I don't know how many iPods in my house. I still think the Apple IIci is the greatest computer ever made.)

Reason 1: As You May Have Heard, Steve Jobs Passed Away

Although most often kindly thought of by the general populace as a brilliant innovator and visionary, Jobs was also "kind of a dick" - which is, of course, the best kind of guy to run a gigantic multinational corporation. Tim Cook was a great CFO, but may not be sociopathic enough to be a great CEO - and he doesn't emit a reality distortion field. Apple leadership also took a big hit when Cook fired Scott Forstall, Apple's most prolific inventor. Which brings us to...

Reason 2: Apple Is No Longer Innovating

Remember how crazy people went over the iPhone when it first came out? Over the iPad in 2010? Those products were "beautiful" and "revolutionary" and cool as hell. Now we've got the iPad Mini and the iPhone 5 - and the reaction is... not so much. As far as status symbols go, the iPhone is now sold at a discount at WalMart.

Reason 3: Apple Now Has Real Smartphone Competition

You might disagree, and will let go of your iPhone only when somebody pries it from your cold, dead fingers. But lots of people love those Samsung phones with the big-ass screens, not to mention the Google Nexus 4 - if the Nexus supply wasn't constrained, Apple might have sold even fewer iPhones, and iPhone sales account for an incredible two-thirds of the company's profit.

Reason 4: Trees Don't Grow All The Way To The Sky

Apple has enjoyed a lovely run, from $6.56 a share on April 17, 2003 to slightly more than $702.10 last September 19, an increase of - wait for it - slightly more than 107,000%. Do you think the stock is going to repeat that growth over the next 12 years? Are you crazy? Did you pass middle-school math?

The company's revenue growth has also been astounding: Apple grossed $156 billion in 2012, vs. $6.2 billion in 2003, or "only" an increase of about 25 times. If it were to repeat that performance, in 10 years Apple's revenue would be close to the GDP of a major European nation, like the UK, France or Italy. Not likely.

Reason 5: Never Catch A Falling Knife

Apple was a "generational buy" last November 16th at $522 per share, according to CNBC's Joe Terranove. I'm not sure how long a generation is - 20 years? But Apple was in the $300s just 15 months ago. Is 15 months a generation? If it was a generational buy at $525, what is it at $450? So maybe a generation is now 10 weeks?

Reason 6: There's Nothing Sadder Than A Momentum Stock That's Lost Momentum

Remember our old friends Krispy Kreme, Soda Stream, Crox, Solar Fun…? Better yet, let's try to forget them. I'm not comparing Apple the company to those companies, but Apple the stock is all too similar.

Reason 7: Apple Is Over-Owned And Over-Loved

One out of every four mutual funds owns Apple, and many have limits on how much of one individual stock they can own. Apple makes up 20% of the Nasdaq 100 (QQQ). Who's left to buy it? Remember what happened to Sun, Microsoft, Cisco and Qualcomm - other brilliant, innovative, widely owned and loved stocks when the chickens came home to roost? To put things in perspective, Apple's staggering loss of $70 billion in market capitalization in one day last week was only the third largest one-day drop in history - Microsoft holds first and second place, from back in the Spring of 2000. It was also a can't-miss company that grew like crazy year after year - until it didn't. And Microsoft stock is still only about a quarter of what it was at its peak, 12 years later.

Reason 8: Technical Analysis

Apple's been carving out a textbook head-and-shoulders chart pattern for a few months now, with left and right shoulders at around $590 per share.

This is a very common pattern, so common it holds true only about 50% of the time. But as Apple has become a plaything of hedge funds and algos (over 70% of trading on Wall Street is computer-based these days), it has worked perfectly with various technical analysis methods. Turns out Apple did start to fulfill the head-and-shoulders prediction last week, when it broke the neckline at $500, and according to some, is now perhaps headed to $340.  Perhaps not coincidentally, $340 is also a classic 50% Fibonacci retracement of the March 2009 to September 2012 climb from $80 to $700.

Some other technical analyses to keep in mind: Apple made a "death cross" last December 10, meaning the 50-day-moving average dipped below the 200-day-moving average. The stock is now trading well below both its 50-day and 200-day moving averages. As Apple started its descent in September, the volume picked up on selling, and was light on the uptick days; those mini-rallies were probably due to short covering. This is not a pretty picture.

Finally, note that the stock went vertical at $425, and is destined to return there, according to Jeffrey Gundlach, perhaps the world's most successful bond trader. But if you look at the chart, there's some gaps around $375, and the initial take-off was on very light volume. Hard to imagine a worse technical setup.

Reason 9: The Market Was Going Up While Apple Was Going Down

Most damning of all, perhaps, is the fact that the market went up the last two days of last week. Apple couldn't even manage a dead-cat bounce on short-sellers covering their positions back up to $500, even on a fairly positive day, with good economic news. Imagine if the market in general was tanking, how bad this would be? In general, it's a good idea to stay away from stocks that show red while everybody else is green.

Reason 10: Conspiracy Theory Time

Apple, along with the rest of the market, is manipulated - by, whom I don't know: Ben Bernanke, Jamie Dimon and Goldman Sachs, the Rothschilds, aliens from the hollow earth - all definite possibilities. Last Friday, the blogosphere was alight after Apple closed at exactly $500.00 when we all knew a close under $500 would be very bad for Apple, and thus the market, because in the last few years, Apple was the market. But that all changed. If you were watching closely, you might have wondered why AAPL plummeted five bucks in the last moments of trading last Friday. Apparently, some whale dumped 800,000 shares of Apple one second before the market close, and bought an equal dollar amount of ES-Minis (S&P 500 futures).

WTF is that? Do you really trust a market where such things are commonplace? Anybody who owns any individual stock these days is taking a helluva risk. (More disclosure: I own some individual stocks.)

The Counter Arguments

There are two main counter-arguments for buying Apple:

One is the fact that it enjoys a low price-to-earnings (P/E) ratio, right round 10. Long story short, P/E ratios are rarely a good indicator of when to buy a stock, and do not necessarily a bargain make. A great time to have bought Apple was in October 2004, when its P/E ratio was 45.

The other is that Apple has tons of cash in the bank ($137 billion or so - enough to buy every man, woman and child on the planet the new Nicki Minaj CD and a slice of pizza). Unfortunately, Apple doesn't have ready access to most of that money, as the company is stashing it overseas for tax reasons.

Sure, maybe Apple may have one last ace up its sleeve with the Apple TV, but we won't know until it finally gets here - if it ever does.

To sum up, Apple's leadership and vision are suspect, its market share, margins and cool factor are shrinking, the stock is technically broken, and it's over-owned and over-loved. To me, it looks bad, really bad. But I'm so bearish that I'm probably wrong already. Apple could still get to $1,000 next year. But whether it hits new heights or falls to $200, or both, expect plenty of volatility, dead cat bounces and flash crashes along the way.

With that in mind, maybe the one thing I should have told my nephew before he bought his five shares Wednesday morning is this: "Nobody knows anything." On the other hand, as it was his first stock trade, this was probably a wonderful learning opportunity for him. He now knows everything he needs to know about the stock market.

Finally, please remember that everything I've said is provided for education and informational purposes only, without any express or implied warranty of any kind, including warranties of accuracy, completeness or fitness for any particular purpose. These points are not intended to be and do not constitute financial advice, investment advice, trading advice or any other advice. You should not make any decision, financial, investments, trading or otherwise, based on any of the information presented on this forum without undertaking independent due diligence and consultation with a professional broker or competent financial advisor.

Lead image courtesy of bloomua / Shutterstock. Other images courtesy of Shutterstock and ReadWrite.

Technology Isn't Everything

Technology is important, but don't forget that people need to build things, buy things and pay for them, and those industries generate revenue, too. Only 12 of the world's 100 richest hail from the tech industry, so it's far from a dominating presence. The tech billionaires are well distributed throughout the list, with only Bill Gates and Larry Ellison in the top 10, and half the techies landing the bottom 50. Tech has a significant showing on the list, but its not as strong as retail (17 total, with 9 in the top 20). Overall, technology seems to be about as lucrative as mining or finance. It's still a much better bet than newspapers, though. Only three of the top 100 hail from the media world.

Almost All-American - For Now

All but two of the tech 12 are Americans. The others – Wipro CEO Azim Premji, (India, #49) and Samsung Chairman Lee Kun Hee (South Korea, #91) – are the first of what is likely to be many more future overseas members of the club. The U.S .list is still weighted pretty heavily toward the heavy hitters of the 1990s. SAS, Microsoft, Oracle, and Dell are solid companies, but most people wouldn't consider them the future of tech. Yet these "legacy" companies account for 6 of the 10 Americans on the list. It's a pretty sure bet that 5 to 10 years from now, we'll see a lot more members from South Korea, China, India and Russia.

$10 Billion Takes Time

Becoming an overnight millionaire in the tech industry is no big deal, but there's no shortcut to the top 100 billionairs. Well, there might be just one. Mark Zuckerberg. Zuck is the only person under 30 in any industry to make the list. Even stepping up to the sub-40 bracket, there are only three more additions: Larry Page, Sergey Brin, and Colombia's Alejandro Santo Domingo, who manages a collection of media companies and SABMiller. Technology can certainly make you rich in a hurry, but to join the ranks of the mega-mega-rich, even geeks have to work at it for a while.

Family Planning

One bonus for the children of tech billionaires is inheritance. While many of the more traditional industries seem to favor having lots of children, the tech industry tends toward a more reasonable family size. The sweet spot seems to be 2-3 children - which leaves lots more cash for each offspring. Zuckerberg and Paul Allen have no children (yet), while Jeff Bezos and Michael Dell each have 4. On the rest of the list, 21 have 5 or more kids, and Malaysia's Robert Kuok has 8! Of course, since many of the techies on the list have already signed Bill Gates' Giving Pledge to donate the bulk of their fortunes to charity, those kids might have to settle for measly single-digit billions, anyway.

Facebook Recovers And Hovers 

Facebook hit $30 a share on January 9, the day after the company sent out a press invitation to join Zuckerberg and company in Menlo Park. At the January 15 event, Facebook revealed Graph Search, the social network's so-called third pillar, which joins the ranks of Timeline and News Feed.

Facebook hadn't hit levels over $30 per share since last July. Last August, Facebook stock dove to roughly half of its IPO valuation of $38 a share. After weathering its big lockup expiration scare in November, it began a steady crawl back up through the end of 2012.

A Mobile Quarter

During its 2012 Q3 earnings call, Facebook declared that its strategy moving forward would be mobile, mobile, mobile. And true to its word, the company had a pretty busy mobile fourth quarter:

• Released a native Android app to join the new native iOS app (re-built away from HTML5)
• Launched Poke, a Snapchat-like disappearing-messaging app
• Announced Nearby, a reimagined local check-in and discovery tool
• Managed to put a tourniquet on the Great Instagram Almost-Exodus of 2012
• Added Photo Sync mobile photography feature
• Added free VoIP calling to the Messenger iOS app

In its Q3 earnings report, Facebook highlighted its intention to boost mobile engagement even further while zeroing in on monetizing its mobile product family (Facebook, Messenger, Camera, Poke, Instagram). On the call, Zuckerberg noted that 14% of reported ad revenue that quarter came from mobile, totaling some $150 million.

We look forward to hearing how the last quarter of 2012 shakes out during next week's earnings call, which should also be chock full of juicy fiscal-year revenue details and (hopefully) some hard stats on its number of active users beyond the billion mark.

Still, the company's stock remains down roughly 20% from its initial offering price. In a wild world in which the biggest social network ever created suffers the slings and unlikes of fickle investors, it's impossible to say what's just around the corner for the financial fate of Facebook.

Image by Taylor Hatmaker.

Years Of Bad Decisions

The fall is the result of years of poor choices. The overpriced, underperforming uDraw is the poster child for the company's woes (in fact, it's called out specifically in the filing), but THQ has been doing things wrong for years.

While accidental hits from the Saints Row or UFC franchises have propped up the business from time to time, its Electronic Arts-style buy-and-bleed policies (snapping up game development studios but not investing in them) have robbed credible franchises of life and produced financial train wrecks.

THQ acquired studios Juice Games, Paradigm Entertainment and Kaos Studios, fumbled their titles, and ended up closing all three shops. Big Huge actually thought its chances would be better with the now collapsed 38 Studios (think about that)! Add some underperforming releases like Darksiders II and a total bungling of its once-core children's line-up, and there was only one way for this to end.

Can Bankruptcy Be A Good Thing?

So what does Chapter 11 mean for the company? According to THQ president Jason Rubin, nothing but sunshine. On his corporate blog, he posted the following: "The most important thing to understand is that Chapter 11 does not mean the end of the THQ story or the end of the titles you love. Quite the opposite is true, actually."

Rubin goes on to explain that Clearlake Capital Group has agreed to purchase the company's assets, and work will continue uninterrupted on current projects. With the bankruptcy wiping liabilities off the table and new funding in place, "the teams will be unburdened by the past and able to focus on what they should be focusing on - making great games."

He has a point. If Clearlake is willing to invest in the company at a substantial premium, it must have some faith in upcoming products, so a hands-off approach makes sense.

Bankruptcies Are Never Clean

But despite the promises, bankruptcies are never clean, for good reason. Something got the company into this spot, so something has to change. It's unlikely that THQ will have the financial resources to go on a buying spree any time soon, but that too could be fortunate. The bankruptcy may indeed force what's left of the company to focus on the little picture of game design and playability - a concentration that's been absent for too many years.

Rubin did note that anything can happen during a Chapter 11 filing, so they money isn't locked in just yet. But with no other buyers circling, Clearlake looks like a good bet to "win" control of THQ. And it might just be able to force THQ to turn things around.

Wall Street firms, for example, are searching hard for programmers with a side of database skills, according to employment recruiter eFinancialCareers, which specializes in financial gigs. When the site posted its top 10 skill searches for the summer of 2012, programming languages and databases were at the top "by a wide margin," a company statement reported.

It's also evident what's driving a large part of this aggressive searching: big data. That's because C and Java programming skills were the top specific skills sought for data applications that need C's speed of execution and data engines like Hadoop that are all about the Java.

The next most-sought skill? SQL, the database query language that's still very pervasive in relational databases and even in some of the non-relational databases that are such hot properties in big-data land these days.

"The next four skill sets on Wall Street's 'buy' list are fixed-income, risk, project-management and business analysis. Technology pervades these jobs as well," an eFinancialCareers representative said.

Consider job listings such as the one for an investment bank and securities firm looking for a fixed-income quantitative analyst who's well-versed in matrix-oriented programming languages such as MATLAB, R, Python, or GAUSS, and who has a working knowledge of Ruby, VBA, SQL, and database programming. 

The meshing of technology and business skills is a big "get" for most businesses, as any geek who can speak numbers or any suit who can grok tech is highly sought candidates.

Programming and development is also the big target for the technology sector. Tech job site Dice.com recently released its top-skill requests for the year as of October 1, and software development topped its list, too. Quality assurance came in second, followed by Python, SOAP and virtualization skills, respectively.

"Software development is beyond compare in today's tech-job market. Even if you are not an engineer –- many hiring managers want candidates to have a thorough understanding of the software development lifecycle. More development equals more QA or ensuring a project, product or service meets certain standards and satisfies requirements," wrote Managing Director Alice Hill on the Dice blog.

High finance is not the only sector hiring tech workers. Last month General Motors announced it would hire up to 10,000 IT workers globally, kicking it off with 500 new IT slots in its Austin "innovation center."

Yesterday, GM followed up on that, announcing a new innovation center in the Detroit suburb of Warren, Mich., which will need 1,500 IT staffers. The company plans to open two more such tech centers in the United States soon, spreading the wealth, as it were, to make up for some regional shortages in programmers and developers.

Programming has been at the top of the career skills lists for quite a while, and there are no signs of this demand abating any time soon. Between big data and mobile-application demand alone, those who code well should have more employment opportunities for some time to come.

Image Courtesy of Shutterstock

Kayak said in a filing with the SEC that it will offer 3.5 million shares at a price between $22 and $25 per share. At the high end of that range, Kayak would raise $87.5 million and be worth just below $1 billion.

Since May's Facebook debacle, only two other Internet companies have priced initial public offerings, both of them in the enterprise space. In late June, ServiceNow, an on-demand business-software platform, raised $210 million. (It's trading 44% above its $18 offering price.) And on Monday, Palo Alto Networks filed to raise $220 million to build its business providing firewalls for corporate networks.

Kayak, which employs 185 people, said that revenue in its most recent quarter rose 39% to $73 million and net income totaled $4.1 million, or 11 cents per share. In 2011, the company posted a net profit of $9.7 million on $225 million in revenue. Its biggest expense is marketing, which consumes more than half of revenue.

To show their confidence in the Kayak IPO, several venture financiers are planning to invest more money in the company in a private round concurrent with the IPO. Oak Investment Partners, General Catalyst Partners, Sequoia Capital and Accel Partners, all longtime backers of Kayak, are participating in a 1.2 million-share private placement. Such tactics are common in biotech IPOs, but it's not clear whether the move will assuage concerns among jittery investors in Internet IPOs.

Kayak has delayed its IPO for nearly two years as other Web companies like Zynga, Pandora and most notably Facebook have gone public only to see their shares tank in the following days and weeks. Facebook's IPO was initially seen as the spark that would ignite demand for Web IPOs, but it ended up having the opposite effect.

In the meantime, Kayak's market has grown only more crowded. The company is seeing competition not only from bigger, more established companies like Expedia and Orbitz; it also faces upstarts like Hipmunk, which has grown quickly despite similarities to Kayak.

After languishing so long in the IPO queue, Kayak seems an unlikely candidate to restore confidence in Internet IPOs. If successful, it could help pave the way for more such offerings. If not, it could be remembered as a canary in the coal mine that is the post-Facebook market for tech IPOs.

StockTwits, which has a new beta design that will feature in this post, is often referred to as a "social investing" site. It enables investors to track financial news and swap advice on stocks.

As the name implies, StockTwits is heavily influenced by Twitter. In fact StockTwits is basically a Twitter for financial data, with its focus on real-time streams and short bites of discussion. You can follow people and stocks, create "watchlists" (for example, stocks in a particular market segment) and "streams" (such as Equities, Futures and Options).

The stock market is commonly seen as a market for public sentiment. If stocks are falling, that reflects negativity in an economy. Today, for example, the S&P 500 market in the US fell 1.26% - due largely to continued worries over the European economy and the flow-on effects for the US economy. Just as stock markets measure public sentiment, so does Twitter. StockTwits tries to merge the sentiments coming out of the financial markets, with Twitter (along with other social media, such as Facebook).

One way StockTwits does this is with heatmaps, introduced earlier this year, which measure what people are talking about on the site. Today, due to the WWDC conference, Apple was a heavy topic of discussion. Apple's part of the heatmap is a maroon color because the stock declined by about $9.

Much of StockTwits' value comes in the social data it is aggregating. There are hundreds of sources for financial data and most of them are more established than StockTwits (Bloomberg, Yahoo Finance, MarketWatch, and so on). What StockTwits brings to the table is both a platform for social discussion and a way to analyze the resulting data. A good example is this chart showing "unusual social volume" on the site. It shows that J. C. Penney Company, Inc. ($JCP) has been the most discussed company over the past 30 days (not counting Nasdaq itself) and "Diagnostic Substances" the most discussed industry.

StockTwits is a small piece of the pie for financial market analysis and discussion, but it has added a valuable new ingredient: social data. I believe in the theory that markets are primarily driven by human behavior, moreso than objective data. The "irrational exuberance" of the Dot Com era being a prime example. If you subscribe to that view of the world, then StockTwits is re-imagining investing to better match the way markets really work.

Here’s your chance to meet the real world of Horrible Bosses, and get a glimpse of how they were rewarded - or occasionally punished - for behaving badly:

Scott Thompson, Former Yahoo CEO

Scott Thompson was at Yahoo’s helm only five months before getting the boot for claiming to have a computer science degree from a college that didn’t offer one at the time. While a charitable observer might say he never lied, Thompson also never explained how that erroneous info got on his work bio. Nevertheless, the untruth gave investor activist Dan Loeb just what he needed in his proxy battle to stack the Yahoo board with his supporters. Thompson was given the heave-ho this month and Loeb, who runs the hedge fund Third Point, got the board seats. Thompson didn’t leave empty handed. While he missed out on a severance package, he did walk away with $7 million in bonuses from the struggling Internet portal.

Brian Dunn, Former Best Buy CEO

Brian Dunn stepped down in April as chief executive of electronics retailer Best Buy for what the company later called an “extremely close personal relationship” with a female employee more than 20 years younger. The 51-year-old Dunn did not use company resources in his “friendship,” which included lunch and drinks during the workweek and on weekends. The pair also seemed to stay in touch a lot. During two separate trips abroad for a total of nine days, Dunn contacted his “friend” by mobile phone at least 224 times. In the end, the board found that Dunn’s behavior violated company policy, yet he was still entitled to some big bucks. His separation package totaled $6.6 million.

Mark Hurd, Former Hewlett-Packard CEO

Mark Hurd resigned in August 2010 as chief executive of tech giant Hewlett-Packard following a dalliance with a contract employee who later accused Hurd of sexual harassment. While investigating the allegations, the HP board found that Hurd had doctored expense reports in order to hide his personal relationship with marketing consultant Jodie Fisher, a former soft-core porn actress. Fisher denied the relationship with the married Hurd was sexual. She settled privately with Hurd and both sides agreed not to discuss the affair. Hurd left HP with $12.2 million in severance and enough stock to earn millions more - and was immediately hired by his friend Larry Ellison as co-president, director and board member of Oracle.

David Edmondson, Former RadioShack CEO

David Edmondson resigned in February 2006 as CEO of electronics retailer RadioShack after lying about his education. Edmondson topped Yahoo’s Thompson by claiming to have two college degrees when he had none. The CEO apologized for the “embarrassment” he brought to the company. RadioShack’s hometown newspaper, The Fort Worth Star-Telegram, broke the story, reporting Edmondson never graduated from the unaccredited bible college he attended. The newspaper also found that the CEO was facing a trial on his third arrest on drunk-driving charges. Edmondson left the company with a severance payment of less than $1 million in cash.

Sanjay Kumar, Former Computer Associates CEO

Sanjay Kumar, ex-CEO of IT management software and solutions company Computer Associates, pleaded guilty in 2006 to his role in a $2.2 billion accounting fraud. He also admitted to interfering with a federal investigation by authorizing a payment of $3.7 million to silence a potential witness. Kumar, who was once a part owner of the New York Islanders hockey team, was sentenced to 12 years in prison, which he started serving in 2007. Computer Associates, which later changed its name to CA Technologies, paid more than $225 million to a shareholder restitution fund. Kumar contributed about $20 million from his own assets.

John Rigas, Founder, Former CEO of Adelphia Communications

After leading Adelphia Communications for more than five decades, Chief Executive John Rigas was sentenced in 2005 to 15 years in prison in a multibillion-dollar fraud case that collapsed the company he founded. Rigas and his son Timothy Rigas, who was Adelphia’s chief financial officer, were convicted of 18 felony counts of fraud and conspiracy. The younger Rigas got 20 years in prison. The Rigases were convicted of stealing $100 million from Adelphia, which had been the fifth-largest cable company in the nation. They also were found guilty of conspiring to hide $2.3 billion in company debt.

Bernard Ebbers, Former CEO of WorldCom

Bernard Ebbers was sentenced in 2005 to 25 years in prison for leading the nation’s largest-ever corporate fraud. The former chief executive of telecom carrier WorldCom was convicted of nine felonies in an $11 billion accounting scandal at the company. When WorldCom filed for bankruptcy in 2002, it was the largest in U.S. history and led to shareholders and employees losing billions of dollars. Ebbers forfeited the bulk of his assets to burned WorldCom investors. Those assets included a Mississippi mansion and other holdings worth as much as $45 million. The day before his sentencing, Ebbers called the predicament he was in “bizarre.”

Robert McCormick, Former CEO of Savvis Communications

Robert McCormick resigned in 2005 as chief executive of IT infrastructure management outfit Savvis Communications (now owned by CenturyLink) after it was revealed that he spent $241,000 entertaining business associates at a Manhattan strip club. The company’s board might have looked the other way, if McCormick hadn’t used his corporate charge card to pay for lap dances and then claim to be a victim of fraud when American Express demanded its money. Dubbed the “The Lap Dunce” by The New York Daily News, McCormick never submitted an expense report for the party at Scores. The company claimed it did not pay for McCormick’s night out on the town.

Joe Nacchio, Former CEO of Qwest

One-time Qwest CEO Joe Nacchio was convicted in 2007 of 19 counts of insider trading and was sentenced to nearly six years in prison. Nacchio was convicted of selling $52 million in stock in 2001 after it became known internally that the telecom carrier (also now owned by CenturyLink) was in danger of missing sales forecasts. Nacchio, who resigned in 2002, was ordered to forfeit almost $46 million and pay a $19 million fine. In 2011, Nacchio sued his lawyers from prison, claiming they were negligent. He also accused them of overbilling, pointing to charges that included lawyers' underwear purchases.

Gregory Reyes, Former CEO of Brocade

Gregory Reyes was convicted in 2007 in a stock options backdating scandal at networking solutions vendor Brocade and received a 21-month prison term. The conviction was later overturned and the ex-CEO was retried. Prosecutors won again and he was sentenced in 2010 to 18 months in prison. At his second sentencing hearing, Reyes broke down crying, and his attorney had to read his statement for him. At his second criminal trial, Reyes blamed the company’s outside counsel, which he claimed signed off on the backdating of stock options. The judge at the sentencing hearing didn’t buy the argument, saying that, at some point, people have to take responsibility for what they say and do.

Thompson photo courtesy of Yodel Anecdotal. Raju image via World Economic Forum/Flickr.

You may wonder: How does Facebook make money? Sure, 900 million users and billions of photos, but how is this a business? It's pretty simple, actually.

The majority of Facebook's business is advertising: Those little ads on the right side of the Facebook screen.

The first three months of this year, Facebook sold $872 million worth of advertising, or almost $1 per user. That represented 82% of Facebook's sales, which sounds like a lot. But it's actually down from 85% last year and 95% in 2010.

The rest of Facebook's business is payments and "other fees": Mostly selling Facebook credits, which people use in games like FarmVille.

The first three months of this year, Facebook's payments business generated $186 million in revenue. That's about 18% of Facebook's overall sales, up from 15% last year and 5% in 2010.

(Beyond taking a cut from Facebook payments, the company generates revenue "in connection with arrangements related to business development transactions and fees from various mobile providers," but it says this line of business has been "immaterial" recently.

Expect the payments business to continue to represent more of Facebook's overall sales, as it looks to diversify away from advertising. Ads will likely generate most of Facebook's sales for a long time, but maybe not forever.

Related: Facebook's 4 Biggest Risks

A conversation with Dr. Gautam Shroff, Vice President at Tata Consultancy Services (TCS) and head of the TCS Technology Innovation Lab in Delhi, reveals that they’re making progress, but that they still have a ways to go.

Tata, of course, is a huge collection of more than 100 companies across 6 continents, including everything from car makers to consultants, chemicals and consumer products. And this year, TCS opened a facility in Silicon Valley.

Innovation is complicated

Shroff acknowledged that firms like TCS are not known for innovation, but said the picture was more complicated than that. There are two sides of innovation, Shroff said, creating ideas, and getting those ideas out into the world to create solutions out of them. TCS, he said, has done a lot of work on the latter side.

The company has been investing in research since 1981, he said, and now has the largest academic computer science effort in India. Those efforts have contributed to significant businesses, but mostly for Tata itself. Shroff said that in the 1990s, TCS research created software development tools that led to the company’s entire financial product business, as well as the only end-to-end cloud business in India, with hundreds of small and midsize business customers.

Most of Tata’s R&D isn’t productized, though, Shroff said. Instead of producing “great science,” it’s used for practical, incremental business improvements within Tata’s activities for its customers. “We also innovate for our customers where we have replicable [innovations]," Shroff said. “We just don’t call them products.”

That’s useful, certainly, but not exactly what most observers think of when they hear the word “innovation.” So, how exactly is Tata moving toward more innovation in its offerings?

Trying to get smart about business intelligence

The key areas Tata is focusing on include social media, cloud computing, mobility and big data. And for Shroff, those all come together in business intelligence, which he sees reaching an important inflection point that requires major changes - fusing deep analysis of big data from both inside and outside the enterprise, and looking for new patterns and correlations.

As an example, he cited companies that are monitoring Twitter streams to identify “adverse events” that might not reach news outlets but could still impact business operations. “If that matters to you, it’s better to know now, so you can alert people in the field on how it’s likely to affect their business,” Shroff explained.

“People are looking at it with great curiosity in the business world,” Shroff said, “exploring how more data can improve the business. What was traditionally a niche market can now be a force … something the CEO needs to know about. And we are right in the middle of that.” While Shroff wouldn’t name individual BI customers, he said Tata is working with firms in the retail, consumer packaged goods and financial services markets on the consumer and supply sides of their businesses.

Finally, Shroff said opening a facility in Silicon Valley has given Tata access to a new talent pool. “We’re now able to get people who work in startups who don’t want to leave the valley.” The company also uses the outpost to work with academics at Stanford University and UC Berkeley and partner with startups that are developing useful technologies.

Amazon just reported its fourth quarter financial results, and, shocking no one, it doesn't disclose how many Kindle Fire tablets it sold. Or even how many total Kindles it sold.

Instead, Amazon just shared a few statistics designed to make it seem like the Kindle business is doing really well, without actually proving it.

Specifically, Amazon said that "millions of customers... purchased the Kindle Fire and Kindle e-reader devices this holiday season." And that Kindle unit sales, including the Kindle Fire and Kindle e-ink readers, grew 177% over last year during the 9-week holiday period ending Dec. 31, 2011.

So, the new Kindles helped Amazon more than double, and almost triple, its device sales. But unless Amazon makes a bold move and discloses more on its earnings call tonight, that's about all we'll know officially.

Apple, meanwhile, announced last week that iPad sales during the fourth quarter grew 111% year-over-year to 15.4 million units.

Of course, Amazon doesn't have to disclose how many Kindles it sells. It's actually probably to its benefit to keep that information secret. Still, it would be interesting for those of us who keep score to have real data and not just estimates. It could also be useful for mobile app developers to know what the potential market size for Kindle Fire apps is versus iOS apps.

Overall, Amazon's fourth quarter sales actually came in below expectations, a bit of a surprise, actually, given all the recent talk from retailers about pricing pressure.

For the first quarter, Amazon now says it may even lose money. It didn't specify why, but giving away millions of Kindle Fire tablets near cost, or at a loss, can't help.