Wilson Zhu's Blog

On November 8, 2013, Twitter debuted on the NYSE and shot up to a closing price of $44.90 for the day. Now for the good part: the IPO was priced at $26 per share. Do the math and you will find that anyone who invested in the IPO experienced a lofty 73% rise in value of their shares. Yet, with any exorbitant growth in such a short period, questions and concerns over whether Twitter is overvalued exist.

Even though Twitter’s stock price is similar to Facebook’s, its net worth is nowhere close to Facebook’s, due to its lesser amount of shares outstanding. With that being said, its IPO was much more successful than Facebook. In the article, Matt Nesto of Yahoo Finance primarily discusses how the IPO’s launch in a more suitable environment were critical to the company’s public debut. These factors included the stock market sailing along with year highs and how debuting on the NYSE benefited Twitter. Even with this, I am skeptical that Twitter is worth its current valuation. To me, the price is currently propped up by investor confidence. The company has already mentioned that even though revenues have been increasing, it is not profiting. If I were to invest in a company, I would be concerned with this statement as I expect a company to profit when it can utilize millions of users as ad revenue and as a source of trends.

Original article: Yahoo Finance

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[1] Yahoo Finance

This week there has been tremendous buzz about Bitcoins surpassing the $500 value per unit. In case you are not familiar with Bitcoins, they are essentially a decentralized online currency. Over the past year Bitcoins have sky-rocketed from approximately $25 in value to $500. [1] I could not definitively tell you why Bitcoins are experiencing such amazing growth, but I can see reasons why it is growing. For one, it is a currency that is extremely challenging to trace to a real-life person. While this can be seen as a safety precaution for online shopping, it has also opened up a market for the online distribution of illegal drugs via a black-market site called The Silk Road. Despite the hype, I have reason to believe that it is a stretch from becoming a currency.

As far as I am concerned, the limitations for Bitcoins are currently far too great. Rarely do online retailers accept them as a form of payment and more importantly, practical purchases such as food, clothing, and rent cannot be purchased via Bitcoin. Instead it requires the owner to convert their Bitcoins into currency so they are able to purchase the above items. To me, they seem more like a commodity than a currency. They have no innate value, but because there is enough demand for them, prices soar and people “hop onto the bandwagon”. This is the very definition of a “bubble” and by that very nature, they eventually burst.

Original article: Seeking Alpha

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[1] Bitcoin Charts

Remaining relevant. One of the hardest things to accomplish in the fast-paced world of business. Karan Girotra and Serguei Netessine of the Harvard Business Review write about how Amazon continuously audits its business model in order to make necessary changes and keep up with the industry.

Amazon questions its operations and any plans for expansion it may have. It essentially became its own harshest critic and has proved to be successful because of its ability to face what may be unpleasant truths. It seems basic, but that is the beauty of it. When I read this article, I was surprised at how it appears that many companies probably do not do this enough. As you might may have guessed, the first company that came to my mind was Blackberry. Applying what I gained from this article, Blackberry’s inability to face the fact that its products were soon becoming irrelevant caused the company’s growth to stagnate and allowed for Google and Apple to walk on the company. Blackberry is not the only example of this however. When Microsoft released its MP3 player, Zune, in an attempt to compete with Apple’s famed iPod, it failed. But even then, Microsoft realized it was a failed campaign and discontinued the Zune. The lesson to be learned for business owners is that maintaining a business does not just involve expansion, but it entails criticizing your own operations in order to better your company.

Original article: Harvard Business Review

In the past, not many people would have thought that you could now tap your phone at the scanner of your supermarket in order to pay for groceries. Technology has come very far in an attempt to make everyday life more convenient and entrepreneur, Kanishk Parashar, wants to change how you pay for purchases again with Coin.

My friend, Colin Lam, believes that even though there are concerns, Coin will still be a success. I have to disagree with his opinion. It is an ambitious idea, to combine all your credit cards into one that syncs with your smartphone, but I ultimately believe there are several kinks in security and compatibility that need to be worked out. If I were an owner of Coin, my primary concern would be fraud. After all, because Coin transmits its information via Bluetooth, there is a possibility of thieves stealing that data without you knowing it. And because of this risk, as Visa or Mastercard, I would be less inclined to offer any protection to the consumer if they are a victim of fraud because there is no physical registration of the card during the time of transaction. Lastly, if I were completely reliant on Coin as a payment source and my smartphone ran out of battery (a common occurrence), I would essentially be left with no ability to pay for items. Coin has a great concept, but until it works out these (along with other) issues, I cannot see it being widely-used.

The talk of the town in the technology world has undoubtedly been the fight between two gaming titans, Sony and Microsoft. With the holiday season approaching, many wish lists are sure to have the PS4 or Xbox One on them.

My friend Alex Lee gave his thoughts about how the PS4 would sell a greater volume than the Xbox One due to the fact that it would be retailing at $100 cheaper. However, from experience, I do not believe this is necessarily an accurate statement. Both Sony and Microsoft have their own cult followings and primarily due to exclusive gaming titles, they are sure to attract different audiences. They have created points of difference almost solely based on which game titles will be available on each console. In particular, the “Uncharted” and “Halo” franchises have gained Sony and Microsoft (respectively) numerous fans as they are recognized to be the greatest series of games for each console. Of course, both companies will be partnering with game developers to ensure that these titles remain exclusive in order to attract fans to purchase their product. With both consoles targeting the same market segment, it will be interesting to see how Sony and Microsoft will advertise their product in order to reach the most amount of consumers possible. No doubt, Microsoft has lofty expectations to live up to as Sony has sold 1 million consoles on launch day alone. [1]

[1] Reuters

Recent changes to the Youtube comments system have had users up in arms. From 400,000 Reddit users spamming the Google’s product forums to another 150,000 people signing a petition on Change.org, users obviously want to see these changes revoked. [1][2] However, Google’s track record shows that they tend to move forward with their revisions. Things are looking relatively grim for protesters as Google has yet to respond to their outrage.

Logically, this move would hurt Google more than it would benefit them. After all, businesses like Google rely on a user traffic in order to generate ad revenue from companies. By alienating the user base, Google is detracting from its service and losing traffic. However, I believe that this is largely theoretical. For example, when Facebook first implemented its “Timeline” format for the site, there was an equally (if not larger) backlash. The situation panned out fine for Facebook as the voices died down. Google is well aware that Youtube has such a massive database of videos that users cannot replace the site with any others. This lack of substitutes is exactly why Google is able to push the boundaries so far and in the end, is able to get away with it.

Original article: Bloomberg

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[1] Change.org
[2] Google product forums

Google and its subsidiary, Motorola, recently announced that their new Moto X smartphone is “first smartphone ever to be designed and assembled in the U.S.A”. [1] This statement is clearly an attempt to attract consumers towards purchasing the phone.
From an American consumer’s perspective, the words “Made in America” may create a sense of patriotism or evoke images of American workers being treated and paid fairly. The consumer is now given the opportunity to support their people with the purchase of this phone. From an outsider’s perspective, this is a brilliant marketing campaign because Google has capitalized on a perceived notion and is profiting from it. The market for smartphones is extremely competitive, so what better way to differentiate your product than to give people a sense of empowerment that they may not necessarily receive from purchasing an iPhone or an Android device. Despite being assembled in the United States, a breakdown of the Moto X shows that it only costs 9% more to produce than Apple’s iPhone 5. [2] From an accounting perspective, a 9% increase is massive, but consider how many more units Google is able to sell and the strategy seems to pay off.

Original Article: Bloomberg

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[1] Motorola’s Moto X Product Page

[2] Teardown of the Moto X

French luxury good conglomerate, LVMH, is currently under fire as concern about the future of the company has been raised. Louis Vuitton, which makes up more than half of LVMH’s financial profits, is suffering from slow sales. [1]

Louis Vuitton suffers from brand saturation as the company has marketed itself to be a luxury brand that is available to middle to high-class consumers. This is a mistake because if middle-class consumers are hurt by a slow economy, Louis Vuitton’s profits will follow. The choice to market to a broader market has also reduced the brand’s prestige and has been affected by the production of counterfeit products. This failure to occupy a niche market and create new designs is now hurting the company, whereas ultra-luxury brand, Hermès, does not share this issue.

Despite this pessimistic outlook, LVMH can still recover. The conglomerate owns major fashion house, Dior, which could be a major outlet into the ultra-luxury market. Louis Vuitton now faces the choice of continuing with its current strategy or revamping the name into a more prestigious brand. While I believe the latter option is viable, it proves to be a gamble as there is no guarantee consumers will follow.

Original article: Reuters Canada
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[1] LVMH’s First Half of 2013 Financial Report

The cigarette industry is a multi-million dollar one despite the fact that sales of cigarettes in Canada have been dropping annually in Canada since 1980. [1] Cigarette company, “Lucky Strike”, has sold 10 billion more packs of cigarettes since it has aired on the television show “Mad Men”. [2] However, this industry looks to be collapsing with the popularization of electronic-cigarettes.

“E-cigs”, are electronic cigarettes designed to help people quit or reduce their smoking by mimicking the same “deep inhaling” sensation without the additional additives. Additional benefits over cigarettes include a cheaper price and being permitted for use where cigarettes are not. Using these qualities as their value proposition, the industry is now a major threat to cigarette companies, with sales estimated to exceed 1 billion dollars in 2013. [3] With the development of a product that has the potential to replace cigarettes, there are questions regarding opportunities in the market. From my research, I believe that a company which is able to simplify the components of electronic cigarettes would be popular. In addition, they could utilize the internet to create an easily-accessible method to purchase their product, something which is hard to come by currently.

Original Article : The Economist
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[1] Health Canada

[2] The Daily Mail

[3] Forbes

On April 24 of this year, the Rana Plaza in Bangladesh collapsed, leaving 1,129 dead. [1] Survivors of the accident claim that even though several cracks appeared in the building, they were still instructed to resume work. [2] Let’s not forget that Bangladesh has a history of workplace incidents relating to poor safety regulations.

Shortly following this event, major clothing labels H&M, Zara, and others agreed to sign the “Bangladesh Accord on Factory and Building Safety”. [3] While this agreement intends to protect workers from accidents, it also shows that many companies who outsource have little regard for the safety of their workers. After all, these companies focus on maximizing profit by cutting corners. These corporations could improve wages and safety measures, but that would mean an increase in the production price of their products; this option could upset shareholders and detract customers. We have seen companies like American Apparel, who pay their employees well and still profit financially, but they are considered the minority. [4] It is my belief that because corporations focus so heavily on maximizing profit, a majority of them voluntarily ignore the ethical issues behind their decisions, yet it rarely causes permanent damage to their image.

Original Article: The Guardian

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Sources:

[1] The Guardian
[2] The New York Times
[3] Clean Clothes Campaign
[4] American Apparel Press Archive