Stock Analyst Eats Own Foot

What's important about a standards story? Well, that depends on your audience, doesn't it?

Today’s stories that are directly and tangentially related to standards include two that at first blush have nothing in common, but when taken together make an interesting point about how standards fit into the concentric spheres of the world around us.


To anyone who’s likely to be reading this blog entry, standards are something that you probably think of as tools to achieve specific technical objectives (if you are an engineer), or as required specification elements (if you are an end user making a purchase) or perhaps as strategic plan components (if you are a vendor). But there is another sphere of observers that from time to time pays close attention to standards, and that is the one that is made up of securities investors, analysts, and speculators. To them, standards are not of importance in and of themselves, but they are important to the extent that they have the potential to positively or negatively impact the price of a given stock.


Enough investors have become sufficiently aware of the power of standards in this regard that I’m on an experts list of a service that finds answers for stock analysts, some of whom appreciate that the outcomes of standards-based litigation and the likely winner in a face-off between competing standards initiatives can move stocks, sometimes significantly. The two stories that we’ll take a look at today involve such situations.


The first story involves the very recent proposal announced by Michael Quinn, the Commonwealth of Massachusetts CTO, to permit State agencies to use only approved open formats to save documents (Quinn’s proposal concludes that only OpenDoc and pdf files would meet this test at this time). The comment period on the proposal ends tomorrow, and the policy will then move towards mandatory implementation. You can find several past articles on this story, and will find future articles as they come out, at the Open Source category page of our News Portal.


Each of the past stories takes an interesting and genuine tack, looking at the policy itself, or the motivation behind the proposal, or the unique needs of governments that are reflected in the policy.


But the first story that I want to point out tonight is one that appeared at The Motley Fool’s site, In that story, called Microsoft’s New England Nemesis. The analysis in this article, after a cursory explanation of what’s going on, goes as follows:

For Microsoft, this could certainly be an annoyance, but it’s hardly a deathblow. If media reports are any indication, Massachusetts has an annual IT budget of about $100 million, of which a “substantial portion” is spent on software. Even if we assume that a quarter of this “substantial portion” is spent on Microsoft products (and that’s highly unlikely, anyway), it would amount to only $25 million — less than 0.1% of Microsoft’s fiscal 2005 revenues of $39.8 billion.

Well, now we know why this open source stuff really matters (or doesn’t, as the case may be). The article goes on to confuse open source and open standards. If you want to know the real story about the OpenDoc/Microsoft/Massachusetts interplay, as well as link to all of the important pieces, take a look at the insightful analysis at Steve Wallis’s blog. Until not so long ago, Steve was an open source evangelist inside Microsoft (no, that’s not quite an oxymoron), so he has a unique perspective on this story.



The second story I want to note is but the latest installment in the endless Rambus soap opera (run a search at this site on “Rambus” and you’ll see what I mean by endless). To cut to the chase, Rambus is a licensing company, a “patent farm,” as some would call it, that develops but does not commercialize technology. Instead, it licenses its patented technologies to memory manufacturers. Nothing wrong with that, as such (after all, MIT and many other universities do the same thing, albeit with different motivations and far gentler economics).




Unfortunately, a Virginia jury decided that along the way Rambus also gamed a standard setting process in the early 1990s in order to reap the very significant (as in “billions of dollars”) benefits of its submarine patents, and then destroyed documents to cover its conduct up when some refused to pay up and litigation followed (and still continues today).




The result is that Rambus is the darling of stock speculators, since it is infinitely volatile, depending upon the latest developments in its various lawsuits over the years with Infineon, Micron, the FTC, Samsung, and others. Stay ahead of herd, and you can cash in on the bumps and the bounces. And when there’s nothing happening in court, there’s nothing after a long value slide like a good rumor to make for some quick buy/sell opportunities, such as today’s rumor that Rambus might be acquired. As Mike Cohen, an analyst at Pacific American Securities (and a holder of Rambus stock) noted in today in another article on the same rumor, Rambus stock is “worth either $5 or $90,” based on whether you think that Rambus will eventually come out on top or with the short end of the litigation stick. Either way, it’s quite a poker chip, if you bet smart. Who cares what the ultimate outcome is? That’s what puts are for.




Still, even some day traders forget that it’s all about the moola, and start drinking their portfolio company’s Kool-aid. Does that make them better or worse? My writing in the past on this subject, as well as the pro bono briefs that I’ve written and filed with the Supreme Court and the FTC, are part of the mix of data that the market absorbs, leading me to have a certain negative appeal to the penny stock speculators that are True Believers in the infinite righteousness of Rambus. Take a look at RMBS and (Another) Dark Side of the Internet and see what you think.




So what’s the point (or points)? I suppose that, for better or worse, standards mean different things to different people. They can be vital enablers to some, strategic weapons to others, and just another poker chip to others who don’t know or care what standards even are. Is this a great country, or what? (You decide.)




Not to reveal my own biases, of course, but as I read these two articles, I couldn’t help recalling one of the many cleverly handled visual clichés in the 1980 movie spoof Airport. In that scene, the crisis that is the focus of the movie takes long enough to play out in mid-air that it captures the attention of the entire country, to the exclusion of all else. In time-honored fashion (assuming that you watch a lot of old movies), the camera cuts to spinning newspaper after spinning newspaper, each of which slows in turn to reveal it’s take on the lead story of the day story. The Times headline tells the story of the airborne drama in staid fashion, while Variety’s headline about the same story is smarmy and alliterative, and so on.



But the last one makes my point best. That paper is a supermarket check-out counter tabloid that, when it eventually comes to rest, holds a huge headline announcing its own lead story of the day: