The big news this week, at least for some of us, was the announcement made at the beginning of the week that Yahoo has reached an agreement to acquire Tumblr. While that is certainly great news for Tumblr, given the $1.1 billion price tag, and even better news for its senior management team that Tumblr will continue to tumble on as an independent entity, we very seriously doubt that it will do so for very long. Yahoo will soon enough swallow its true soul and in the quest for more eyeballs will – we predict – kill the golden goose Tumblr has had in hand in generating eyeballs. It certainly never generated any revenue – $13 million annually at last count. $1.1 billion strikes as definitely falling into soul-eating camp!
Several weeks ago, we took note of a new bill in the U.S. Senate that was going to target the issue patents, how they are issued, and the implications for abuse by patent trolls. This week brings some additional efforts on the patent front. Front and center is the Coalition for Patent Fairness, which continues to draw attention to the many problems presented by patent trolls in the United States. Recently, the organization held a conference which attracted many industry representatives – ranging from those representing small businesses to larger companies.
Of similar concern is the theft of intellectual property (IP), which has been a top-of-mind issue for U.S. companies and public policy makers for quite some time. The intensity of this interest led to the formation of the independent and bipartisan Commission on the Theft of American Intellectual Property (IP Commission), headed by co-chairs Dennis C. Blair, former director of National Intelligence and commander in chief of the U.S. Pacific Command, and Jon M. Huntsman, Jr., former ambassador to China, governor of the state of Utah and deputy U.S. Trade Representative. After almost a year of investigation, the group is out with its report, and despite its length (roughly 90 pages), it is a must-read.
Apple was front and center in the news this week as well, although for Apple is was decidedly very different set of circumstances that have brought the company into the limelight this week. Those circumstances are based on the issue of taxes, and more specifically on the issue of avoiding taxes. We ourselves happen to be in the camp that strongly underscores that a 35 percent corporate tax rate is nothing short of being grossly idiotic. Maybe someday certain parties in the federal government will come to realize their stupidity on this front, but until then companies such as Apple – and in truth every multinational out there – is going to take advantage of as many loopholes as can be found to save on taxes.
There is in fact nothing un-American about it – every company’s job is to maximize value for its shareholders and that is the only thing Apple did – taking fully legal advantage of every opportunity to do so. The US Senate brought Apple in to give Apple CEO Tim Cook a good going over on the issue, but alas for the senate it was Cook that gave the senate a good going over.
Our colleague Peter Bernstein dubbed the whole thing as great reality TV. He noted in a commentary that, “unfortunately, the performance by Apple CEO Tim Cook, company CFO Peter Oppenheimer and Apple tax chief Phillip Bullock before the U.S. Homeland Security Government Affairs Permanent Subcommittee on Investigations was just that – entertaining. And…while illuminating as a lesson in tax planning by a major multi-national, the carefully scripted kabuki dance was little more than entertaining.” These words reflect our own views rather accurately. The senate got schooled and the lesson we draw from it reflects on the stupidity of a 35-percent corporate tax rate.
We will note that due to the rather outsized dollars involved in what Apple saved – and we will also note that Apple, in all its candor, said it didn’t even work hard to save it all by choosing not to take advantage of other possible savings – that the U.K. and other Euro companies did express a certain level of being appalled by all of the tax savings Apple managed. They turned their ire on Ireland as a means to cover their own souls, so to speak. Perhaps they were just jealous that Ireland got the business from Apple! In any case, it was interesting to take note of some of the tax techniques Apple used via Ireland.
In recent weeks we’ve celebrated a number of technology birthdays and anniversaries. This week was no different. YouTube has hit the ripe old age of eight. The birthday comes just as parent Google announced that YouTube may be doing a bit of growing up, not only in age but from a revenue-generating perspective as well. Google announced that YouTube will be introducing new “pay-based channel offerings. We’re not sure we’re on board with this and we certainly hope none of our favorite Joe Bonamassa blues videos suddenly disappear into the great beyond of paid YouTube offerings. How about yourselves? Ready to pay?
As you ponder that question, we hope everyone enjoys a most excellent Memorial Day and long weekend!