Parchayi.com – Personal Finance Simplified

History of Netflix in a nutshell:

1. DVD By Mail
2. DVD By Mail with Streaming Added
3. Streaming with DVD By Mail Added
4. Streaming and DVD by mail separated

This shows how Netflix completely changed their business model from being a DVD by mail company to a streaming company. Step 3 to Step 4 happened so quickly that Netflix pissed off a lot of its customers and investors and wiped out more than half the value of the company.

Here is my take on their logic. Netflix wants to be a streaming company because streaming is the future. But at this time nobody wants to give them content and those who would give them content want to get paid by number of subscribers.

Netflix: We want your streaming content
Content Provider: How many subscribers you got?
Netflix: 25 million
Content Provider: We want $x/subscriber
Netflix: But a lot of our subscribers don’t stream
Content Provider: But they can
Netflix: But they don’t
Content Provider: Not my problem

At this point a bulb goes off in CEOs head. Ooh what if I could cut that number in half?  What if I can get the non-streaming folk out of the equation? Let’s split the business completely.

Some Customers: We like to do both and you’ve screwed us
Netflix: BooHoo
Customers: Your streaming selection sucks and your DVD by mail is worse than blockbuster and I can also go to redbox. Bye Bye Netflix
Netflix: We’re sorry (read – we’re really not).

A link to someone who explained the customer perspective better than I can

My Take: Netflix had something nobody else had – streaming and DVD by mail and both combined at a reasonable price. Now Netflix will compete with Blockbuster (aka Dish) on the DVD by mail front and Blockbuster doesn’t have a stupid 28 day delay on new releases yet and does not charge extra for Blu-ray either. It will compete with Amazon for subscription streaming and Amazon Prime also gets you free two day shipping on products fulfilled by Amazon. DISH plans to announce a new streaming service on Friday too. Then there are Redbox, iTunes and Amazon rentals. So instead of having no competitors, Netflix now is competing with everyone. And some of those have deeper pockets and more resources than Netflix does. At this point in time the only advantage Netflix has is universal device support but that is nothing a few dollars and a few software updates cannot fix. I wish them luck as I stick with my Blockbuster by mail plan and hold off on streaming. So far Blockbuster has grandfathered me in to my plan and rate even though it is no longer available to new customers. Maybe after Friday DISH will have what Netflix customers had – a discount on streaming and discs combined.

LinkedIn priced its IPO at $42 to $45 a share, up from its original planned price of $32 to $35 a share. This would make LinkedIn worth an approximate $4 billion!

Granted LinkedIn is money making but is it worth 4 billion? Last year’s revenues were 123 million with a profit of $15.3 million. That would make it have a P/E of 260 or so.

Update May 19: So the LinkedIn IPO opened at $83 and is currently sitting at around $100. Do people really think LinkedIn is worth nearly 10 billion dollars?!

If you have an HSBC Credit Card, here is a security warning for you:

The website http://www.hsbccreditcard.com/ is not secure and their “Secure Login” is also not secure. You should always look for https:// in the URL to make sure that a site is secure. Just having the words “Secure” and  a padlock does not make the login secure.

If you are technically inclined here is the form source code from that page:

<form id=”login” method=”post” action=”" enctype=”application/x-www-form-urlencoded” target=”_self” onsubmit=”if (this.submitted) return false; this.submitted = true; return true”>

That means that the form is not even submitted to a secure page and it doesn’t even hash your password onsubmit. So if you do have an HSBC Credit card, use this link:

https://www.hsbccreditcard.com/

It is shameful that a large bank is so willy nilly about your security.

Today’s headlines:

“Oil falls to near $112 after bin Laden killed”

“Wall Street gains after bin Laden death”

What the.. Bin Laden’s death is somehow magically going to improve oil supply and make companies more profitable?

Nokia, a company that spends more on R&D than most of it’s peers has decided to abandon Meego, it’s next generation smartphone Operating System and semi-abandon Symbian, the heart and soul of most of it’s current phones.

Official Statement about Meego:

Under the new strategy, MeeGo becomes an open-source, mobile operating system project. MeeGo will place increased emphasis on longer-term market exploration of next-generation devices, platforms and user experiences. Nokia still plans to ship a MeeGo-related product later this year.

Official Statement about Symbian:

With Nokia’s planned move to Windows Phone as its primary smartphone platform, Symbian becomes a franchise platform, leveraging previous investments to harvest additional value. This strategy recognizes the opportunity to retain and transition the installed base of 200 million Symbian owners. Nokia expects to sell approximately 150 million more Symbian devices in the years to come.

Huh? What does that even mean? How does Nokia expect somebody to buy a Symbian device with that nonsense about “leveraging previous investments to harvest additional value“.

And for Meego, that sounds like the death knell. I wonder why they are even bothering to produce that oft delayed Meego phone anymore. Are they taking insiration from the Kin?

This is fantastic news for Microsoft though. With Apple and Android quickly taking over the smartphone market, Windows Phone 7′s future was sort of uncertain even though the product itself showed promise. With Nokia’s might behind it, WP7 is here to stay.

Sponsored Post

It is one thing to be running tight on money. Without quid, one must restrict purchases, travel and the like. Sometimes, it may not even be possible to pay all bills when they are due. But it is another level of – shall we say difficulty? – when you need money that very same day and do not know where to find it. That is a situation that calls for an instant cash advance.

Nice idea if it is available, right? In fact, anyone over age 18 who is a resident of the United Kingdom and who holds a job is eligible for an instant cash advance . The quid can be withdrawn as cash from an ATM in as little as one hour.

How does that work? To get an instant cash advance – which is a loan against a worker’s next paycheque – the borrower signs on to the lender website. The application asks for employment and banking information (the borrower needs to have a bank account, where the money can be deposited electronically). There is no credit score requirement, and the borrower does not need to offer collateral. Technologically proficient providers of instant cash advance loans also do not require any faxes to be sent. Approvals go to more than 85 percent of loan applicants, and the money is available in one hour or a bit later (after 22:00, the loan will be in the bank account by 3:00).

This type of instant cash advance can be made for amounts up to £1500, although that is determined by the borrower’s rate of pay at their job. The borrower is advised to look for fees and other charges, which vary by lender. These can be such items as the following:

* Application fees
* One-hour funding fees
* Monthly account maintenance fees
* Collection fees
* Post default interest charges

Other factors that can vary between lenders are the amounts charged for missed payments, and interest charged on past due balances. Overall finance charges can vary considerably.

I just got this notice from Vanguard in my latest statement:

NEW FEE FOR ALL UVA RETIREMENT PLANS

Beginning in the first quarter of 2011, participants in all University of Virginia retirement plans will be charged an administrative fee of $12 per year. The fee will be deducted from each account on a quarterly basis. The first quarterly deduction of $3.00 will be withheld from your account balance and reflected in your first quarter statement. Please note that if you participate in more than one University of Virginia retirement plan, an annual fee will be charged for each plan.

The administrative fee covers the costs associated with record keeping, account statements, participant education, postage, and other services for the retirement plan and its participants. The administrative fee will be deducted from each of the funds in your account on a pro rata basis. For example, if a fund makes up 50% of your account balance, 50% of the fee will be deducted from that fund.

Also Vanguard who claims to have very low expense ratios also has more low balance fees than Fidelity and T Rowe Price (more details to follow in an update tomorrow). I have both a Roth IRA and all my UVA Retirement plans with Vanguard. I’m thinking of moving my UVA retirement to Fidelity and the Roth to T Rowe Price if Vanguard doesn’t do away with this new fee. Our options at UVA are Vanguard, Fidelity and TIAA CREF and Vanguard is the only one charging these new fees. Also my retirement plan is setup as three accounts and I’m sure that I’ll be charged $12 three times.

The only thing that AT&T iPhones can do over Verizon’s is simultaneous talk and data. Otherwise Verizon has the better offer. Unlimited data, like I currently enjoy on my Droid X, 3G Mobile hotspot available (probably the same deal as the Droids) and Facetime over 3G.

But with LTE devices around the corner, will the iPhone do as well as analysts expect? My guess is it will. I know a lot of people who suffered with AT&T when the original iPhone launched and have been suffering for years as they upgraded their iPhones with bad service. But they wouldn’t give up their iPhones.

Disclaimer: Own AAPL and VZ

I’ve been following all the product announcements at CES and amongst the major players, the most interesting devices are both from Motorola - the Motorola Xoom tablet and The Motorola Atrix phone. Both these are one step ahead of everything else out there.

How or why the Atrix landed on AT&T instead of Verizon first is surprising (maybe due to the Verizon iPhone rumors) but it should hit Verizon soon as the Droid Bionic. Anyway after the split from Motorola into Motorola Mobility, the flaling company is in a lot better shape. Not only that, the company has been doing very well with their lineup of android phones.

And the next two monster devices should keep that momentum going. The iPhone is expected to hit Verizon and that could provide a boost to both Apple and Verizon. It is possible that the news is probably mostly baked into the stocks already and if you are from the buy on rumor, sell on news camp, you might want to be prepared to dump those tomorrow.

I’m holding on to my AAPL holdings for atleast a little while more. I might add some Verizon – the 5.5% dividend looks good even though it is a lot less than the 7% just a few months ago before the fast rise of Verizon stock prices.

Disclaimer: I own no stock in any of the companies mentioned in the article except Apple. I do own a Droid X which so far has been great.

This blog was supposed to be about the basics so let’s get back to that for a change. The S&P 500 is the benchmark index against which many, if not most investments are compared. A common misconception, even amongst financial professionals (I’ve heard some talk about it), is that the S&P 500 is composed of the 500 “largest” or 500 “top” companies in the United States.  That is just not true.

Standard and Poor calls the S&P 500 a “gauge of the large cap U.S. equities market”. That is what it is designed to be. However the selection is not an objective rule based selection. It is selected by a committee based on what they think represents the US economy. The S&P 500 can contain a few non-US companies (currently 5) and it can also contain mid-cap companies. The index is float weighted (float = number of shares available for public trading). The index used to be market cap weighted so larger companies have would a higher influence on the Index values. That still kind of applies to float weighting too but not as heavily as it did with the market cap weight because in general (very high share prices cause problems with float because those stocks are not commonly traded) larger companies will have larger float.

If you would like to invest in the S&P 500 companies, almost every mutual fund company has a  fund that tracks the S&P 500 and you can also buy an ETF (Exchange Traded Fund, basically a fund that trades like a stock) such as SPY to track the index.