Business Blog: Hoover’s Business Insight Zone

When I closed this comment thread, I promised I would write further about Rambus and its legal issues. I’ve been meaning to do thorough research on the subject, but two things derailed me:

1) Life, as it’s prone to do, intervened. I got distracted with other projects and forgot to devote time to this topic.

2) I realized that I don’t really care enough about the Rambus affair to spend a couple of hours researching it.

Mind you, it’s altogether possible that the Rambus legal story really is interesting enough to merit hours of research by a disinterested non-lawyer who’s not specifically assigned to the story. Possible, I say — but so far I don’t see it.

What does intrigue me, though, is just how avid the response of Rambus defenders was as soon as the Rambus name was mentioned — even in a post that was originally about something else (i.e. the recent court ruling against SCO’s Linux copyright claims). No sooner had I opened the can of worms that is the Rambus story than the comment thread filled with claims and counterclaims — some of them very smartly done — about Rambus’s culpability, or lack of it, in its various patent lawsuits.

Mind you, as a blogger I’m not complaining, since more comments means more traffic for the blog and (generally) more fun for me as the conversation widens to more people. But it’s hard for me to understand why this particular company — and not a big company — draws so many impassioned responses.

So, Rambus defenders and detractors alike, help me to understand: What is it about this case, or this company, that so inspires your passion?

–Joel Makower offers extensive thoughts on Coca-Cola and plastic bottles, which we discussed here the other day.

–Ryan Paul of Ars Technica reports on the decision that SCO will face a judge rather than a jury in its Novell trial. We talked about SCO’s legal issues last month. SCO’s troubles look to be getting worse.

–Ville Heiskanen of Bloomberg reports that “Motorola May Fail to Lift Profits With New Razr Phone.” This reminds me — in the vein of this post from a couple of months back — of how poor an indicator business-magazine stories are for long-term success. When the Razr was at its peak, the stories came thick and fast about how Motorola had gotten its groove back. Now the prevailing line — which seems apt, given the company’s struggles to sustain financial and branding performance — is that Motorola had a one-hit wonder with the Razr, and that so far it’s not built to produce a string of hits a la Apple.

–The New York Times offers this extended business/exec profile on Dell the man and Dell the company: “Can Michael Dell Refocus His Namesake?” Writer Steve Lohr’s answer to that runs to several thousand well-informed words. My own take: Dell the company is nowhere near folding its tents, but Dell the man faces an uphill battle. Just because his company has been successful doesn’t mean it has the long-term answers. It’s hard to think of it this way, but in fact the PC market is still quite young in historical terms. I wouldn’t bet against Michael Dell, but what got them to where they are is not likely to get them where they want to go.

–Like the rest of the business world, we’ve talked plenty about Countrywide Financial as the huge mortgage company has navigated the troubles in the real estate and credit markets. Now they’re going to be navigating with fewer hands on deck: the company is laying off 12,000 employees. I’ll say again what I’ve said before: we’re a long way from working out all the hidden problems that built up during the real estate bubble of the early 2000s.

Y’all be sure to keep me honest when I blow a prediction, but on this one, I’m claiming victory. Having beat the anticompetitive rap that the FTC tried to pin on it in court, Whole Foods has completed its acquisiton of Wild Oats.

Whole Foods Closes Wild Oats Deal

What I wrote about this in June:

My opinion is that in this case Whole Foods is right, the feds are wrong, and it’s not even close. I’m willing to cite my own experience, unscientific though it is, in support of this view: I sometimes buy groceries at Whole Foods, as well as a Wild Oats-owned Sun Harvest Market around the corner from my house, but I also regularly shop at H-E-B and Randall’s, which is owned by Safeway. Here in Austin — the hometown of Whole Foods, remember — the primary competition for Whole Foods’ mega-flagship store downtown isn’t the little Sun Harvest in my neighborhood, but the large and exquisitely capitalized Central Market stores owned by H-E-B.

That’s why I’m claiming victory now. Of course, I’ve also come down on the side of the FTC, more or less, in the Rambus case, so let’s see how that one works out . . .

We talked briefly a couple of weeks back about Rambus’s litigous history. (See especially the comments for that post.) All in all, that’s worked out in a pretty satisfactory way for the company in the US (if you ignore that little to-do with the Federal Trade Commission, anyway), but now things are hotting up again in the European Union. More details:

European Commission Accuses Rambus of ‘Patent Ambush’

Six months after U.S. regulators capped royalties that vendors must pay to Rambus Inc., the European Union (EU) is taking a close look at the company’s monopoly on the DRAM (dynamic RAM) chip market.

On July 30, the European Commission (EC) issued a preliminary “Statement of Objections” finding that the Los Altos, Calif., company violated EU competition law by not disclosing that it owned relevant patents during the development of the DRAM standard. DRAM chips provide the memory in computers.

. . .

“Rambus engaged in intentional deceptive conduct in the context of the standard-setting process, for example by not disclosing the existence of the patents which it later claimed were relevant to the adopted standard,” the statement said. “This type of behavior is known as a ‘patent ambush.’” Against this background, the Commission provisionally considers that Rambus breached the EC Treaty’s rules on abuse of a dominant market position.”

Now, that’s just the Commission’s preliminary opinion, not the last word. But at the very least, it looks like Rambus could be in for a bit more legal grilling in the months to come.

Potentially the worst stain in the history of the National Basketball Association is attached to the name of Tim Donaghy, a former NBA referee who has just pleaded guilty to felony counts of “conspiracy to engage in wire fraud and transmitting betting information through interstate commerce.” We know now, beyond any doubt, that Donaghy bet on games for which he was a referee.

Donaghy faces up to 25 years in prison for his sins. NBA commissioner David Stern faces the task of restoring the public’s confidence in his league, which has long come under fire for the inconsistent, not to say frequently poor, quality of its officiating. (By what must have been a herculean task of self-restraint, Dallas Mavericks owner Mark Cuban — by a mile the most prominent critic of NBA officiating — has kept mum about l’affaire Donaghy on his highly trafficked blog.) There’s more than honor at stake here: the financial consequences of the Donaghy scandal — for the league and for individual teams — could be enormous.

So far, Stern has responded gravely to the revelations about Donaghy’s crookedness, and given Stern’s long track record of probity and smarts, I’ll wager that he comes up with the right package of actions and rhetoric to ensure that nothing like this happens again. (Okay, given the circumstances, maybe “wager” isn’t the word we need here . . .) He’ll need to do the same thing that Judge Kenesaw Mountain Landis did when he served as commissioner of baseball in the wake of the Black Sox Scandal: reassure a dubious public that his game’s integrity is above reproach. If Stern’s league gets bailed out by a Babe Ruth- or Michael Jordan-caliber superstar (Kevin Durant, anyone?), so much the better.

• For more on the legal aspects of the Donaghy case, read this informative summary by sports law expert Lester Munson.*
• For an expert view of the impact that bad refs have on NBA games, and the likely impact the Donaghy scandal will have on the NBA, check out this column from Bill Simmons. Simmons is well-known for his smart-alec, tongue-in-cheek humor, but his knowledge of pro basketball runs very deep, and his take here is on point.

~

* Several years ago I happened to meet Munson when we were both guests at the same wedding. I can confirm that, besides being a legal expert and a sharp writer, he’s a prince of a guy.

No common theme here — just a follow-ups and one-offs on items that intrigue me:

• Ryan Paul of Ars Technica has a nice summary of litigious saga of SCO, which we discussed the other day. Well, the summary isn’t nice for SCO, which Paul believes is headed for “financial oblivion.” Paul has a complementary piece on the precipitous decline of SCO’s stock price — which, as I write this, is 39 cents.
• Kara Swisher of AllThingsD has an interesting video conversation with political-media blogger extraordinaire Jeff Jarvis. Jarvis classifies Yahoo as an “old media” company and thinks it’s just as doomed as the newspapers unless it “blows up” its business model. (We discussed Yahoo’s future a couple of weeks back.) You can read some of his further thoughts on media innovation in this column posted on his blog.
• The latest news in the mortgage meltdown/credit crunch: Merrill Lynch analyst downgrades Countrywide Financial. (What — don’t they read this blog at Merrill?) Yesterday, the NYSE halted trades in Thornburg Mortgage shares after prices fell 47%. But Thornburg has assured the markets that it will soldier on, and the share price has bounced right back up.
• The old rule makes sense in Indian grocery stores as well as anywhere else: give your customers what they want.
• Not related to the business world at all, but interesting in its own right: The Sun in Motion.

One of the most contentious issues in the open-source software community over the past few years has been SCO’s enduring quest to protect its copyright claims on key elements of the Unix operating system. But now comes the news that Federal judge Dale Kimball has ruled that Novell rather than SCO owns those copyrights, which means that SCO’s legal actions over the years — and the millions of dollars in licensing fees it has collected from Microsoft, Sun, and others — have been founded on air. From the *nix community’s perspective, Novell are the good guys and SCO are the unquestionable bad guys in this drama, so now the bad guys are getting theirs.

Dan Farber has an informative writeup of the situation here. What’s hard to convey is the degree of incredulity and rage that has built up in the *nix community over the past few years as SCO has asserted, over and over and over, a legal position that was at odds with the basic understanding — and even some deeply held philosophical beliefs — of the most of the *nix world. SCO’s chief, Darl McBride, has become an industry punching bag for asserting the company’s intellectual property claims, but without ever coming forward and showing all the evidence that would properly establish those claims. Of course, SCO’s detractors said all along that he didn’t come forward with evidence like that because he couldn’t — the evidence didn’t exist, because SCO’s claims were false. Judge Kimball’s ruling gives a world of solace and satisfaction to those detractors, who now have reason to believe that, for all its slowness in resolving the issue, the court system has come to the right verdict at last.

SCO has been nothing if not dogged in this fight, not unlike Rambus was in asserting its claims to key memory-chip technologies right up until the time the courts determined that Rambus had falsely established patent claims on those technologies.* So don’t be surprised if it tries to fight this ruling. Tries, I say — because it may not be able to, if indeed Kimball’s findings and the general sense of the *nix community are as unambiguous as they seem. Rambus has soldiered on; will SCO?

~

* Addendum, Tuesday morning: Turns out my memory was faulty vis-a-vis Rambus, which made it a bad analogy. See the comments for more details.

And we have a trifecta! In the wake of the revelations that Whole Foods CEO John Mackey posted messages about his company under a pseudonym to online financial discussion boards (more on which here and here), Whole Foods put out the following three press releases yesterday:

• SEC Contacts Whole Foods Market as it Begins Inquiry
• Apology Statement
• Whole Foods Market’s Board of Directors Begins Independent Internal Investigation Associated with Online Financial Message Board Postings

The first and third of these are typical corporate p.r. anaesthetic. As for Mackey’s apology, you can decide for yourself whether it’s sincere, pro forma, or merely cautious because of potential legal ramifications. Here it is, in full:

“I sincerely apologize to all Whole Foods Market stakeholders for my error in judgment in anonymously participating on online financial message boards. I am very sorry and I ask our stakeholders to please forgive me.”

Thoughts, anyone?