SEBI-MCX tussle-Substance over form debate.

MCX-SX(MCX Stock Exchange) was set up by Financial Technologies(FT) and its subsidiary MCX. Under SEBI's new regulations, ownership needed to be diversified with each entity not owning more than 5%. Obviously, the regulatory intent was for the promoters to divest their stake.

The promoters get a capital reduction scheme sanctioned by Bombay HC wherein they wipeoff 60% stake in return for equity warrants convertible at nominal rate. So, the ownership is transferred only in name. Now, SEBI cannot contest this easily on a legal footing. So they are using the weapon given to them in the SEBI Act-delay and best judgement.

Why do "Free" products best commerical ones?

Mozilla Firefox-world's 2nd installed browser(No 1 by non-default installations)
Seeking Alpha- world's major free source of investor transcripts
Google- Need I say more?
SSRN -World's No 1 source of academic research-downloadable free(mostly)
Project Gutenburg-World's most used ebook source
Wikipedia- most referred to online encyclopedia

The common thread among these is that the end user does not pay for them. Either the advertisers pay(as in Google/Seeking alpha) or it is run by donations(in Mozilla, SSRN and Gutenburg). We humans suckers for "Free" as any retailer would attest. But "Free" is merely an entry point. Unless there is quality and value addition, even the free websites will not prosper.

When people give their time/individual contribution to create something non-commercially, it becomes a labour of love filled by passion(sadly lacking in many jobs). The Wisdom of Crowds ensures that the overall output quality does not suffer. The above services have not stagnated because of renewal and people giving their time. It shows that non commercial ventures(not including Google/Seeking alpha) still have a chance in today's world

Can Oracle's strategy of margin based selling work?

In the 1Q10 conference call(http://seekingalpha.com/article/211786-oracle-corporation-f4q10-qtr-end-05-31-10-earnings-call-transcript), Oracle President Sara Catz said that "...our plans for Sun is based on a more profit aware model as we said a number of times. We are no longer selling products at a loss as Sun did. We are now compensating our sales teams on margin, not just revenue, and this has the effect of changing the sales mix from systems were Sun lost money to value-added systems where Sun’s differentiation is clear to our customer. These changes are allowing us to form a base line for our hardware revenues and profitability at a level from which they can grow".

Considering that the IPR model based software industry(licensing revenues led) is frontloaded(most lifecycle costs incurred upfront) with sunk costs, conventional economic theory may demand revenue maximization to maximize contribution.

However, this strategy works best with predictable life cycles. With shrinking lifecycles, more verisons etc, it makes best sense to get the profit in the short term itself. Hence maybe, Oracle has decided to do so.

This strategy success(compensation on margin based) will work best if the margin calculation is transparent & fair to all concerned. If this suceeds, it may prove a model to the rest of the software industry

What is in a name?

Shakespeare's quote would have us believe that it is the substance that matters over mere shape or appearance. This is similar to the substance over form principle in accounting where you record the transaction as per the economic reality and not merely as per legal nomenclature. Law has also taken this stand with the concept of removing the corporate veil to help the Income Tax authorities and for other purposes.

But, our Indian companies seem to believe in this strongly. Where else would you see a sugar company have the name of an engineering company- for example Triveni Engineering? Or a financial services company have the name "Vakrangee Software"?

I could go on and on, but I think the point is clear. Such names are quite misleading to any lay person. Any person who goes on the basis of a hot stock tip will not know the truth. SEBI should wake up and delist such companies- or at least have them, change their names to reflect their substance.