Prince Al Waleed Bin Talal, through his company Kingdom Holding Co., has acquired a 3% stake of the popular social networking website Twitter for $300 million. The news sent KHC’s stock up by more than 7% during today’s trading. The deal values Twitter at $10 billion, which represents a 25% jump since late summer, when the website was valued at $8 billion. The demand for social networking websites is still growing, with investors’ appetite for such investments is still strong even with the current macro economic conditions. Facebook, which is thought to be going public next year, saw similar small private transactions multiply the firm’s value during the past couple of years.

The only issue that I have with Twitter as an investment is the ability to monetize the website. How will Twitter justify such a valuation unless it generates revenue and in turn profit? Will they add an advertising capability, similar to what Facebook did? Will they create a new type of premium accounts that users have to pay for and offer add capabilities, similar to what LinkedIn did? Other social websites are revenue generating and some are even profitable. Facebook, for example, generated revenue of $2.5 billion for the first three quarters of 2011, and profits of $714 million for the same period.

So unless Twitter finds a way to generate money, an investment into the website will be worthless.

Not sure if any of our readers carry a blackberry smartphone anymore, but I find myself aberrant carrying mine around. More than a year ago, almost everyone I know had a blackberry phone, but today the game seems to have changed as RIM failed to step up to competition and deliver. 2011 is a wakeup call for the once hot smartphone company as it saw its stock price plummet almost 71% year-to date as it missed on earnings, repeatedly lowered guidance and took a beating on its tablet. How bad is the tablet? Well to put it in numbers, during the last quarter RIM sold only 150,000 PlayBooks while Apple sold about 120,000 iPads every day. Moreover, RIM recently announced that it will take a one-time charge of $485 million to account for unsold inventory of its Playbook tablet and yet insisting that it still has a chance in tablets. In terms of smartphone sells, blackberry is still holding up but the real question is for how long? Its obvious its no longer a leading contender, but does it have a chance to come back and lead again?

Everybody anticipated Apple’s event yesterday. Much speculation arose about the first post-Steve Jobs event. Many believed that Apple was about to release a new iPhone. It wasn’t only the tech-savy consumers that were expecting the new iPhone, but also investors on Wall St. Before the event, Apple’s stock traded range bound, around the previous day’s closing price of $375. However, much to the disappointment of both the consumers and the investors, Apple announced an improved version of the iPhone 4 rather than a new model. The new iPhone 4S came to as a shock. Wall St didn’t react kindly, slicing $20 off the stock’s value, a decline of 6%, after the new announcement. The decline was later partially recouped, as the overall US market moved up by more than 4% in the last trading hour (S&P 500 went from -1.9% to 2.5%).

The demand for MBAs has fallen this year. The number of applicants to business schools has fallen by 10% marking a third year in a row that applications have fallen. A third of B Schools surveyed (total of 649 schools) reported a decline of more than 10%. Harvard Business School also wasn’t immune. Applications for its full-time M.B.A. class entering this fall slid 4% to 9,134 from a year earlier, helping to boost the school’s acceptance rate to 12% from 11%. One reason for the decline is the bad job market, as historically people are incentivised to get an MBA during a good job market. Also, some companies that sponsor employees’ education have cut spending. However, MIT did report a 3% increase in applicants for its Masters of Finance degree.

So if you are thinking of applying for an MBA, now might be a good time.

Apple announced yesterday the resignation of its CEO Steve Jobs, citing health issues as a reason for his departure. He will, however, remain the Chairman of the Board of Directors. Mr. Jobs will be replaced by Tim Cook, currently the COO of Apple, who has been widely considered as the leading candidate to succeed Mr. Jobs for some time now. Apple’s stock slid almost 5% yesterday after hours upon the news of Steve’s resignation. Steve Jobs has been accredited with the impressive turnaround Apple has seen ever since he retook control of the company back in 1997. Under his tenure, Apple released such reveloutionary products as the iMac, iPod, iPhone, and iPad. Apple’s stock skyrocketed during that period, appreciating by more than 6,400%.

Below is Steve Jobs’ resignation letter:

“To the Apple Board of Directors and the Apple Community:

I have always said if there ever came a day when I could no longer meet my duties and expectations as Apple’s CEO, I would be the first to let you know. Unfortunately, that day has come.

I hereby resign as CEO of Apple. I would like to serve, if the Board sees fit, as Chairman of the Board, director and Apple employee.

As far as my successor goes, I strongly recommend that we execute our succession plan and name Tim Cook as CEO of Apple.

I believe Apple’s brightest and most innovative days are ahead of it. And I look forward to watching and contributing to its success in a new role.

I have made some of the best friends of my life at Apple, and I thank you all for the many years of being able to work alongside you.”

Steve

Government workers’ salaries in Kuwait are a hot topic these days. Parliament members are trying to win the confidence of their voters by increasing their salaries without any thought to the implications. The government is now awarding its employees with certain majors special salary additions. They also increase everybody else’s salary by KD 100 (to be fair).

These actions are causing a huge strain on the government budget. Salary expeditures have grown by 150% in the past 8 years (up from KD 1.7 billion in 2005 to KD 4.4 billion this year). Kuwait’s budget has been in a surplus for the past couple of years due to high oil prices, but as these expenses increase, and the outlook on oil and the global economy remain bearish, Kuwait’s budget outlook seems dim. If the global economy does go into a recession, and oil drops again to $30, then Kuwait would probably receive KD 6 billion less than the budgeted oil revenues (in the budget, oil is forecasted to be at $60), raising the deficit for the year to KD 13 billion, up from the KD 7 billion forecasted.

These salary increases are also having a negative unintended affect on the Private Sector. These increases are negating the effect of the Manpower Government Restructuring Program (the monthly support the government offers to Kuwaitis in the private sector to encourage citizens to work in the private sector).

As the markets are tanking, sending oil prices down due to fears that the US and other developed economies might face periods of slow economic growth (or a recession). Low oil prices raises a red flag in Kuwait, as concerns about the government budget start to rise.We did a simple “back of the napkin” calculation to get the price of oil that the Kuwaiti givernment budget breaks even.

We start with the expenditures. The budget forecasts an expenditure 0f KD 19.44 billion, or USD 71.45 billion. We subtract the non-oil revneus (electric bills, taxes, etc), which are forecasted to amount to KD 1.14 billion (or USD 4.18 billion), leaving us with USD 67.27 billion. We then add 10% of the needed oil revenues, as Kuwait allocates 10% of its oil revenues to the Future Generations Fund (managed by the KIA). The total oil revenue that Kuwait needs amasses to USD 74 billion. If we assume that Kuwait produces 2.5 million barrels per day, then the break even oil price would equal to $81.09, 20% below current prices.

So for the time being, the goverment budget will generate a surplus.

Yesterday, Apple overtook oil-giant Exxon Mobil as the biggest company in the World by market size. Apple ended the day with a market cap of $337.17 billion, while Exxon’s market cap was at $330.77 bilion.

The graph of the market values of Apple and Exxon Mobil, with Apple overtaking Exxon yesterday:

The Top 20 companies globally by market cap: