Yahoo! Inc.

Maximum Point on the Quarterly Profits-Revenues Graph 1. Summary

A review of the quarterly profits-revenues data for Yahoo! Inc., from 1Q 2008 to 2Q 2012, also indicates a maximum point on the profits-revenues graph, akin to the maximum point observed in the annual profits-revenues data. Again, at the low quarterly revenue levels reported in the early years, we observe a positive trend (i.e., a positive slope h in the profits-revenues graph), i.e., profits increase with increasing revenues. However, in more recent years, especially after the peak profits were reported in 2005, we see a negative trend (i.e., a negative slope h), i.e., decreasing quarterly profits with increasing quarterly revenues. This change in the sign of the slope, from positive to negative, means that the profits-revenues graph must be a continuous curve with a maximum point. Yahoo is currently operating past its maximum point, in the falling portion of the curve. An exactly similar pattern was also observed with the old General Motors (before its bankruptcy in June 2009) and also with Air Tran (before its merger with Southwest Airlines in March 2011). Yahoo! Inc. has clearly made some missteps since 2005, when the negative trend got established. Steps must now be taken to reverse this trend and return Yahoo to the pattern of rising profits and profit margins observed in earlier years. It is also shown that the power-exponential law, y = mxne-ax + c, which reveals a maximum point at x = n/a, can be fitted to the quarterly profits-revenues data. Here x is revenues, y is profits and m, n, a, and c, are constants whose numerical values can be deduced from the (x, y) data. This equation is a mathematical generalization of Plancks radiation law, which marks the birth of modern quantum physics, and also describes the relics of the radiation from the Big Bang that created the Universe (Cosmic Microwave Background Radiation). Justification for extending this law beyond physics is possible once we recognize that the energy in physics is just like money in economics, and vice versa.

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Table of Contents
No.
1. 2. 3. 4. 5. 6. 7.

Topic
Summary Introduction The Power-Exponential Law for profits-revenues data Quarterly profits-revenues data for a single year Multi-year quarterly profits-revenues data Brief Discussion List of References

Page No.
1 3 8 11 15 18 26

The Little known Origin and Meaning of Yahoo! A 1961 Bollywood Love Song (Blockbuster Movie: Junglee)
http://www.youtube.com/watch?v=XDH8uzVcRds&feature=related This song starts with a happy shouting Yahoo which is repeated; see at 0.40-0.45

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 2. Introduction
A review of all of the profits-revenues data for Yahoo! Inc., going all the way back to its inception in 1995, indicates a surprisingly little known fact of the modern business and financial world. This has been discussed briefly in Ref.[1] and in more detail in Ref. [2]. Yahoo! Inc., like many other companies, is now operating past the maximum point on its profits-revenues graph in the falling portion of the curve, see Figure 1, taken from Refs.[1, 2].
3.00

Annual Profits, y [$, billions]

2.50 2.00

1.50
1.00 0.50 0.00 -0.50 -1.00 -1.50 0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0 8.0 9.0 10.0

y = 1.1x3.6e-0.96x - 0.9

Annual Revenues, x [$, billions]

Figure 1: The power-exponential law, y = mxne-ax + c fitted to the profits-revenues data for Yahoo! Inc. (1995-2011). The four parameters, m, n, a, and c are fixed here to yield a good fit to the data at high revenues. In other words, profits are decreasing even as revenues are increasing and vice versa. Yahoo reported its peak profit in 2005 ($1.896 billion with revenues of $5.258 billion). A negative trend has been established since then with the profits
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and revenues data literally crisscrossing, chaotically, up and down along a line with the negative slope, see Figures 2 and 3 and the references below. 1. Yahoo! Inc. Quick Look at recent profits-revenues trends, Published Oct 1, 2012, http://www.scribd.com/doc/108514055/Yahoo-Inc-Quick-Look-atRecent-Profits-Revenues-Trends 2. Yahoo! Inc. Maximum Point on the Profits-Revenues Graph, Published Oct 1, 2012, http://www.scribd.com/doc/108512834/Yahoo-Inc-MaximumPoint-on-the-Profits-Revenues-Graph

2.50

Annual Profits, y [$, billions]

2.00

1.50

Type III y = -0.757x + 5.798 r2 = 0.8648 2005-2011 data with 2011 excluded

2005

1.00

2011 7
2006

2010

0.50

2009

2007 1 2008

0.00 0.00

1.00

2.00

3.00

4.00

5.00

6.00

7.00

8.00

Annual Revenues, x [$, billions]

Figure 2: The profits-revenues graph for Yahoo! Inc., between 2005 and 2011. The company has essentially been moving back and forth along this downward sloping line established since 2005. Many other companies, notably the old General Motors, before its bankruptcy in June 2009, and Air Tran, before its merger with Southwest Airlines in March 2011, were also operating past their maximum point, for a sustained period of time, with
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profits decreasing as revenues increased. The examples of the old GM and Air Tran should serve as a guide for Yahoo! Inc. and its new CEO and CFO, as they try to lead Yahoo into a new era where profits and profit margins both increase with increasing revenues. Such a pattern, see Figure 4 of current article, was indeed observed between 1995 and 2004 (see also Figures 4 and 5 in Ref. [2]).
2.50

Annual Profits, y [$, billions]

2.00

1.50

1.00

0.50

0.00 4.00

4.50

5.00

5.50

6.00

6.50

7.00

7.50

8.00

Annual Revenues, x [$, billions]

Figure 3: The crisscrossing path taken by Yahoo! Inc. along the Type III line established since 2005. This is the same as the graph in Figure 2. The data points (in red) are joined together by arrow-tipped line segments to show chronology. The main purpose here is to call attention to EXACTLY the same pattern, with a maximum point, when we consider the historical quarterly data for Yahoo! Inc., going back all the way to 1998. This is simply a continuation of the discussion initiated in Refs.[1, 2]. The quarterly data, obtained from various Annual Report, which are readily available on the internet, has been complied in Table 1.

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Table 1: Quarterly Profits-Revenues Data for Yahoo! Inc. (Q2 2012 to Q1 1998)
Quarter Quarterly Revenues, x $, millions 1217.794 1221.233 1324.153 1216.665 1229.024 1214.357 1525.109 1601.203 1601.379 1596.960 1731.977 1575.399 1572.897 1580.042 1806.389 1786.426 1798.085 1817.602 1831.998 1767.506 1697.920 1671.850 1702.448 1580.322 1575.854 1567.055 1501.000 1329.929 1252.997 1173.742 1077.717 906.715 832.299 757.786 Quarterly Profits, y $ millions 226.631 287.478 295.572 293.291 236.972 222.992 312.020 396.131 213.321 310.191 152.954 186.093 141.387 117.558 -303.428 54.348 131.161 546.840 205.723 151.286 160.567 142.424 268.673 158.529 164.330 159.859 683.208 253.773 754.689 204.560 372.524 253.305 112.512 101.212 Annual Revenues, x $, millions Annual Profits, y $, millions

Q2 2012 Q1 2012 Q4 2011 Q3 2011 Q2 2011 Q1 2011 Q4 2010 Q3 2010 Q2 2010 Q1 2010 Q4 2009 Q3 2009 Q2 2009 Q1 2009 Q4 2008 Q3 2008 Q2 2008 Q1 2008 Q4 2007 Q3 2007 Q2 2007 Q1 2007 Q4 2006 Q3 2006 Q2 2006 Q1 2006 Q4 2005 Q3 2005 Q2 2005 Q1 2005 Q4 2004 Q3 2004 Q2 2004 Q1 2004

4984.199

1048.827

6324.651

1231.663

6460.315

597.992

7208.502

428.921

6969.274

660.000

6425.679

751.391

5257.668

1896.230

3574.517

839.553

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Table 1 (Contd): Quarterly Profits-Revenues Data for Yahoo! Inc. (Q2 2012 to Q1 1998)
Quarter Quarterly Revenues, x $, millions 663.922 356.821 321.406 282.948 285.787 248.823 225.792 192.665 188.911 166.131 182.165 180.215 310.873 295.548 272.950 230.807 203.148 155.863 128.815 103.960 76.410 54.576 41.688 30.596 Quarterly Profits, y $ millions 75.019 65.329 50.828 46.703 46.209 28.857 21.394 -53.645 -8.659 -24.119 -48.524 -11.486 -0.098 0.048 0.053 0.067599 37.764 11.073 -1.461 0.435 18.524 12.771 -8.977 3.270 Annual Revenues, x $, millions 1625.097 Annual Profits, y $, millions 237.879

Q4 2003 Q3 2003 Q2 2003 Q1 2003 Q4 2002 Q3 2002 Q2 2002 Q1 2002 Q4 2001 Q3 2001 Q2 2001 Q1 2001 Q4 2000 Q3 2000 Q2 2000 Q1 2000 Q4 1999 Q3 1999 Q2 1999 Q1 1999 Q4 1998 Q3 1998 Q2 1998 Q1 1998

953.067

42.815

717.422

-92.788

1110.178

70.776

591.786

47.811

203.270

25.588

Sources: 1995 data is for partial year, since inception on March 5, 1995. http://files.shareholder.com/downloads/YHOO/2089225128x0xS1193125-1286972/1011006/filing.pdf 2007 to 2011 data; http://files.shareholder.com/downloads/YHOO/2089225128x0xS891618-07108/1011006/filing.pdf 2002 to 2006 data; http://files.shareholder.com/downloads/YHOO/2089225128x0xS912057-0210181/1011006/filing.pdf 2001 to 1997 data; http://docs.yahoo.com/docs/investor/ar96/fdata.html 1996 and 1995 data.

http://investor.yahoo.net/results.cfm All data from this website by going to

individual annual reports.
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1.00

Annual Profits, y [$, billions]

0.80

Type I y = 0.326x 0.327 = 0.326( x 1.001)

C B A

0.60

0.40

0.20

0.00

x0
-0.20 0.00

0.50

1.00

1.50

2.00

2.50

3.00

3.50

4.00

Annual Revenues, x [$, billions]

Figure 4: The Profits-revenues data for Yahoo! Inc. from 1995 to 2004, with the Type I labeled C joining the data for 2001, with a small loss, and 2004, with a nice profit. The slope h has increased and also the cut-off value x0 indicated by the blue

3. The Power-Exponential Law for Profits-Revenues Data

As we see from Figure 1, and earlier discussions, the profits-revenues graph is described by a smooth curve y = f(x) with the derivative dy/dx, the slope of the curve, decreasing (from a finite positive value) as x increases and becoming negative at the highest revenues. At the maximum point dy/dx = 0. One example of such a mathematical curve is the power-exponential equation given below. y = mxne-ax + c and, dy/dx = (n ax)(y c)/x = a(xm x)(y c)/x (1) (2)

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While the linear law y = hx + c, has two parameters h and c which must be deduced form the (x, y) data, equation 1 includes four parameters m, n, a, and c. The maximum point occurs at x = xm = n/a. As we see from Figure 1 and the graphs to be presented later here (Figures 8 and 9), this equation provides a good fit to the data over a range of revenues. For the pure law, y = mxn + c (equation 1 with a = 0), the constants m and n can be determined using a double logarithmic plot, since ln (y c) = n ln x + ln m. Here ln denotes the natural logarithm of the function. The graph of ln (y c) versus ln x is a straight line with the slope n and the intercept ln m. Likewise, for the pure exponential law, y = me-ax + c (special case of equation 1 with n = 0), a semi-logarithmic plot can be used, ln (y c) = ln m ax. The slope of the graph of ln(y c) versus x equals (a) and the intercept equals ln m. The Microsoft Excel program provides a quick and easy method of fitting the four parameters. As discussed briefly in Refs. [1,2] and also in Ref.[3] (to be published shortly), equation 1, as applied to thermal radiation data, is known to physicists as Wiens law. It was discovered by Wilhelm Wien, using purely curve fitting techniques, similar to those being discussed here for the financial data. The studies of the radiation spectrum for a heated body engaged the attention of the physicists of the mid to late 19th centuries. Experiments revealed a maximum point on the graph of the radiation spectrum (energy density, or radiation intensity is plotted versus frequency). This could not be explained theoretically. Wien proposed the simple power-exponential equation 1 as a providing a good fit to the data. (Wien received the Nobel Prize in 1911 for this contribution, click here.) The remarks made by Wien, in the introduction to his Nobel lecture are worth reading. Wien talks about purely mental speculations and idealized processes in order to understand complex phenomena such as thermal radiation. The same remarks also apply here as we try to understand financial data and why companies reveal the maximum point on the profits-revenues graph. Subsequently, in December 1900, Planck derived the slightly modified equation 3, using statistical arguments (first introduced into physics by James Clerk Maxwell and later extended greatly by Boltzmann to develop the field called statistical mechanics; see Longair, Ref. [6]) which laid the foundations of modern quantum
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physics. Essentially, Planck imagines a system of N microscopic entities (called oscillators) with a total energy UN = NU where U is the average energy. This energy can be distributed in many different ways between the N entities. This gives rise to the property known as entropy. The total entropy SN = NS where S is the average entropy. The temperature T = dU/dS, the rate of change of the average energy with respect to entropy. It should now be obvious that Plancks argument can also be extended beyond physics to describe how any other property U of interest to us is distributed among N entities. Instead of energy U we can think of the symbol U in Plancks theory to be money , profits or revenues, which is to be distributed among N microscopic entities (or N product streams that generate the profits or revenues). Thus, associating new meaning to each of the mathematical symbols in Plancks analysis (see Ref. [7] for the English translation of Plancks original paper), we arrive at the following generalized equation relating revenues x and profits y. y = mxn [ e-ax/(1 + be-ax)] + c with, dy/dx = [ n ax axg(g 1)] [(y c)/x ] where, g = 1/(1 + be-ax) (3) (4) (5)

In Plancks original law n = 3, m = 8h/c3 and a = h/kT (with h being the Planck constant, c the speed of light, k the Boltzmann constant, T the temperature of the blackbody radiating energy, and the frequency). Also, in Plancks original law, the parameter b = -1 and c = 0, where c is now the nonzero intercept of equation 3. Plancks modification of equation 1 (i.e., Wiens law) also improves agreement with the experimental data. Later Einstein used Wiens equation 1, in his 1905 paper, to derive the photoelectric law, K = E W = hf W = h(f f0) which is a linear law, exactly analogous to the profits-revenues law, y = hx + c = h(x x0). It is also of interest to note here that the most eloquent confirmation for Plancks equation 3 was obtained in the 1990s. The Cosmic Microwave Background Radiation (CMBR) measurements made by NASAs COBE satellite were shown to fit data very precisely. Nearly 80 data points were shown to lie almost exactly on
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the theoretical curve, see Refs. [8-12]. This is being discussed in more detail in a separate article, see Ref.[3]. Essentially, it appears that energy in physics is just like money in economics. Einsteins photoelectric law, K = E W, deduced from the Wien-Planck laws, see Refs. [13-15], is exactly analogous to the profits-revenues law P = R C. The photon energy (E = hf) is just like the revenues R of a company. Not all of the photon energy E appears as the electron energy K. Some of it must be given up to do the work W, or the energy, needed to overcome the forces that bind the electron to the metal. Likewise, not all of the revenues R of a company appear as profits P. Some of it must be given up in the form of costs C of the operation. Thus, we can attach new meanings to each of the mathematical symbols in Plancks famous December 1900 paper to arrive at equations 1 and 3 here, which can thus be extended to describe the financial data, such as the profits-revenues data being considered here.

4. Quarterly Profits-Revenues Data for a Single year

The annual profits-revenues data are obtained by adding the quarterly values for each year. Companies also report the three-month ending, six-month, nine-month, and 12-month ending values each year and compare them with the same values for the same period for the prior year. In other words, the seasonal nature of the profits and revenues is being recognized when we make such comparisons. However, if we consider the cumulative values of the profits and revenues for a single year, we again see a remarkably linear relation between profits and revenues. This is illustrated in Figure 5, for the banner year of 2005 when Yahoo! Inc. reported its highest recorded profits. The fundamental significance of this remarkably linear relation, y = hx + c, observed in Figure 5, especially the significance of the slope h and the intercept c, has been discussed in detail in Ref. [2]. This can be appreciated further by considering the quarterly data for the year 2002, see Figure 6.

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Cumulative Profits, y [$, millions]

2,500

2,000

Yahoo! Inc. Type I line Year: 2005 y = 0.414x 281.64 = 0.414 (x 679.91)

1,500

1,000

500

0 0 1,000 2,000 3,000 4,000 5,000 6,000 7,000

Cumulative Revenues, x [$, millions]

Figure 5: The cumulative profits-revenues graph for 2005, when Yahoo reported its highest profits. Notice that Yahoo! Inc. reported its last quarterly loss in Q4 2008. Before the Q4 2008 quarterly loss, a quarterly loss was reported for Q1 2002 with an overall profit for the full year of 2002. However, as revenues increased in the successive quarters of 2002, the cumulative loss for the six-month and nine-month ending periods in 2002 started decreasing and with a further increase in the revenues and the fourth quarter, Yahoo moved into the positive territory for 2002. The straight line joining the two extreme points, the (x, y) pairs for Q1 2002 and Q4 2002, has the equation y = hx + c = h(x x0). The slope h = (y2 y1)/(x2 x1) where subscripts 1 and 2 indicate any two points on the graph. Once h is determined, the intercept c can be computed from c = y2 hx2 = y1 hx1 since the straight line passes through both the points. We will use this simple procedure here to determine h and c. (A linear regression equation can be developed but this is not deemed necessary here to illustrate the general concepts.)

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Cumulative Profits, y [$, millions]

100 80

60
40 20

Yahoo! Inc. Type I line Year: 2002 y = 0.127x 78.09 = 0.127 (x 615.55)

0
0 -20 -40 -60 -80 200 400 600 800 1,000 1,200 1,400

-100

Cumulative Revenues, x [$, millions]

Figure 6: The cumulative profits-revenues graph for 2002, when Yahoo reported its a loss in first quarter with cumulative losses turning into profits at the end of the fourth quarter. The intercept made by the straight line, y = hx + c = h(x x0) on the revenues axis (x = x0 when y = 0), therefore, equals the breakeven revenue (see the blue dot), the minimum revenue needed before profits appear. The same linear law is also observed in 2005 with a higher slope h = 0.414 and also a slightly higher value of x0 = $680 million. The straight line describing the cumulative trend for 2002 cuts the revenues axis at x0 = - c/h = $615.553 million. For the nine month ending Q32002, the cumulative loss was -$3.394 million, or very close to zero, the breakeven value. Revenues in excess of this minimum resulted in a profit. The rate of conversion of revenues into profits is given by the slope h = 0.127 or about 13%. For 2002, revenues in excess of the calculated breakeven ($953.1 $615.6) = $337.5 million. The reported profits of $42.82 million equals 13.7% of additional revenues, which is in good agreement with the slope h = 0.13. These quarterly results, for a single year, therefore, confirm the conclusions in Refs.[1,2], drawn by considering the annual data covering many years.
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1.00

Quarterly Profits, y [$, billions]

0.80 0.60 0.40 0.20 0.00 -0.20 -0.40 0.00

0.20

0.40

0.60

0.80

1.00

1.20

1.40

1.60

1.80

2.00

Quarterly Revenues, x [$, billions]

Figure 7: Quarterly profits-revenues data for the period Q1 1998 to Q2 2012 revealing both a positive slope h (at low revenues, profits increase with increasing revenues) and a negative slope h (at high revenues, profits decrease with increasing revenues). This implies a maximum point at some intermediate revenue. The classical breakeven analysis for a company making and selling N units of a product (see Refs. [2,3]) leads to the conclusion that the profits-revenues relation is given by the simple linear relation P = R C = [1 (b/p)]R a. Here C is the total cost and R is the revenues. The total cost C = a + bN and R = pN, with a being the fixed cost and b the unit variable cost, and p the unit price. It follows that, at least in this idealized case, the slope of the profits-revenues graph, h = 1 (b/p), depends on the unit variable cost b and the unit price p. The changes in the slope h, over time, thus imply a change in both b and p, or b/p. The slope h will decrease as the ratio b/p increases (increasing b, reducing p). In the extreme case, when b > p, the slope h will become negative. This too is observed in the real world, as discussed with the Yahoo! Inc. annual data in Refs.[1,2]. We see the EXACTLY the same trends now with the quarterly data.
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Slope h = 1 (b/p) Depends on the unit variable cost b and unit price p Intercept on y-axis, c = - a Depends on the fixed cost, a Intercept on x-axis, x0 = ap/(p b) Depends on a, b, and p

5. Multi-year Quarterly Profits-Revenues Data

The multi-year quarterly data, from Q1 1998 to Q2 2012, is plotted in Figure 7 and reveals the same trends observed earlier with the annual data. At low revenues, profits increasing with increasing revenues (positive slope h). At the highest revenues, this trend is reversed and profits decrease with increasing revenues (negative slope h). This reversal in the slope also means that there is a maximum point on the graph at some intermediate revenue.
1.00

Quarterly Profits, y [$, billions]

0.80
0.60

y = 15x3.6e-3.5x
0.40 0.20 0.00

A
y = 8.5x3.6e-3.5x

-0.20 -0.40 0.00

0.50

1.00

1.50

2.00

2.50

Quarterly Revenues, x [$, billions]

Figure 8: The power-exponential law, y = mxne-ax + c fitted to the data at both low and high quarterly profits-revenues data for Yahoo! Inc. (Q1 1998 to Q2 2012).

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These trends can be described by the equation y = mxne-ax + c. As we see from the graphs presented in Figures 8 and 9, this equation does provide a good fit to the data over a range of revenues. The two curves labeled A and B in Figure 8 correspond to the values m = 15 and m = 8.5, respectively. The numerical values of n = 3.6, a = 3.5, and c = 0 were held constant. The higher the value of m, the higher the profits. The theoretical maximum point is at x = xm = n/a = $1.03 million.
3.50

Quarterly Profits, y [$, billions]

3.00 2.50 2.00 1.50 1.00

y = 410x3.75e-5x 0.4

C D

0.50
0.00 -0.50 -1.00 0.00

y = 130x3.75e-5x - 0.4
0.50 1.00 1.50 2.00 2.50

Quarterly Revenues, x [$, billions]

Figure 9: The power-exponential law, y = mxne-ax + c fitted to the Yahoo! Inc. quarterly profits-revenues data (Q1 1998 to Q2 2012). Different values of the four parameters are used here and provide a good data to other data points especially at the highest revenues. The curves labeled C and D in Figure 9 were generated for different values of the four parameters. Again, n = 3.75, a = 5, and c = -0.4, were held constant with m = 410 and m = 130 for the upper and lower curves. The maximum point xm = n/a

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now occurs at a lower revenue of $0.75 million. However, because of the steeper slopes of the curves, a better fit to the data at the highest revenues is obtained. As also noted in Refs. [2, 3], the simpler version of the power-exponential law is being offered here simply as a good fit to the data. As with the development of quantum physics, a rigorous theoretical procedure for fixing the four unknown parameters (or five, m, n, a, b, c if we consider Plancks law) is still required.

Table 2: Selected Quarterly Profits-Revenues data Normal Type III and the INVERSE Type III behavior
Quarter Quarterly Quarterly Revenues, x Profits, y $, millions $ millions
1253 1818 1786 1601 1832 1597 1501 1818 1253 1501 1732 1601 1576 1672 755 547 54 213 206 310 683 547 755 683 153 213 164 142

Change Change Revenues, x Profits, y $, millions $, millions

565 -208

Slope h y/x

Q2 2005 Q1 2008 Q3 2008 Q2 2010 Q4 2007 Q1 2010 Q4 2005 Q1 2008 Q2 2005 Q4 2005 Q4 2009 Q2 2010 Q2 2006 Q1 2007

-0.368

-185

159

-0.859

-235

104

-0.444

317

-136

-0.431

248

-72

-0.288

-131

60

-0.462

96

-22

-0.228

Note: The change is always computed with respect to a later quarter compared to an earlier quarter. For the first (x, y) pair, the revenues increased between the quarters Q2 2005 and Q1 2008 but profits decreased yielding the negative slope. These are the highest profits and revenues values in Figure 7 with the negative slope h, see also Figure 10.
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1.00

Quarterly Profits, y [$, billions]

Q2 2005
0.80

Type III line y = -0.368x + 1.216

Q4 2005 Q1 2008

0.60
0.40

A
0.20 0.00

B
-0.20 -0.40 0.00

0.50

1.00

1.50

2.00

2.50

Quarterly Revenues, x [$, billions]

Figure 10: Instead of the power-exponential law, y = mxne-ax + c, we now fit the simple linear law to the Yahoo! Inc. quarterly profits-revenues data, especially at the highest revenues x, greater than $ 1 billion (observed since Q4 2004) There are 31 (x, y) pairs with revenues in excess of $ billion in the cluster seen to the right of this quarterly profits-revenues diagram. The solid line A with the negative slope joins the Q2 2005 and Q1 2008 data (the two outer points) and passes very close through the data point for Q4 2005.

6. Brief Discussion
As noted earlier in Refs. [1, 2], the pattern of decreasing profits y with increasing revenues x, observed with the Yahoo! Inc. financial data since 2005, when the peak profits were reported, is the most important finding of the analysis presented here and in the companion articles. This pattern was referred to as Type III

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behavior, a classification made with reference to the simple linear law, y = hx + c to describe the various possibilities based on the numerical values of h and c. 1. Type I behavior (h > 0, c < 0) refers to the case of both profits and profit margins increasing with increasing revenues. 2. Type II behavior (h > 0, c > 0) refers to the case when profits increase with increasing revenues but profit margins are decreasing. 3. Type III behavior (h < 0, c > 0), refers to the situation where both profits and profit margins decrease with increasing revenues.

1.00

Quarterly Profits, y [$, billions]

0.80
0.60 0.40 0.20 0.00 -0.20 -0.40 1.00

Type III line y = -0.368x + 1.216

Normal and Inverse Type III Either x < 0 or y < 0

1.20 1.40 1.60 1.80 2.00

Quarterly Revenues, x [$, billions]

Figure 11: A small selection of the quarterly data at high revenues (x > $1 billion revealing both normal Type III behavior (increasing revenues, decreasing profits) and INVERSE Type III behavior (decreasing revenues, increasing profits). We also observe the INVERSES of these three cases. The same three patterns are also observed with decreasing revenues instead of increasing revenues (i.e., the normal Type I, Type II and Type III behaviors). With the Yahoo! Inc. quarterly
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data, we find evidence for both the normal Type III behavior (revenues increasing) and the INVERSE Type III behavior (revenues are decreasing), see Table 2. The slope h is negative in both the versions of Type III. Either the change in revenues, x, or the change in profits, y, is negative, if we consider any two (x, y) pairs, but not both. The negative slope h of the various line segments yields the cluster of points in Figure 7, at the highest revenues, which a generally negative trend. The overall negative trend is described by the two parallels in Figure 10, with the negative slopes, with the three highest (x, y) pairs showing the decreasing profits with increasing revenues, also in clear chronological order. The INVERSE Type III , for Yahoo! Inc. is illustrated in Figure 11 with a small selection of the data points from Figure 7. An exactly similar pattern of decreasing profits with increasing revenues, over a sustained period of time, was also reported by Air Tran before it was forced into a merger with Southwest Airlines in March 2011. The same pattern was also observed with the old General Motors, before its bankruptcy filing in June 2009. Hence, it is suggested that URGENT ATTENTION must be paid (by the new CEO and the new CFO) to the same trends now being observed with both the annual and the quarterly profits-revenues data for Yahoo! Inc. The same future might lie ahead for Yahoo if corrective actions are NOT taken to restore Yahoo to either: Type II behavior (h > 0, c > 0, profits increasing with increasing revenues, even if profit margins are decreasing), or Type I behavior (h > 0, c > 0, profits and profit margins increasing with increasing revenues) The Type III line in Figure 10, with the equation y = -0.368x + 1.216, joins the data for Q2 2005 and Q1 2008, with the highest quarterly profits and revenues corresponding to this negative trend. The data for Q4 2005 falls in between and very close to this line. Notice that the Type III trend obeys the chronological order in that revenues are increasing, as time increases, but with decreasing profits. A total 28 points may be found in this cluster, with quarterly revenues greater than $ 1 billion, which lies beneath the Type III line labeled A. The average revenue
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for all 31 points data points (including the three highest on line A) is xa = $1.521 billion and the average profit is ya = $0.242 billion. The (dashed) parallel B, with the slope same as the Type III line A, is chosen to pass through this average point (xa, ya). The cluster of 28 points seems to follow this general trend, although shown by the calculations in Table 2, individual line segments joining various quarterly data (in proper chronology) would execute a chaotic crisscrossing along such a Type III line (as seen in Figure 3 with the annual data).

Table 3: Selected Quarterly Profits-Revenues data Illustrating Normal Type I behavior at low revenues
Quarter Quarterly Quarterly Revenues, x Profits, y $, billions $ billions Change Change Revenues, x Profits, y $, billions $, billions Slope h y/x

Q4 2000 0.311 -0.098 0.664 0.075 0.353 0.173 0.490 Q4 2003 0.907 0.253 0.243 0.178 0.734 Q3 2004 1.078 0.373 0.171 0.119 0.697 Q4 2004 Q4 2005 0.423 0.311 0.734 1.501 0.683 The average slope h = 0.664 in agreement with linear regression slope.

Note: The change is always computed with respect to a later quarter compared to an earlier quarter. All four slopes are positive. The average slope h = 0.664 which agrees with the linear regression analysis. This procedure of considering individual (x, y) pairs was also used by Millikan in his Novel Prize winning experiments to determine the Planck constant h from Einsteins photoelectric law, K = E W = hf W = h(f f0). A total of 10 slopes can be determined if we consider other (x, y) pairs systematically. The slope h = 0.656 if we consider the two extreme pairs Q4 2000 and Q4 2005. Also, as discussed earlier with the annual data, at low revenues, we observe a pattern of profits increasing with increasing revenues. This is highlighted by the calculations presented in Table 3, which considers a small selection of five (x, y) pairs between Q4 2000 and Q4 2005. Yahoo had established a pattern of profitability in this period, after the fluctuating between a loss and a profit in the early years. As noted earlier, a peak in the annual profit was reported in 2005. The profits and revenues data for two of the four quarters from this year fall on the Type III line highlighted earlier. The Type III trend began after 2005.
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Quarterly Profits, y [$, billions]

1.00 0.80 0.60 0.40 0.20 0.00 -0.20 -0.40 0.00

Type I line y = 0.664x 0.336 = 0.664 (x 0.505) r2 = 0.9926

0.40 0.80 1.20 1.60 2.00 2.40

Quarterly Revenues, x [$, billions]

Figure 12: Instead of the power-exponential law, y = mxne-ax + c, we now fit the simple linear law to the Yahoo! Inc. quarterly profits-revenues data. At the highest revenues (x > $ 1 billion, observed since Q4 2004), we see the Type III behavior. At lower revenues, we see the Type I behavior illustrated here. The linear regression line was determined as discussed with reference to Table 3.

A linear regression analysis can now be used to fix the slope h and the intercept c of the best-fit line through these five data points. This yields the slope h = 0.664 and an intercept c = -0.336, giving the breakeven revenue x0 = -c/h = $0.505 billion. This is superimposed on to the graph in Figure 12. Alternatively, an average slope h can be determined by considering different (x, y) pairs in this data set. A total of 10 slopes can be determined if we consider all five (x, y) pairs in a systematic manner. For example, four different slope can be determined if we take Point 1 and determine the slopes of the line segment connecting 1-2, 1-3, 1-4, and 1-5. Three more slopes can be determined between 2-3, 2-4, and 2-5 and so on. The slope h = 0.656 for the line segment 1-5 (joining Q4 2000 and Q4 2005) which is in good agreement with the regression analysis (h = 0.664). Indeed, the
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average slope for line segments 1-2, 2-3, 3-4, and 4-5, see Table 3, also equals equals h = 0.664, and turns out to be identical to the regression value! This procedure of considering various (x, y) pairs to determine the average slope was also used by Millikan, in his Nobel Prize winning experiments to determine the Planck constant h from Einsteins photoelectric law, K = E W = hf W. Because of their kinetic energy, the electrons produced when light shines on the surface of a metal (lithium and sodium were used in Millikans experiments), are able to reach a collector which completes surrounds the metal. The collector is the negative terminal of an electrical circuit. To determine h accurately, it is important to determine the maximum value of K (as also emphasized by Einstein in his 1905 paper). Thus, Millikan measures the electric potential V0 that will stop any electrons from reaching the collector; see also discussion of this point in the articles on Google, Kia, and Air Tran Refs. [16-19]. The maximum K = V0q where q is the electrical charge on a single electron. In a separate series of very elegant experiments (still voted as one of the top 10 most beautiful experiments in physics), Millikan had already determined the charge q, very accurately. This enabled Millikan to determine the Planck constant h, using the averaging method just described. Millikan considers 5 data points from the experiments with lithium, and 6 data points from the experiments with sodium (different W, data falls on a parallel line) to determine the average value of the Planck constant, now considered as one of the fundamental constants of the universe. The two opposing trends illustrated in Figure 12 imply the existence of a maximum point on the profit-revenues graph, around the intersection point of the Type I and the Type III lines (around $1.5 billion). This is a higher revenue compared to the revenue at the maximum points for the power-exponential curves illustrated in Figures 8 and 9. A final calculation is presented in Figure 13, which includes a power-exponential curve (dashed darker blue) with a maximum point at xm = n/a = 3.65/2.43 = 1.5. This provides a good description of the data around the maximum point. However, a much better agreement if the maximum point is shifted to a slightly lower value of xm = n/a = 3/2.5 = 1.2. The three curves in Figure 13 were again generated by varying the parameter m and holding n, a, and c constant.

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Notice that higher profits were reported in some quarters although the revenues were roughly the same. The four curves in Figure 13 provide a good description of the data for various profit levels. The curve D provides an accurate description of the negative trend observed with the highest profits, while the other curves describe the positive and negative trends (rising and falling parts of the curves) observed at relatively lower profit levels. Thus, it seems that the idea of a temperature T can be associated with these curves.
1.00

Quarterly Profits, y [$, billions]

0.80 0.60

D
0.40 0.20 0.00 -0.20

C A B

-0.40 -0.60 0.00

0.50

1.00

1.50

2.00

2.50

3.00

Quarterly Revenues, x [$, billions]

Figure 13: The power-exponential curve A, y = mxne-ax + c = 5.5x3.65e-2,43x 0.3 (small dashes, darker blue) has its maximum point xm = 1.502 1.5 and describes the data close to this maximum. The three other curves here, with the maximum point shifted to xm = 1.2, provide a good description of the rest of the data. These curves are generated by varying the constant m while holding n, a, and c constant. Thus, y = 6x3e-2.5x 0.3 for curve B (red) with m = 7.9 for curves C (dashed lighter blue) and m = 12.8 for curve D (solid blue). The choice n = 3 here is suggested by the same value of n = 3 in Planck original theory as applied to blackbody radiation data of the late 19th century (November 1899 which Planck used to guide
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him in December 1900) and also the Cosmic Microwave Background Radiation data from NASAs COBE satellite of the late 20th century (COBE was launched in November 1989, and the data presented January 1990). The higher the temperature T, the higher the profits for the same fixed revenues. There U is some property (here profits) of interest when dealing with a complex system with N micro-entities over which this property is distributed. Since there are many ways of distributing U over N, this gives rise to the property called entropy (a measure of chaos, disorder, or randomness). The temperature T is the derivative of U with respect to S and tells us how the property U increases (or decreases) as the entropy S increases. The temperature T = dU/dS. This is Plancks definition of the temperature when he develops quantum physics. We apply the same arguments here to define the temperature for the financial system, where U and S are defined as just described. It should also be noted that the idea of a temperature is also associated with the CMBR (Cosmic Microwave Background Radition) measurements although no physical thermometers were used to measure the temperature. A temperature is implied just by the intensity of the radiation at each frequency. Likewise, we postulate that the intensity, as measured by the profits, describes the temperature of the financial system.

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Yahoo! Inc. Financial Data Sources

1. http://files.shareholder.com/downloads/YHOO/2089225128x0x28459/9E08180 4-FB02-4BBE-B26C-4D77404F5F1E/yahoo_10k2001.pdf Quarterly 2001 and 2000 (page 57 of 69), and Annual 2001 to 1997 (page 23 of 69) 2. http://files.shareholder.com/downloads/YHOO/2089225128x0x28484/F0FA2D AB-B37A-4F1E-89DD-0D989467BF4C/yahoo_10k2000.pdf Annual 2000 to 1996 (page 23 of 62) and Quarterly 2000 and 1999 (page 51 of 62). 3. http://files.shareholder.com/downloads/YHOO/2089225128x0x28467/9D73E6 1E-B5BD-40EF-BD6D-A980071B9247/yahoo99_10k_intro.pdf Annual 1997 to 1999 (page 23 of 46) 4. http://files.shareholder.com/downloads/YHOO/2089225128x0x28414/1F3842A 4-9493-4839-9C4D-974DF83A9E71/yahoo_98ar.pdf Annual 1998 to 1995; data here is not in agreement with other reports cited here. Example, for 1998, revenues of $203.270 millions and profits of $25.588 millions and for 1995, revenues of $1.620 millions and loss of $1.016 millions.

List of References

1. Yahoo! Inc. Quick Look at recent profits-revenues trends, Published Oct 1, 2012, http://www.scribd.com/doc/108514055/Yahoo-Inc-Quick-Look-atRecent-Profits-Revenues-Trends 2. Yahoo! Inc. Maximum Point on the Profits-Revenues Graph, Published Oct 1, 2012, http://www.scribd.com/doc/108512834/Yahoo-Inc-Maximum-Pointon-the-Profits-Revenues-Graph
3. Corporate Bankruptcies, Mergers: The Maximum Point on the Profits-Revenues Graph of the Old GM, Ford, and Some Other Leading Companies, To be Published.

4. On the laws of Thermal Radiation, Wilhelm Wien, 1911 Nobel lecture in physics, http://www.nobelprize.org/nobel_prizes/physics/laureates/1911/wienlecture.html 5. Wiens Displacement Law, http://frank.mtsu.edu/~phys2020/Lectures/Part_2__L6L11/Lecture_6/Wien_s_Law/wien_s_law.html

6. Theoretical concepts in physics, by M. S. Longair, Cambridge Univ. Press. 7. M. Planck, The Quantum Hypothesis, in Great experiments in physics, Edited by Morris H. Shamos, Dover Publications (1959) pp. 301-314.
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8. From the Big Bang to the Nobel Prize and Beyond, John C Mather, Nobel

lecture, Dec 8, 2006, see introduction and remarks on page 20 (section V, on Data Analysis and Interpretation, the COBE FIRAS, Far Infrared Absolute Spectrometer, data was presented in January 1990 at the meeting of the American Astronomical Society, in Crystal City (suburb of Washington D. C.).
http://www.nobelprize.org/nobel_prizes/physics/laureates/2006/mather_lecture.pdf 9. Cosmic Microwave Background Radiation Anisotropies, Their Discovery and Utilization, George F Smoot III, Nobel lecture, Dec 8, 2006, see Figure 8 caption,

The FIRAS data fit with the expected blackbody curve with T = 2.726 K so precisely that the uncertainties are smaller than the width of the blackbody curve, the data points are covered by the curve and not visible [45].
http://www.nobelprize.org/nobel_prizes/physics/laureates/2006/smoot_lecture.pdf

10.Americans John C Mather and George F Smoot win Nobel Prize in physics, USA Today, Oct 3, 2006, http://www.usatoday.com/tech/science/200610-03-physics-nobel-prize_x.htm, also NASA Scientist shares Nobel Prize in physics, http://www.nasa.gov/vision/universe/starsgalaxies/nobel_prize_mather.html 11.Big Bang Theory comedy gets Nobel Laureate, George F Smoot III appears as a guest in this episode of the CBS comedy show, http://www.symmetrymagazine.org/breaking/2009/04/14/big-bang-theorycomedy-gets-nobel-laureate 12.George Smoot, Blackbody, and Anisotropy of the Cosmic Microwave Background Radiation, osti.gov, DOE R & D Accomplishments, http://www.osti.gov/accomplishments/smoot.html 13.On a Heuristic Point of View about the Creation and Conversion of Light, by A. Einstein, esfm2005.ipn.mx http://www.esfm2005.ipn.mx/ESFM_Images/paper1.pdf . See also, hermes.ffn.ub.es
http://hermes.ffn.ub.es/luisnavarro/nuevo_maletin/Einstein_1905_heuristic.pdf

14.A. Einstein, The Photoelectric Effect, in Great experiments in physics, Edited by Morris H. Shamos, Dover Publications (1959) pp. 232-237. 15.Einsteins Quanta, Entropy, and Photoelectric Effect, sigmapisigma.com, by Dwight E. Neuenschwander, Fall 2004, http://www.sigmapisigma.org/radiations/2004/elegant_connections_f04.pdf 16. Google: A Lovable One-trick Pony, July 1, 2012, http://www.scribd.com/doc/98825141/Google-A-Lovable-One-Trick-PonyAnother-Single-Product-Company-Analyzed-Using-the-New-Methodology

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17.Kia Motor Company: A Disappearing Brand

http://www.scribd.com/doc/99333764/Kia-Motor-Company-A-Disppearing-Brand,

Published July 6, 2012. 18. The Air Tran Story: The Merger and the Maximum Point on the ProfitsRevenues Graph, August 14, 2012, http://www.scribd.com/doc/102832984/The-Air-Tran-Story-The-Merger-andMaximum-Point-on-Profits-Revenues-Graph 19. The Future of Southwest Airlines, August 14, 2012, http://www.scribd.com/doc/102835946/The-Future-for-Southwest-AirlinesThe-Unknown-Story-of-Rising-Costs-and-the-Maximum-Point-on-ProfitsRevenues-Curve 20. Yahoo Replaces CFO as New CEO Marissa Mayers Delivers Pep Talk, By Paul Bond, Hollywood Reporter, Sep 25, 2012,
http://www.hollywoodreporter.com/news/yahoo-cfo-ken-goldman-marissa-mayer374137

21.GM Before the Bankruptcy: Maximum point on the profits-revenues graph, http://www.scribd.com/doc/103938349/GM-Before-the-Bankruptcy-MaximumPoint-on-Profits-Revenue-Graph , Published August 25, 2012. 22. The New GM: A Brief Analysis of the Profits-Revenues Data, http://www.scribd.com/doc/103600274/The-New-GM-A-Brief-Analysis-of-theProfits-Revenues-Data-through-1Q2011, Published May 9, 2011 and again on
August 22, 2012, Discussion of the new GM data from 1Q2010 to 1Q2011.

23.Why Cant GM be more like Microsoft? The New GM Just May be. http://www.scribd.com/doc/103607023/Why-Can-t-General-Motors-be-morelike-Microsoft-The-new-GM-may-just-be Published August 22, 2012. 24.Ockham's Razor and Bayesian Analysis, Jeffreys, W. H., and Berger, J. O. (1992), American Scientist, 80, 64-72 (Erratum, p. 116). http://quasar.as.utexas.edu/papers/ockham.pdf
25. Teaching Statistics with Data of Historical Significance, By David A. Dickey and J. Tim Arnold, http://www.amstat.org/publications/jse/v3n1/datasets.dickey.html 26. Engels Law Reconsidered, By Manisha Chakrabarthy and Werner Hildenbrand, http://www.econ2.uni-bonn.de/members-of-the-chair/hildenbrand/engelslaw.pdf The poorer a family the greater the proportion of its total expenditure that must be devoted to the provision of food. 27. Revisiting Engles Law: Examining Expenditure Patterns for Food at Home and Away from Home, By Rodney B. Holcomb, John L. Park, and Oral Capps, Jr. http://ageconsearch.umn.edu/bitstream/27224/1/26020001.pdf
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28. Engels Law Around the World, 150 years Later, By Richard Anker, http://www.peri.umass.edu/fileadmin/pdf/working_papers/working_papers_201250/WP247.pdf 29. Deformation and Rheological Behavior of Semi-solid Sn-15 wt% Pb Alloy, By V. Laxmanan and M. C. Flemings, http://www.springerlink.com/content/45uj4gh37051172r/ http://books.google.com/books/about/The_Deformation_and_Rheological_Behavior.h tml?id=mF8_NwAACAAJ 30. Rheology 2000: http://books.google.com/books?id=rC1BAQAAIAAJ&q=laxmanan+flemings+defor mation&dq=laxmanan+flemings+deformation&source=bl&ots=0MU4I8TwKv&sig= 2Kh8nAM6RByEUYfiRrpvbDpnN9g&hl=en&sa=X&ei=mvlnUKGqIoTx0gH6pYA 4&ved=0CEkQ6AEwBA 31. The Maximum Point on the Profits-Revenues Graph of the Old GM, Ford, and Some Other Leading Companies, To be Published.

32.Planck, Quantum, and Historians, By Clayton A. Gearhart, http://employees.csbsju.edu/cgearhart/Planck/PQH.pdf 33.M. Planck, The Quantum Hypothesis, in Great experiments in physics, Edited by Morris H. Shamos, Dover Publications (1959) pp. 301-314. 34.R. P. Feynman, R. B. Leighton, and M. Sands, The Feynman Lectures on Physics, Addison Wesley, Reading, MA, Sixth Printing, see volume which deals with Quantum Mechanics, 39-1 to 41-10. 35.What is Entropy? June 3, 2012, http://www.scribd.com/doc/95728457/Whatis-Entropy 36.Plancks Blackbody Radiation Law Re-derived for the general case, May 30, 2012, http://www.scribd.com/doc/95329905/Planck-s-BlackbodyRadiation-Law-Rederived-for-more-General-Case Other Related References
37. Equation of a Parabola, Standard form and Vertex form equations, mathwareshouse.com, http://www.mathwarehouse.com/geometry/parabola/standard-andvertex-form.php ; Quadratic functions, http://www.valleyview.k12.oh.us/vvhs/dept/math/quadshelp.html

38.Galileo: The Search for the Parabolic Trajectory, by R. H. Naylor, Annals of

Science, 33 (1976) 153-172,

http://www.tandfonline.com/doi/abs/10.1080/00033797600200201#preview
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39.Projectile Motion, http://en.wikipedia.org/wiki/Projectile_motion 40.Catenary, http://en.wikipedia.org/wiki/Catenary 41.Electromagnetism, in Theoretical concepts in physics, by M. S. Longair, Cambridge Univ Press (1984). 42. Microsoft reports first quarterly loss EVER in 26-year history as a public company, By Daily Mail Reporter, July 19, 2012,
http://www.dailymail.co.uk/sciencetech/article-2176227/Microsoft-reports-quarterlyloss-EVER-26-year-history-public-company.html

43.A Fresh Look at Microsoft after its Historic Quarterly Loss, Published July 25, 2012, http://www.scribd.com/doc/101062823/A-Fresh-Look-at-MicrosoftAfter-its-Historic-Quarterly-Loss 44.A Second Look at Microsoft after its Quarterly loss, Published July 30, 2012, http://www.scribd.com/doc/1015181/A-Second-Look-at-MicrosoftAfter-the-Historic-Quarterly-Loss 45.The Clinton Budget Surpluses, http://www.scribd.com/doc/105819500/TheClinton-Budget-Surpluses-Treating-Government-like-a-Business, Published Sep 13, 2012 , Google financial data for early years may be found in Table 2. 46. Amazon.com, Analysis of the Profits-Revenues Data, Published Sep 24, 2012,
http://www.scribd.com/doc/106881274/Amazon-Profits-Revenues-Data-Analysis

47.Three Types of Companies: From Quantum Physics to Economics, May 24, 2012, http://www.scribd.com/doc/94647467/Three-Types-of-Companies-FromQuantum-Physics-to-Economics 48.Some Examples of Corporate Financial Behavior, June 4, 2012, http://www.scribd.com/doc/95906902/Simple-Mathematical-Laws-GovernCorporate-Financial-Behavior-A-Brief-Compilation-of-Profits-Revenues-Data 49.The Future of Facebook I, May 21, 2012, Power law behavior with n < 1, http://www.scribd.com/doc/94325593/The-Future-of-Facebook-I 50.Mount Profit Revealed by Ford Motor Company, May 29, 2012,
http://www.scribd.com/doc/95140101/Ford-Motor-Company-Data-Reveals-Mount-Profit

51.The Amazing US Government Surplus (Deficits)-Receipts Relation during the Clinton Presidency, http://www.scribd.com/doc/105821230/The-AmazingUS-Government-Receipts-Surplus-Relation-during-the-Clinton-Presidency, Published Sep 13, 2012. 52. A Brief Review of the Historical US Government Receipts-Surplus (Deficit) Relation, http://www.scribd.com/doc/106003088/A-Brief-Review-of-the-HistoricalUS-Government-Surplus-Receipts-Relation , Published Sep 15, 2012.

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53. The Efficiency of the Government Compared to the Thermal Efficiency of a

Heat Engine, Sep 18, 2012, http://www.scribd.com/doc/106220758/The-Efficencyof-Government-Compared-to-Thermal-Efficiency-of-a-Heat-Engine

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About the author V. Laxmanan, Sc. D.

Email: vlaxmanan@hotmail.com The author obtained his Bachelors degree (B. E.) in Mechanical Engineering from the University of Poona and his Masters degree (M. E.), also in Mechanical Engineering, from the Indian Institute of Science, Bangalore, followed by a Masters (S. M.) and Doctoral (Sc. D.) degrees in Materials Engineering from the Massachusetts Institute of Technology, Cambridge, MA, USA. He then spent his entire professional career at leading US research institutions (MIT, Allied Chemical Corporate R & D, now part of Honeywell, NASA, Case Western Reserve University (CWRU), and General Motors Research and Development Center in Warren, MI). He holds four patents in materials processing, has co-authored two books and published several scientific papers in leading peer-reviewed international journals. His expertise includes developing simple mathematical models to explain the behavior of complex systems. While at NASA and CWRU, he was responsible for developing material processing experiments to be performed aboard the space shuttle and developed a simple mathematical model to explain the growth Christmas-tree, or snowflake, like structures (called dendrites) widely observed in many types of liquid-to-solid phase transformations (e.g., freezing of all commercial metals and alloys, freezing of water, and, yes, production of snowflakes!). This led to a simple model to explain the growth of dendritic structures in both the groundbased experiments and in the space shuttle experiments. More recently, he has been interested in the analysis of the large volumes of data from financial and economic systems and has developed what may be called the Quantum Business Model (QBM). This extends (to financial and economic systems) the mathematical arguments used by Max Planck to develop quantum physics using the analogy Energy = Money, i.e., energy in physics is like money in economics. Einstein applied Plancks ideas to describe the photoelectric effect (by treating light as being composed of particles called
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photons, each with the fixed quantum of energy conceived by Planck). The mathematical law deduced by Planck, referred to here as the generalized power-exponential law, might actually have many applications far beyond blackbody radiation studies where it was first conceived. Einsteins photoelectric law is a simple linear law, as we see here, and was deduced from Plancks non-linear law for describing blackbody radiation. It appears that financial and economic systems can be modeled using a similar approach. Finance, business, economics and management sciences now essentially seem to operate like astronomy and physics before the advent of Kepler and Newton.

Cover page of AirTran 2000 Annual

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