Leaving Googlemania and returning to reality

Google announced that it earned $372 million in Q4 2005 or $1.22 [Earnings call transcript available here at SeekingAlpha.com]. This was far below what analysts expected; according to the Wall Street Journal (subscription required), some had put the whisper number for the stock up at nearly $2.00. Google stock tumbled about $70 in after-hours trading or about 16 percent at 5:30 pm. I'm sure there are a lot of mutual fund managers saying, "Yikes! How could they miss by so much?"


Lest any Google owners be considering descending from their office towers without benefit of an elevator, perhaps this little excerpt from the company's S-1 filed in April 2004 might help:

As a private company, we have concentrated on the long term, and this has served us well. As a public company, we will do the same. In our opinion, outside pressures too often tempt companies to sacrifice long-term opportunities to meet quarterly market expectations. Sometimes this pressure has caused companies to manipulate financial results in order to “make their quarter.” In Warren Buffett’s words, “We won’t ‘smooth’ quarterly or annual results: If earnings figures are lumpy when they reach headquarters, they will be lumpy when they reach you.”

Sounds like they did what they said, and they even quoted Warren Buffet to back them up.


And even though the market will probably punish the stock tomorrow as well, Google still does nearly half of the searches done on the Internet, and that's roughly double that of its nearest competitor. Further, Google has controls a huge share of the advertising on more than eight million blogs on the internet because Google make it easy for marketers to place and measure advertising. Plus, Google was the most influential brand globally in 2005, beating out branding giant Apple. I doubt any of those numbers will change next quarter, regardless of what the earnings were or what the stock does tomorrow. Why? Because those are the long-term metrics that management is worrying about, and they are also the ones that will determine Google's value long-term.


So I guess if we don't like their earnings, we can just lump them.

Technorati Tags: Analysis, Financial analysis, Google, Marketing, Search

Deconstructing news in the attention economy

Slate's Jack Shafer chimed in over the weekend with a vision of how blogs and democratic publishing are eroding the business value of newspapers. He likens the rise of blogs to the introduction of phototypesetting, which undermined the unions and eliminated thousands of linotype operator jobs. He argues, rightly I think, that traditional news organizations need to differentiate their news reporting or fall prey to the onslaught of the army of bloggers. So that's two pundits in one weekend (three if you include me) who are predicting the decline and fall of today's news business.

I'd summarize the situation this way. News is changing because the economics are changing in three important ways:

1. media creation, production, and distribution are getting cheaper,


2. advertising is becoming more networked and more measurable,


3. but audience attention is getting scarcer and more expensive.

So what does that really mean? It means it is getting easier to create news and a news business, but it is harder to make it profitable.

Don't think this trend implies the decline and fall of professional reporting, analysis, editing, illustration, or production of news. On the contrary. If anything, these functions will become more important as consumers look to new media for news. But in my opinion, many of these functions will become disaggregated -- they will become branded activities that businesses will pull together to create the equivalent of today's newspaper. Think of traditional newspaper activities as being a collection of tracks on a music album; future news companies will buy and sell these activities by the track as well as by the album.

You can see a sample of this mashup of branded functions today already at destinations like Newsvine.com (invitation required), where the professional reporting and photographs come from the Associated Press, but the analysis and commentary comes from independents members of the community like me. Editing is minimal -- the only form of editing widely done is by voting articles up and down. Production and branding is done by Newsvine, but they sell advertising to pay the sources and for the Internet distribution. All those functions that used to be under one newspaper masthead are still there, but some have become outsourced to other companies or given to the community to do for free. Newsvine is changing the cost structure of news.

But sadly, that's the easy part.

The real business problem is on the audience side. We face a terrible challenge in today's Attention Economy: media overload is making attention scarcer and more expensive. You pay as much for a full-page ad in the Wall Street Journal today as you did last year, but fewer people will pay attention to it. Why? Because some of the Wall Street Journal readers now read sites like SeekingAlpha.com. More of them buy the paper and then spend their trainride answering their Blackberry messages or joining a conference call. Some of the Journal's print subscribers only read on-line and therefore see a different set of ads. The cost of reaching today's fragmented and divided-attention audiences are going up faster than production costs are going down. That's what's killing the broad news business -- and for that matter, many of today's media businesses from magazines to the TV networks.

This is what we here at Blackfriars call the tyranny of too much. We are overwhelmed with media, messages, ads, news, TV shows, and iPod tracks. We are all becoming too hard to reach. Our problem is not that we can't find the news. It's that the news we want can't find us. And unless it does, no one will pay for it.

There's a name for the process of finding audiences that want products and influencing them to consume them. It's called marketing. Media companies spend about 10% of their revenues on marketing on average, compared with 9% for all business. But do you think those newspapers that we started this column talking about are spending 10% of their revenue on marketing? How about the Internet news companies just hitting the street? In both cases, I'll bet they are vastly underspending the average.

The news business is being reinvented. Creation and production is getting cheaper, but reaching audiences is getting more expensive -- vastly more expensive. Want to figure out who will be the survivors? Look at their marketing budgets. Spending on marketing willl predict the winners and losers in the attention economy.

Technorati Tags: Internet, Newspapers, Opinion, Predictions, News, Newsvine, Blogs, SeekingAlpha, Marketing, Publishing

Sounding the alarm for publishing's decline

Scott Karp at Publishing 2.0 notes that the publishing and media businesses are changing dramatically, and not necessarily in a good way for old media. And before bloggers get too smug about being on the forefront of new media, he summarizes some great research being done by Umair Haque as follows:

The proliferation of media is destoying the economics of Old Media, which depended on a finite media universe.


The proliferation of media is a bubble because it’s being driven by speculation — the 20 million bloggers and dozens of Web 2.0 sites popping up everyday are speculating on the unbundling of content and distribution.


As a result of the speculation in media, there is now too much media competing for too little attention.
....
The speculation in media that is being driven by the technology industry and blogging is still based on old media economics — it assumes that each site can gather a sufficiently large slice of the attention pie to finance its existence. But if media attention becomes completely fragmented and chaotic, no one will have sufficient scale or a sufficiently coherent audience to capitalize on their investment in media creation — even if the only real cost is time.


If all of the advertising dollars pass through Google, the only one who will be left with a meaningful share of those dollars will be Google. Same with content fees.

Blackfriars has seen this coming for a while. Almost two years ago, we reoriented our company strategy to offer services that deal with the tyranny of too much in modern life. But we have a different view that Haque's about how it will play out, because we believe people 1) aren't entirely driven by economic theory, and 2) often tap off-line resources like other people to deal with technology overload. But we do agree with one of Haque's conclusions: that content quality will become more of a differentiator and driver of media acceptance.

The bottom line: there is a great land grab going on now to capture enough quality content under a brand today to survive the coming deflation of media value. We can be pretty sure it won't be the old media companies that do this because of the challenge of The Innovator's Dilemma. The open question is, who will?


A final note: Blackfriars is considering publishing a longer analysis of the creative destruction of the media industry. If you are interested in reading a more extensive report that tries to predict in detail what will happen to publishing over the next five years and what authors and creators should do about it, please leave a comment or drop me a line. If we get lots of interest, we'll do it. If we don't, we won't.

Technorati Tags: Advertising, Analysis, Blogs, Marketing, Media, New media, Predictions, Pricing, Publishing, Umair Haque

What Disney should do to keep the Pixar magic alive

I've heard a lot of skepticsm over at Newsvine about my optimistic view of Disney's acquisition of Pixar. The argument is largely, "Disney is old and stale; they'll bore Pixar to death." And I have to say, there are a bunch of ways Disney could screw this up, particularly if they cut out John Lasseter or Ed Catmull from the action -- they really are the heart and soul of Pixar. But they are the guys with the unbeatable track records, not Disney. I expect the Disney crew will treat them with respect. And remember, with Jobs sitting on the board and being the largest stockholder, he can make a big stink if Disney goes in the wrong direction. And we know he isn't afraid to do things like that.

But they can do better than not screwing it up. One of the best things that Disney could do is to transfer all its animation staff to the new Pixar headquarters up at Emeryville, CA (click on the title of the post for the link to the Pixar tour pictures), and let Pixar continue running as a division of Disney. That facility was built for creative animators (have you heard about the original concept of only one bathroom for the entire building to ensure people interacted?), and I think it would do wonders for boosting Disney animation morale as well as keeping the Pixar magic alive. If they do that, watch out. It ain't going to be your father's Disney any more -- and it will be a lot more like when Walt was running the place.

As an aside, Walt Disney was always considered to be a tyrant in business. Maybe Jobs is just Walt coming back to haunt the place. And maybe that's just what Disney needs.

Technorati Tags: Apple, Disney, Pixar, Animation

Popping the blog valuation bubble

Jason Calacanis, CEO of Weblogs, Inc., who sold his network to AOL for somewhere around $25 million, has a great post a couple months ago telling everyone to stop valuing blog networks according to the benchmark his sale set. It rings just as true today, if not more so. He argues (rightly, I assert) that valuations are driven by revenue and revenue growth, not by monthly visitors. Spoilsport that I am, I would add profit to the equation as well.

Amen to that. I wrote a piece last year saying much the same thing. After all, if you use that $38-per-monthly-visitor benchmark to value Google, you'd have to value it at $1.3 trillion. While that may make Larry Page and Sergei Brin very happy, you really really don't want to do that.

Technorati Tags: Blogs, Business, Financial analysis, Internet, New media, Valuation, Web, Web 2.0

Who is winning in the video game business?

The wires are full of glowing reports of Microsoft's earnings release today. And some are touting the XBox 360 launch numbers, tepid though they were, as indicating that Microsoft will make headway in its push into next-generation gaming. In Microsoft's filing, the company noted that its revenue shortfall was partly due to XBox 360 shortages. Still, Microsoft logged more than $1.5 billion in revenue for its Home and Entertainment division while recording nearly $300 million in losses for the quarter. Given that XBox 360 consoles are sold at a loss, the lower volumes actually kept the losses at Home and Entertainment from being bigger.

Meanwhile, tiny little gaming competitor Nintendo, also reported earnings for the quarter. Unlike Microsoft, it had no new console launch to talk about (other than the Gameboy Micro which came out earlier in the year). Yet, the company reported a near doubling of profits over the prior year to almost 56 billion yen (about US$482 million at today's exchange rate), based upon Gamecube and Gameboy sales. That's within spitting distance of giant Sony's gaming profit for the same quarter of 68 billion yen (about $521 million), despite Sony's more than installed base of 100 million Playstation 2s worldwide. Needless to say, Nintendo is making profits on every console and game it sells, and it shows in their business results.

Looking forward to the coming year, both Nintendo and Sony have next-generation console launches to manage, while Microsoft is past that point. But while Sony will get all the glitz for its Playstation 3, with its 1080p high-definition gaming action and Blu-ray disk player, but Nintendo's new Revolution console with its radically redesigned gaming controller and backward compatibility for practically every Nintendo game made may turn out to be the business results star. Nintendo continues to delight its young gaming market with its focus on kid-friendly games and great gaming experiences, while innovating with completely new gaming concepts such as Nintendogs for the Gameboy DS. But if it continues to generate near-market-leading profits like the ones last quarter from its more target-market-driven strategy, it should delight investors as well.

Technorati Tags: Sony, Marketing, Playstation 2, Playstation 3, Revolution, Nintendo, Microsoft, Gaming, Opinion, Financial analysis, XBox 360, Analysis, Games

A citizen journalism experiment loses a leader

Dan Gilmore, ex-San Jose Mercury News reporter and founder of Bayosphere.com, notes in a letter from a couple days ago that he and Bayosphere will no longer be spending VC money on Bayosphere. Instead, Gilmore is founding a new non-profit called the Center for Citizen Media in conjunction with the University of California Berkeley Graduate School of Journalism and the Berkman Center for Internet & Society.

I noted the other day that there are no fewer than 16 different news sites offering reader input and voting on content, and of these few have any marketing strategy. Combine that with the fact that as Scott Karp points out few ordinary people have time for creating, editing, and voting for content, and it's clear that Bayosphere had an uphill battle to reach any type of critical mass. But more importantly, I believe Bayosphere's focus on citizens controlling all content prevented it from having a strong point of view and brand through editing, which I view as one of two requirements for success in online journalism today. Sadly, given all the other Web 2.0 citizen participation sites out there, we don't think Bayosphere will be the last to fade off into the sunset.

Technorati Tags: Journalism, Opinion, Web 2.0, Marketing, Internet, Blogs, Publishing

Sony: on the comeback trail -- maybe

Sir Howard Stringer, the new CEO and first non-Japanese leader of Sony, promised to turn the company around. Has he actually turned the ship in just a couple quarters at the helm of this electronics and movie giant?

Well, he's made a start. Sony today reported an 18% rise in profit and that it would end its fiscal year on March 31 with a profit. Particularly notable in the report was the fact that Bravia flat-panel displays were the best-selling LCD displays in the US over Christmas. Sony also shipped 6 million Playstation Portable (PSP) game systems over the holiday season, bringing the PSP installed base to more than 15 million units. But Sony also announced that it is discontinuing making plasma flat-panel TVs as well as its AIBO robot dogs.

The big question is whether the company that invented the Walkman and the Trinitron TV can refocus its efforts to be competitive in today's consumer electronics world. It's nemesis in this comeback? None other than the current US darling, Apple Computer, whom Bear Sterns analyst Andrew Neff says is who Sony always wanted to be". Let's compare the numbers behind both firms.

	Sony	Apple
Revenue	$62.0 billion	$38.8 billion
Trailing Price/Earnings	43	39
Profit margin	2%	10%
Operating margin	3%	12%
Quarterly revenue growth year-over-year	10%	65%
Quarterly earnings growth year-over-year	17%	92%
Cash	$3 billion	$9 billion
52-week stock price change	+17%	+105%

It's clear that Sony's comeback has only just started, and most believe that Apple is now at one of its peaks in terms of business performance. Sony has some interesting products planned for its coming year, including the launch of its Playstation 3 game console and a 70-inch Bravia LCD TV. But the company also has some problems to deal with, including Sony Pictures poor business performance and a public relations fiasco in digital rights management over at the Sony BMG Music Entertainment joint venture. And the new Sony Walkman and its Connect digital music service still has a long way to go before it puts any type of dent in Apple's iPod steamroller.

I can't yet recommend Sony as an investment yet; there's too much uncertainty still in its cash cow gaming and TV businesses. But there are two events that would make me re-evaluate that position:

1. A great Playstation 3 (PS3) launch. If Sony can ship five million PS3s in its first month or two of availability, that will demonstrate that its Playstation franchise is likely to survive XBox 360s threat. That would bode well for years of console sales and profits.


2. Striking a deal with Apple on music. Sony has done deals with technology providers like Palm before to bring outside technologies under a Sony brand and experience. Such a deal with Apple is probably the only way Sony will avoid being a minor player in the digital music revolution for years to come. But if Sony can muster the courage to pull it off, it could return some of the shine to the company.

Full disclosure: I own no shares of Sony, but do own shares of Apple Computer.

Technorati Tags: Analysis, Apple, Consumer Electronics, Financial analysis, Flat Panels, Games, Gaming, HDTV, iPod, LCD, Marketing, Opinion, Plasma, Playstation 3, Sony, Technology, TV, XBox 360

Who won the VHS-Beta war?

Lee Gomes in the Wall Street Journal yesterday (subscription required) applied the lessons of the VHS-Beta videotape wars in the 1980s to the coming high definition DVD battle between Sony's Blu-ray and Toshiba's HD-DVD formats. He recalls that VHS won the war because it boasted features consumers cared about (namely longer playing time) and the technology was available from several manufacturers, while Sony's focus on better picture quality left consumers cold. The result: VHS achieved 98% consumer market share for videotape recorders by 1988. It's a frequently cited business lesson proving "good enough" standardized products win in consumer markets over better proprietary technology. Everyone knows this, right?

Ummm, not so fast. What happens when we think about this story using profit dollars as our metric instead of market share? After all, that's the type of measurable strategy that CEOs expect from marketing execs nowadays. How did the story work out in bottom line dollars?

The facts: VHS won the market share battle for consumers, but the victors were forced to fight a grueling commodity battle amongst themselves, not against Sony. And, as in most commodity battles, the players focused on price and features to win. The result? The most successful companies that "won" the battle with VHS -- JVC, Matsushita, and others -- won the right to make devices that had to compete against hundreds of similar products, had no pricing power in the market and achieved profit margins between two and five percent. At their peak in the year 2000, VHS VCR companies sold 55 million devices in a year, yielding somewhere around $330 million in profit for the three major manufactures making VCRs in that year. That's about $100 million each. And that in VHS's peak production year.

But what happened with Beta? Yes, Sony eventually withdrew Beta VCRs from the consumer market. But Sony retargeted Beta videotape recording to a market that valued video quality more than tape length. The result: Sony dominated the professional and broadcast market from the 1980s well into the 1990s with its Betacam, Betacam SP, and Betacam Digital series of products. And Sony had immense pricing power and profitability in those markets. In just one year, Sony logged nearly a billion dollars in profit from its professional video technologies for the broadcast industry. That's about 10 times more profit than each manufacturer of VHS VCRs made during their peak.

The Wall Street Journal is citing the victory of VHS over Beta to guide our understanding of next-generation DVDs. Others have used it to predict that Apple's domination of digital music with the iPod can't last under an onslaught from Windows Media Player-based devices. But the loser in the VHS-Beta war made more money than the victors because of a better marketing strategy. And maybe that's the real lesson we should be learning.

Technorati Tags: Consumer Electronics, VHS, Apple, Financial analysis, Sony, Beta, Opinion, Analysis, Strategy, Marketing, iPod

What Disney acquiring Pixar means

It's all over but the paper signing. Business Week says that Disney's board has approved its takeover of Pixar, which will make Steve Jobs the largest stockholder of Disney as a side effect. This sounds like a simple merger and acquisition story, but it actually reshapes the tech and TV businesses. How? Here's our view of what this deal really means:

• Disney regains its crown as an animation powerhouse. No studio has ever achieved six blockbuster movie hits in a row before Pixar. With Pixar on board, Disney can now add Monster's Inc. and Toy Story to its existing stable of classic movies such as Snow White and Beauty and the Beast.


• Apple gains a gold-plated Fortune 100 customer. Expect Disney to start becoming the biggest buyer of Apple MacBooks and PowerMacs in the country. Why? Imagine being in a board meeting with Steve Jobs, watching the largest shareholder pull out his MacBook to take notes while you pull out your Dell. At least some board members will decide they need a new laptop. And once executives in the boardroom start using Macs, it won't be long before Apples are on the approved computer list.


• iTunes garners access to serious video content. The trickle of iTunes TV shows that started with Desperate Housewives and Lost will grow to a flood this year as new iTunes revenue turns skeptics to converts. As Apple begins creating its own on-demand TV network, Disney will rapidly become the preferred distribution studio because of its deep connection to iTunes.


• Apple gets serious influence in Hollywood. Unlike when Steve Jobs negotiated for rights to distribute music as an outsider, Jobs will now be a peer in Hollywood. When Jobs weighs in on anything from next-generation DVD formats to digital rights management technology, he'll now be able to drive deals and standards that an outsider never would be able to pull off.

With Jobs and Disney CEO Robert Iger joined at the hip, the days when Hollywood could just stonewall a new technology like iPods or dictate distribution terms for movies are over. Steve Jobs' relationship with Disney is now a trump card in his hand. For players in both Silicon Valley and Hollywood, that means it's now a whole different game.

Technorati Tags: All In One HDTV, Apple, Disney, Opinion, Disney, iPod, DRM, iTunes, Pixar, MacBook

What is the marketing plan for News 2.0?

First the good news. Peter Cashmore has a wonderful list of 16 Web 2.0 news sites and points to a list by Paul Montgomery that compares and contrasts all their technology features such as mainstream news feeds, citizen journalism, blogging support, and APIs. But you know what struck me? Not a single one of these sites says anything about how they plan to market themselves to their target audience. Yes, the search engines are good, but they are no substitute for marketing.

Technorati Tags: Blogs, Journalism, Marketing, News, Newsvine

The essence of journalism in the era of too much media

Scott Karp at Publishing 2.0 has a great article challenging claims that consumer input and voices will make sense of the flood of blogs, news feeds, and comments in today's media landscape. He even takes a whack at our favorite new news site, Newsvine.com (invitation only). We here at Blackfriars refer to this tsunami of information and choice as the tyranny of too much. But the article pointedly asks a couple of important questions about the democratization of news editing and story creation:

Who’s got time for all this?

There’s Flickr, del.icio.us, Digg, MySpace – already I’m too tired to list the dozens (maybe hundreds) of collaborative and participatory media. Surfing cable TV could consume an entire Sunday. Now we’re being asked to tag, comment, create, contribute, vote, refer, subscribe, engage, rate, report, add, chat, seed…

When we’re all creating media, who’s going to be left to consume it?

Scott ends the article with his answers to the questions:

Is there a glimmer of hope here for trusted content brands? At the end of a long day, most people aren’t going to collaborate their way through the day’s news. They just want someone to give it to them. Maybe that someone will be the collective intelligence of citizen journalism, but they’re still going to pick one outlet they trust.

Publishers may not control the distribution of content, or even its creation, but they still have brands that people trust. I guess at the end of the day it’s all about control. If you don’t control the creation or the distribution of the content, what do you control?

I may not want journalism delivered in a static print publication. But I also don’t want to be awash in a sea of stories. Even in a town hall meeting (or any meeting), you don’t accomplish much when everyone talks at once.

So who’s going to throw us a life preserver? Who’s going to find the balance between left and right, an American democracy of media?

Whoever figures this out will have the next Google.

I'd take this one step further. Yes, I believe that publishers and brands have a role to play. But those publishers and brands must market themselves to readers to mean something, not just be brands in a vacuum. I believe that successful brands will have two important and necessary activities:

1. Creating a strong point of view and brand through editing. In this era of the tyranny of too much, less choice creates more value. So those publishers who can make sense of the hundreds of news articles and only publish the ten or fifteen quality stories that truly benefit its audience will be the ones that can garner readership, advertising, and investment. This is traditional publishing reborn as editorial selection for a specific audience.



2. Building audiences with personal voices. Audiences relate to people, not robotic feeds. Just as some people read the New York Times for Maureen Dowd or the Boston Globe for Ellen Goodman, others will read their online news for the insights of specific authors. The most successful publishers will host a stable of distinctive writers who tell readers what the news means and add their own personal insights. And unlike in traditional publishing, readers who do have the time can interact with these writers directly and build a public conversation about the issues that they are passionate about.

These two brand attributes -- editorial point-of-view and personal voices -- will only become more valuable as consumers become overwhelmed with choices. These aren't technology features like Google search or Yahoo maps; these are the defining attributes of journalism. And the publishers who figure this out? They won't be the next Google -- they'll be the next CNN.

Technorati Tags: Blogs, Internet, Journalism, Marketing, Opinion, Publishing

Memo to Microsoft: Time to talk about XBox 360 deliveries

I wrote a comment on a recent article about it being February before Gamestop will be able to satisfy all of last year's pre-orders for Microsoft's XBox 360 game system. So I thought I would do a little research to see what general availability looks like for the console now that it is about two months after launch. Looking online at stores like Amazon, Best Buy, Target, and EBGames, there still is no supply of consoles. And the price-gouging on bundles we saw before Christmas still remains, with Amazon not selling any bundles below $900, while EBGames offers a Core system bundle at about just under $600. It's clear supplies are still very tight.

I'm not going to second-guess Microsoft's supply chain issues; I predicted last year they were going to have trouble. But I am going to suggest to Microsoft that they need to get out and talk about their now-serious marketing problem. All Microsoft's public statements to date have simply reiterated goal to ship six million units by June, without acknowledging the dissatisfaction some of their customers are feeling as they approach the seven-month anniversaries of their pre-orders without delivery. Happy talk about "trying to satisfy overwhelming demand" isn't going to fix the damage being done to their brand.

The best thing Microsoft could do at this point is to have Robbie Bach or Todd Holmdahl start a regular weekly blog about how the manufacturing process is going and how many units Microsoft is actually delivering to customers. After all, Microsoft is trying to gain market share in a very competitive market with the momentum in 2006 moving to Sony and Nintendo. It needs to differentiate itself by satisfying its customers better than its competitors. Keeping them in the dark isn't the right answer.

Technorati Tags: Communications, Consumer Electronics, Manufacturing, Marketing, Microsoft, XBox 360

Business Week rebuts the "Intel is cheaper" myth for Apple

A lot of people have been expecting that with its conversion to Intel processors, Apple's Macintosh computers would rapidly become cheaper because of their use of "commodity" Intel parts. Business Week and supply chain analyst firm iSupply rebut that myth by noting that where the G5 chips were costing Apple about $100 or so, the new Intel Core Duos are costing it more like $265. That means that Apple is absorbing $165 more in processor cost on the new iMacs, since it didn't change their pricing.

I think there are two important takeaways here:

1. Standard does not necessarily mean cheaper. Apple's move to an industry standard part has actually raised its parts cost, not lowered it. We shouldn't be surprised at that. A manufacturer like Intel who has the majority of the market for PC processors has immense pricing power, whereas a smaller manufacturer trying to break into the market might be willing to make less profit to do so. Further, some standards have intellectual property (in this case, the processor design is definitely proprietary Intel property) in them that raises their costs.


2. Pricing is a marketing decision to address a specific market, not a function of cost. Apple didn't raise its price to accommodate its higher parts cost because it judged that a higher price wouldn't have met the needs of its target market and might have reduced its sales. Pricing is only one of the four Ps of marketing -- Product, Place, Price, and Promotion -- and the lowest price is rarely the best business decision without thinking about the other three Ps.

The bottom line: Apple switched to Intel parts for more benefits than cost, since the Intel parts are costing it more. Expect to see a lot of marketing about those benefits in Apple's upcoming products and promotions.

Technorati Tags: Apple, Business, Intel, Marketing

Avoiding irrational disappointment on Wall Street

This week, we now have four technology firms -- Intel, Yahoo, Apple, and eBay -- who have reported terrific earnings this week and gotten hammered in the market afterward because of their outlooks. And what were those outlooks? They weren't that they were going to lose money. They were that they were expecting the economy to slow down a little and that they projected lower revenues for 2006.

This is what I call "irrational disappointment", in sharp contrast to Alan Greenspan's famous line about "irrational exuberance." And it is not because any of these companies are performing badly; in fact, all of these firms are growing both revenue and profits rapidly. But what is happening is that investors are saying "It's not enough" and selling. Yet I believe that most investors will wish they owned those stocks by the time summer rolls around and have to buy them back again, probably at higher prices. Heck, most of them will probably be higher in the next two weeks!

How should an investor avoid the trap of irrational disappointment? I think the problem is that it is easy to focus on risks to the exclusion of factoring in possible benefits. I imagine in my mind a balance scale like the one held by the famous paintings of Blind Justice you see in courthouses. On one side of the scale I mentally stack up risk factors like uncertain economic times, product transitions, and supply issues. On the other side of the scale I imagine putting rewards like income from new products, revenue from tapping new customers, and higher stock prices.

When I think about my balance scale in all of the four stocks above, the side that is most weighed down is the one with rewards. All of these companies are likely to grow their businesses substantially over the next six to twelve months, regardless of what the economy looks like. All of them have serious money in the bank to cushion them should things turn sour. And all of them have good marketing plans in place, which is a huge differentiator in the technology business. Yes, analysts may not think these stocks are doing as well as they could. But don't let irrational disappointment keep you from weighing the rewards that are possible as well.

Technorati Tags: Yahoo, Marketing, Stocks, eBay, Analysis, Intel, Financial analysis, Apple

Apple's earnings come in very close to our projection

I had projected that Apple would make $548 million for its fiscal Q1 ending December 31, 2005; the actual amount Apple announced it earned was $565 million. I also used a slightly out of date number of shares in the calculation as well, so instead of earning $0.68 as I projected, Apple earned $0.65. Still, it was a terrific quarter, with earnings up 73% over last year's Q1, on a 64% increase in revenue.

Technorati Tags: Analysis, Apple, Business, Financial analysis, Stocks

Dissecting Intel's missing miss

I've been reading all the wringing of hands over Intel's earnings call yesterday, where Intel forecast slightly lower revenue and earnings numbers for the coming year. So I went and fetched their 8-K filing from the Securities and Exchange Commission and read through it. And just for comparison, I plugged in similar benchmark numbers for another computer (but not semiconductor) manufacturer, Dell. Here are the results:

	Dell	Intel
Revenue	$54.2 billion	$38.8 billion
Trailing Price/Earnings	23	17
Profit margin	6%	22%
Operating margin	8%	31%
Quarterly revenue growth year-over-year	11%	6%
Quarterly earnings growth year-over-year	-28.4%	21%
Cash	$9.3 billion	$13.9 billion
52-week stock price change	-25%	+11%

Now this isn't really a fair comparison, because Intel has much higher R&D costs and plant investments than Dell, and it is in an industry with much higher barriers to entry. But I think the comparison illustrates how strong Intel's financial performance is compared to another highly rated US manufacturer. I have a similar table for Intel versus AMD, if you'd prefer to do the comparison in the semiconductor industry:

	AMD	Intel
Revenue	$5.3 billion	$38.8 billion
Trailing Price/Earnings	498	17
Profit margin	1%	22%
Operating margin	1%	31%
Quarterly revenue growth year-over-year	23%	6%
Quarterly earnings growth year-over-year	73%	21%
Cash	$1.3 billion	$13.9 billion
52-week stock price change	+112%	+11%

Clearly AMD is improving its situation, but once again, Intel's performance comes across as outstanding.

What about that worrisome forecast for the coming year? Quite frankly, if Intel were still pushing Pentium 4s and Xeons, I would be quite negative on their prospects, but they aren't. Instead, the company has chosen a bold new path toward lower power, multi-core products, and therefore, they are in the midst of a product transition. Product transitions always incur greater risk and often affect revenues. So yes, we won't see the same clockwork-like "We boosted revenues, margins, and profits" numbers we've come to expect from Intel.

However, I also think the market has unfairly discounted the upside of the product transition. Intel making lower power products is a very big deal. Lower power means that the parts will work better in battery-powered products, such as laptops, palmtops, and other portable devices. But low power carries more benefits as well: parts can be put closer together with fewer heat sinks and fans. Closer together parts mean smaller boards that can be manufactured more cheaply and put in more places. Low power processors are to the computing industry what hybrid cars are to the auto industry: a whole new engine for innovation and growth.

Add into this equation Intel's new secret marketing weapon. No, I'm not talking about the new slogan "Leap ahead." I'm talking about signing Apple to use Intel processors throughout its product line. Never before has Intel had a customer who had the brand power and product cachet that Apple brings to the partnership. So not only will Intel be able to describe the benefits of low-power computing, they'll have a lead customer who has shown in the past that it can make technology cool. In short, they've got world class marketing to showcase their world-class technology.

The bottom line: Paul Otellini and Intel are taking their lumps this quarter for a whole new product and marketing strategy. In short, the company is taking a risk, which never feels comfortable. But smart investors will understand that risk begets reward. In my opinion, it won't be more than six to twelve months before they can see that reward -- and it will be big.

Full disclosure: I own no shares of Intel, but do own shares of Apple Computer.

Technorati Tags: AMD, Analysis, Apple, Dell, Financial analysis, Intel, Manufacturing, Marketing, Processors

SED flat-panel technology won't sell consumers this year

We wrote back in the December that many analysts expect that we'll see surface-conduction electron-emitter (SED) flat-panel TVs in spring 2006. You can think of these as flat-panel displays with a tiny little cathode-ray tube for every pixel (Anandtech has a nice writeup and diagram of how they work). I also said we'd see more about them at the Consumer Electronics Show in January.

In fact, there were a couple SED displays at CES (as noted by Engadget), but there were also a lot of "no pictures allowed" rules and no information on pricing. But while I was listening outside the Toshiba booth, I did hear a bit of mumblilng of some of the panels being anywhere from $10K to $50K this year depending on size.

Now before anyone cries out in outrage that SED was supposed to bring lower prices, remember that this is a brand new technology requiring about $1.7 billion in investment to get going. Further, it doesn't really have the same clear return-on-investment as more well-understood and proven technologies as plasma and LCD, so making the case for investment to everyone from the board of directors to bankers is also harder. SED is just harder to market to the average person than something they already know.

The bottom line: if you're looking for the introduction of SED technology to drive down prices, you've got a long wait ahead. What you're going to see instead is SED raising the bar on picture quality, and some testing of whether the market wants to pay a premium for that picture quality. My bet: Plasma and LCD technologies from Panasonic, LG, and Sharp will get better faster than SED can get its prices down. At the end of the day, the consumer doesn't want to buy technology; they just wants a great flat-panel picture at an affordable price. The initials SED are just a detail, not a consumer benefit.

Technorati Tags: 1080p, 720p, Canon, Canon, Flat Panels, HDTV, LCD, LG, Manufacturing, Marketing, Panasonic, Plasma, Sharp, SED, Toshiba

Guy Kawasaki's eleven tips on how to get a standing ovation

One of our favorite marketers and former Apple evangelist, Guy Kawasaki, just posted eleven terrific tips to improve your public speaking and get a standing ovation, and we can vouch for all of them. We would add one more though -- don't try to make more than five points. People can only remember seven plus or minus two unrelated things (as noted in this classic 1956 paper, The Magical Number Seven, Plus or Minus Two: Some Limits on Our Capacity for Processing Information) before they start forgetting stuff. It's a good rule to remember even when you are writing blog entries.

Technorati Tags: Communication, Marketing, puppy

Large flat-panel TVs remain in short supply

I haven't had much to say about flat panel TVs since the Consumer Electronics Show. Why? Well, for one reason, they've been scarce. Today's Wall Street Journal has an article titled Where the TV Bargains Are, which has a very telling comment in it:

I still have no 50-inch plasmas to speak of," says Chet Flynn, president of New Resource Inc., a Massachusetts distributor of high-end TVs and consumer electronics. Inventories of the sets were depleted in December and should remain tight through May, helping mute further price drops, he says.

The panel goes on to note that after a year in which flat panel TV prices fell 50 percent, prices needed time to stabilize. But the real issue is just plain old supply and demand:

Right now, "we're all struggling to bring enough panels into the market," says Bob Scaglione, a senior vice president of marketing at Sharp, the largest seller of liquid-crystal TVs. "Once the new factories open, including ours in the fourth quarter, things will get exciting again from a price perspective."

Fortunately, LG and Panasonic have new plasma manufacturing plants coming on-line in 2006, and Sharp has its own LCD facility starting production this year also. But for the next few months in flat panel TV marketing, the price you see is the price you get.

Technorati Tags: 1080p, 720p, Consumer Electronics, Flat-screen TV, LCD, Marketing, Plasma, TV

It's time for Guess...Apple's....Earnings!

Apple Computer will announcing its earnings at the close of the market Wednesday. Steve Jobs has already told the world that Apple had a terrific holiday quarter: the company sold 14 million iPods (vastly exceeding even the most optimistic estimates) and made $5.7 billion in revenue. But the real question is, how much of that fell to the bottom line?

Well, we dusted off the model we used last quarter to estimate iPod sales and production, updated it with the new numbers, and then gazed into our crystal ball. The result? We predict that Apple will earn about $548 million for its first quarter of the 2006 fiscal year (their fiscal year starts October 1). That nets out to around $0.68 per share. That's one penny short of the highest analyst expectation currently recorded, but it feels about right. That 94% earnings growth over last year's $0.35 per share, on 57% growth in revenue. But that estimate doesn't factor in any cost reduction efforts or upside surprises from any part of the business other than iPods and computers, so Jobs still could blow out that number.

Regardless of what I think, we'll find out the real answer tomorrow afternoon.

Technorati Tags: MacBook, Analysis, Steve Jobs, Macintosh, Earnings, Financial analysis, Marketing, Apple, iPod

The WSJ voices mainstream skepticism of readers editing news

Today's Wall Street Journal (subscription required) posts an article about Digg.com, noting its popularity, but also its inaccuracies. The article would have been more interesting to me if they had also compared Newsvine (invitation required), which I find much more useful and informative than Digg.com.

But as another Newsvine writer notes, readers aren't the only ones that create inaccuracies in reporting. If they were, then the Journal wouldn't need a corrections section in the paper. And given the recent test that found that when comparing random articles from Wikipedia and The Encyclopedia Brittanica, Wikipedia actually had fewer errors, perhaps there is more wisdom in crowds than the traditional print thinks.

Technorati Tags: Analysis, News, Digg.com, Newsvine

A new source of news: Newsvine

I got an invitation to join the beta of Newsvine last week, but didn't get around to trying it out until this weekend. And now eight posts and two seeds later, I have only one reaction: I'm hooked.

For those who aren't familiar with it, Newsvine is sort of like Google News, but rather than just being an aggregation of stories, it also allows commenting and voting on stories like at del.icio.us, and allows members to write their own stories and posts, like at Gather.com. The design is simple and uncluttered, and so far, the content seems to be very timely and remarkably rich (no surprise there, since they get feeds from the Associated Press and ESPN).

The challenge in any Internet news site today is not how to gather information, but more how to edit and distill it, so your readers don't recoil from the tyranny of too much. Newsvine (I always want to write Newswire) seems to have struck a near unique balance so far, resulting in just enough detail for me. It will be fun to see how the community and the business evolve. But I believe that Newsvine is going to be a winner -- big time.

Technorati Tags: Web, Newsvine, Tyranny Of Too Much, Blogs, Web 2.0, Analysis, puppy

Jobs predicts Microsoft will introduce X-player this year

A Newsweek interview published at MSNBC has a couple of interesting Steve Jobs tidbits I haven't seen published anywhere. These include:

1. Apple decided to build 14 million iPods last summer. That was a gutsy move considering that they had never sold more than four and a half million iPods in a quarter. Of course, in hindsight, the amazing thing is that 14 million wasn't enough; many consumers couldn't buy iPods anywhere but at Apple stores over the holidays.
   


2. The PC model doesn't work for consumer electronics. This parallels a call we've made in the past. Job's words: "The problem is, the PC model doesn’t work in the consumer electronics industry, where you’ve got all these companies and some does one thing and another does another thing. It just doesn’t work."
   


3. Microsoft will introduce an MP3 X-Player in 2006. Jobs notes that in 2005, everyone said that they were going to take away share from the iPod that year. It didn't happen, so the same story came up at CES this year. But Jobs predicts a change because Microsoft will finally take matters into its own hands and introduce something that Jobs calls "X-player, or whatever. This year". I noted that effort last year as well.
   

So will a Microsoft xPod or xPlayer be able to make a dent in iPod domination? I don't think so. Technologically, there is no question that Microsoft can make an xPod that works. But I don't think Microsoft knows how to market it as a cultural icon like the iPod is. It just isn't in in the company's corporate culture, nor is it what the Microsoft brand stands for. Just as Apple couldn't dent Microsoft's dominance in PCs head-on, I don't think Microsoft can dent Apple's iPod dominance by simply making a competing product. It will have to innovate in a completely new way to outflank Apple in music and video -- and that's not going to be easy.

Technorati Tags: Apple, iPod, Marketing, Microsoft, xPod, Steve Jobs

Design matters, on the Web and off

I know this is getting to be old news, but according to Nature magazine, Web users judge sites in just 50 milliseconds. Having read the book Blink: The Power of Thinking Without Thinking, by Malcolm Gladwell, I completely agree with the effect, if not necessarily with all of Gladwell's causes. I particularly liked the analysis of what users are looking for on Web sites at the end of the article.

These days, enlightened web users want to see a "puritan" approach, Caudron adds. It's about getting information across in the quickest, simplest way possible. For this reason, many commercial websites now follow a fairly regular set of rules. For example, westerners tend to look at the top-left corner of a page first, so that's where the company logo should go. And most users also expect to see a search function in the top right.

I would take it even one step further. Web users want not only clean graphical design, but also clean, easy-to-understand writing as well. If you haven't run a Flesch or FOG readability analysis on your Web site (such as this one available at Juicy Studio), you should. After all, you want your readers to be compelled by your message, not your knowledge of complex sentence structure.

The bottom line: good design and clear language isn't just good practice. It appeals to how our brains are wired. And simpler really is better.

For those of you keeping score at home, this posting has a Flesch score of 64 and a FOG reading index of 9. It is about the reading level of Reader's Digest and suitable for reading by someone in sixth grade, which is just about right to communicate a quick idea.

Technorati Tags: Blink, Analysis, Writing, Web Design, Gladwell, Design, Web

Google's my agent -- and it gets 21.5%

Today's New York Times reveals a number everyone has been wondering about: how much ad revenue does Google keep for itself compared with the amount it gives to the sites running its ads? The answer: it keeps 21.5% and pays out 78.5%. No wonder they are making money hand over fist.

That said, the reach and breadth of Google's traffic (literally billions of hits a day) and brand certainly justify a network premium. But with competitors like Yahoo! and MSN launching their own ad networks, I'm sure that premium will change over time. But as Geoffrey Moore notes in his book The Gorilla Game, it's the 800-pound gorillas that reap most of the profits from a market. And while Google may not be 800 pounds yet, they certainly are gaining weight.

Technorati Tags: Blogs, Marketing, Adsense, Advertising, Geoffrey Moore, Google, Gorilla

NPD projects 2005 US XBox sales to be about 600,000

NPD projects that Microsoft sold only 600,000 Xbox 360 game units in the US in 2005. Blackfriars had projected production of about 850,000 world-wide back in August, and it appears that our estimate was about right.

The real outstanding question: now that the Christmas shopping season is over, will demand for the XBox 360 hold up to allow Microsoft to hit its goal of 5.5 to 6 million XBox 360 sales by June? Rumors have it that Halo 3 is being held in reserve for the day when the Sony Playstation 3 is announced. But Blackfriars' projection is that even Halo 3 won't be enough to drive XBox 360 sales to catch up to Sony's 100 million Playstation installed base. And with Nintendo's Revolution coming on the heels of Sony's Playstation 3 in the spring with its new, innovative controller and gaming model, Microsoft will be hard-pressed to retain its current #2 spot in gaming.

Technorati Tags: Games, Gaming, Marketing, Microsoft, Playstation 3, Sony, XBox 360

Memo to Apple: time to call VMWare

Hidden in many of the announcements around MacWorld last week was the news that Microsoft can't comment on when it will be able to release Virtual PC for the Mac. General manager Roz Ho had some interesting comments on the problem:

"These types of products require a dedicated team and a lot of work to rebuild them for an entirely new architecture. That said, we know that using Windows-based applications on Macs is important to our customers, and we’re working with Apple to figure out the best way to bring this technology to Intel-based Macs. We’ll have a better idea once we have the new machines and can accurately evaluate just what is required to transition the product."

Uh huh. We'll ignore the fact that when Microsoft bought Connectix, the actual creator of Virtual PC, it sold a version of Virtual PC designed for the Intel architecture. Yes, it would need to be modified for use on Mac OS X, but it's not like it is a rewrite from the ground up.

When we combine this piece of information with the fact that Microsoft isn't really willing to say when it will make its Office apps native on Intel Macs, it's clear that Microsoft doesn't want to help a competitor gain ground in the operating systems battle. And that's why if Steve Jobs hasn't called Dianne Green over at VMWare, he should. VMWare Workstation already runs on x86 Linux, so it wouldn't be a stretch to port it to Mac OS X. And my guess is that VMWare would value Apple as one of its clients -- which is more than we can apparently say for Microsoft.

Of course, if Apple plans to release its internal "Yellow Box" project which allows Windows apps to run natively, just as Classic Mac OS apps did on Mac OS X, never mind.

Technorati Tags: Apple, Marketing, Microsoft, Virtual PC, VMWare, Windows

A marketing view on Gather.com

Lots of people are commenting on the article in the Boston Globe regarding Gather.com, which the Globe characterizes as a one-stop site for blogs. Comments I've read so far range from "they can't succeed because the dot.com 2.0 crash is coming" to "I like it". Personally, I was surprised to discover that a couple of my ex-Forrester colleagues -- specifically Susan Whirty and David Cooperstein -- are working there, and I certainly respect their work, so they aren't going to lack for talent.

But I think some of the critics may be onto something asking good marketing questions like, "How will these guys be different from the likes of Bloglines, Yahoo, and About.com?" to "How will they gather content that drives advertising?" In short, it's not really clear what Gather.com's target market is or what their marketing strategy is. These guys are in a market that has low barriers to entry and a tyranny of too much competition. The best way they could differentiate themselves would be to have a clear target market of writers and advertisers, to whom they could uniquely deliver value specific to that market. That would help them make their $6 million in VC money go a lot farther than a broad-brush approach. And while an article in the Boston Globe is a great start, they'll need to spend a lot more sweat and dollars on marketing down the road before they will be successful.

Having just signed up for the Newsvine beta, who seems to both have a clearer target market of readers as well as a clever-if-not-original buzz marketing plan of referrals, Gather.com is going to have serious competition, even if the Web 2.0 bust doesn't happen. At the moment, Gather.com doesn't seem to offer me enough to get me to put content on their site. Let's hope I'm not representative of their target market.

Technorati Tags: Bloglines, Blogs, Gather.com, Marketing, Web, Web 2.0

Apple now worth more than Dell

As of the close of the markets on Friday, Apple's market capitalization of $72.13 billion now exceeds Dell's $71.87 billion. With earnings coming out on Tuesday, that may change, but it's certainly an interesting milestone. However, Apple still has a ways to go before it is more valuable than Microsoft, but it's still a good benchmark to trot out to counter claims that Apple is struggling to survive. It also is a wonderful illustration of the effect of good marketing strategy on business results, especially when you compare it with the conventional (and false) wisdom of "low price always wins".

Technorati Tags: Analysis, Apple, Dell, Financial analysis, Marketing, Microsoft

Mathematicians aren't just for Wall Street any more

Business Week has a terrific new article this week titled "Math Will Rock Your World" that asserts that mathematicians are the new force behind many new business opportunities and ideas. And the effect is showing up in the job market already.

The rise of mathematics is heating up the job market for luminary quants, especially at the Internet powerhouses where new math grads land with six-figure salaries and rich stock deals. Tom Leighton, an entrepreneur and applied math professor at Massachusetts Institute of Technology, says: "All of my students have standing offers at Yahoo! (YHOO ) and Google (GOOG )." Top mathematicians are becoming a new global elite. It's a force of barely 5,000, by some guesstimates, but every bit as powerful as the armies of Harvard University MBAs who shook up corner suites a generation ago.

Math entrepreneurs, meanwhile, are raking in bonanzas. Fifteen months ago, Neal Goldman of Inform sold his previous math-based startup, a financial analysis company called CapitalIQ, for $225 million to Standard & Poor's (MHP ) (like BusinessWeek, a division of The McGraw-Hill Companies). And last May two brothers, Amit and Balraj Singh, sold Perabit Networks -- a company that developed algorithms for genetic research -- to Juniper Networks (JNPR ) for $337 million.

The article goes on to note that much of the application of mathematics is happening in marketing and advertising. Google already uses powerful mathematical systems to model, price, and adjust its text advertising. Harrahs is building similar systems to target, market to, and compensate gamblers in its casinos. But the big message is that with on-line companies collecting terabytes of data about consumers, businesses are turning to mathematicians to unlock the insights in those data vaults.

Having just read "The Equation That Couldn't Be Solved: How Mathematical Genius Discovered the Language of Symmetry" (Mario Livio), and marveling at how Galois' group theory and symmetry underly everything from Einstein's theory of relativity to the biological selection of mates, it's nice to see business starting to value mathematical knowledge again. When I worked at building operating systems for large parallel processors built by BBN in the 1980s, I remember taking a trip down to Dupont to see a scientist using one of our machines to tackle the Traveling Salesman problem, a classic mathematical challenge that tries to optimize the cost of visiting many different cities among different cost paths. He explained the business value to me this way: "Dupont spends about $2 billion a year on transporting materials and products. If my software improves our cost by 10%, we save about $200 million every year. That buys a lot of fancy computers."

If I had one piece of business advice to the new mathematicians joining businesses, it would be to emulate the guy at Dupont. After all, he summarized the goal, business justification and return on investment for his million dollar project in three simple sentences. The fact he could do that proved he was smart to more people than a blackboard full of equations ever could have. And, if this article is any indication, if your company doesn't fund you, you'll have your pitch ready for a venture capitalist who will.

Technorati Tags: Yahoo, Harrahs, Mathematics, Venture Capital, Analysis, Communication, Google, Dupont, Marketing, Business

Google shows how not to do a video store

We have been playing with the Google Video offering, and first impressions are that it is a disaster. Today, for example, it lists CSI episodes on as being available from CBS, but when you click on CSI, there aren't any. Also the video quality is rather poor -- significantly poorer than watching real TV. Compare this with Apple's video offerings that actually look decent on a 42-inch plasma display, even though they are only 320 by 240 pixels. Don't get us started on the digital rights management lurking undder the covers that requires you be online to view the videos (how is that going to work with video iPods? It won't). And finally, since we don't meet use Windows here, we can't download and buy any of the paid content anyway (we can see their general availability fare).

The bottom line: we're disappointed. Compared with the mind-blowing quality of the Google Earth beta we've been running (we love it, especially the ability to watch the 3D paths of airplanes in flight), it feels like a half-hearted attempt. If we were CBS or the NBA offering videos via Google, we'd be rather upset, because Google isn't going to deliver a great experience to purchasers, and that's going to hurt their sales figures. If I were them, I'd start programming Steve Jobs phone number into their cell phones today; they're going to need it.

Technorati Tags: Analysis, Apple, DRM, Google, iPod, iTunes, Video, Video iPod

Cringely joins in on the plasma Mac prediction

Favorite pundit Robert X Cringely has issued his predictions for 2006.. His #1 prediction aligns well with our prediction of plasma Macs this year:

Apple will eventually announce all the products they were supposed to have announced at this week's MacWorld show, but didn't, including a bunch of media content deals, a huge expansion of .Mac to one TERABYTE per month of download capacity per user, a new version of the Front Row DVR application, and two new Intel Macs with huge plasma displays, but with keyboards and mice as options -- literally big-screen TVs that just happen to be computers, too.

I can't wait....

Technorati Tags: Predictions, MacIntel, Plasma, Macintosh, Retail, Apple, Consumer Electronics, Marketing, Front Row, Cringely

No Intel Inside on new iMacs and MacBooks

It was only in December that Business Week's Arik Hesseldahl was wondering Apple could resist the crack cocaine of Intel's co-marketing dollars and not put Intel stickers on its new Intel-based computers. Well, give the folks at One Infinite Loop some credit; they just said no to the co-marketing drug habit on the new iMacs and MacBooks. The result: the products are just as Zen-like in design and stickerless as Apple's PowerPC offerings.

In hindsight, we shouldn't be surprised. My Powerbook G4 box under my desk (I keep it to remind myself of the power of packaging) has exactly one logo on it, and that's the smiley face Mac logo. Even though it uses USB peripherals and DVD drives, both of which have logo programs, Apple doesn't use them on its packaging or its products because they would distract users from the Apple brand experience. After all, you wouldn't expect to see anyone else's logo on a Prada or Fendi product -- why should you see an ingredient logo on Apple's?

Technorati Tags: Apple, Branding, Intel, MacBook, Macintel, Marketing

$499 price tag for Playstation 3?

CNN is citing analysts predicting that the Sony Playstation 3 will debut at a $499 price point because of its high-definition Blu-ray drive. But the article then goes on to note that Sony has not set pricing and of course refused to comment, allowing both pundits and press to speculate without restraint. You know, that's not a bad marketing strategy either. As someone told me today, "You only get to launch once." Sony is smart to not let out details in advance because the speculation builds buzz around the product. After all, it works for Steve Jobs.

Technorati Tags: Games, Gaming, Marketing, Merchandising, Playstation 3, Pricing, Sony, Steve Jobs

An interesting Intel iMac and MacBook tidbit -- Windows won't boot

Thanks to Daring Fireball, who pointed me at this article on BetaNews, apparently Windows XP won't boot on the new Intel-based iMacs and MacBooks announced yesterday. Why, you might ask? Because the new machines don't have a Basic I/O System (BIOS); instead they use the new Extended Firmware Interface (EFI) Intel specification for their read-only memories, which Windows doesn't support. Why doesn't Windows support it? It was just finished last summer, and there haven't been any Windows releases since. Even if you happen to have a 64-bit Windows version which does support EFI, it won't boot because these are 32-bit machines.

Now if there were only a native version of Virtual PC for the MacIntel machines, that presumably would work fine. Hmmm. Despite that being part of at least one Premium version of Microsoft Office for the Mac, I don't remember that being mentioned yesterday.

Undoubtedly some hacker will find a way around this, but for the moment, dual-boot Macs aren't going to be easy to set up.

Technorati Tags: Dual Boot, Apple, Macintosh, MacIntel, Windows, BIOS, EFI, Microsoft

Apple sidesteps the Osborne effect

Today, Apple launched its first new products featuring Intel Duo Core chips, including 17-inch and 20-inch iMacs and newly-named MacBook Pro. By introducing four dual-core Intel computers in one announcement, Apple gave customers their first looks at the types of software, performance, and design that it can achieve with these new power-conscious parts. Jobs also announced a new iLife suite including a new iWeb Internet publishing tool, new .Mac services, and a new Mac OS X software update as well.

Jobs didn't announce plasma displays that we are predicting for this year. As noted in my prior article, that announcement will have more impact as a special TV-based event, possibly around the time of NAB in May. That would line up better with the release of the next generation of plasma panels from companies like Panasonic and Pioneer as well.

But what I thought was most interesting was Jobs' strategy of pre-empting his own delivery date for Intel systems of June 2006. By over-delivering on that promise in six months instead of twelve, Jobs has sidestepped the biggest obstacle critics posed for this processor transition: the Osborne effect of drying up demand for old products in advance of new product availability. By setting everyone's expectations for June and then delivering in January, Apple should see no significant dip in its computer sales because of the processor transition, and may in fact see a boost because of reduced uncertainty. With record revenues for the 2005 holiday quarter on the books, and the Intel processor transition well underway, Jobs has again proved that he's the best marketer in high-technology. 2006 should be quite a year.

Technorati Tags: Analysis, Apple, HDTV, iLife, iMac, iWeb, MacBook, Marketing, Osborne effect, Panasonic, Pioneer, Plasma