Blackfriars' Marketing

My new blog: Notes From Anywhere

2008-02-05T11:41:00.000-05:00

Unable to kick the blogging habit cold turkey, I've set up a new home titled, Notes From Anywhere (current URL notes-from-anywhere.blogspot.com). Readers who are interested in my further musings on the challenges of mobility in our anywhere connected world should join in there. And oh yes, there will still be lots of thoughts on technology, marketing, iPhones, Macs, and anything else I can think of.

See you there!

Not so fast: Private equity and News Corp are interested in Yahoo too

2008-02-02T08:09:00.000-05:00

Silicon Valley Insider claims that some private equity firms were just days away from a deal to buy Yahoo.com.. At the same time, Techcrunch says News Corp and some hedge funds are also interested.

We all did a bunch of interviews at Yankee Group about this yesterday (mine was on NECN), but this point was left on the cutting room floor in all cases: the Microsoft takeover of Yahoo is a hostile offer, not a deal. Both the price and the buyer is subject to change. And the fact that Steve Ballmer took the offer public suggests that Yahoo rejected his offer, not accepted it.

Despite the fact that Microsoft's actually has lowered its offer to Yahoo since last summer, Yahoo.com is a prime Fifth Avenue property in Internet real estate. No one should be expecting it to go cheap, nor should anyone expect Yahoo to jump at the first offer.

My bet is that CEO Yang will fight for ABM as the buyer -- Anyone But Microsoft. From his point of view, a private equity deal might be the best of all worlds, since it would allow Yang to take a longer (but more debt-ridden) view in turning the company around. This deal is far from done.

Technorati Tags: Jerry Yang, Microsoft, Private equity, Yahoo, Yahoosoft

YahooSoft: just AOL/Time Warner all over again

2008-02-01T11:30:00.000-05:00

Microsoft buying Yahoo didn't make any sense as a friendly $50 billion takeover. It doesn't make any more sense as a hostile $45 billion deal, especially given the anti-trust examination and European scrutiny that would slow it down.

In many ways, this reminds me of the $182 billion AOL/Time Warner deal in 2000. The big exception: AOL was the leader in online access in 2000 and Time Warner was one of the leading media companies. Yahoo and Microsoft are #2 and #3 in online advertising market share, and their merger will leave them #2 with about 20% market share -- in a business where Google controls 65% of the market.

Technorati Tags: AOL, Microsoft, Time Warner, Yahoo, Yahoosoft

News flash to reporters and analysts: Apple doesn't do loss leader products

2008-01-30T09:40:00.001-05:00

I read two articles this morning from mainstream news sources that made me realize most people writing about Apple don't really understand its marketing and how it sells its products. Secondly, both articles show a remarkably poor understanding of product businesses overall.

First, I read TheStreet.com claiming that because of the upcoming recession, Apple should slash prices on iPhones to guarantee it makes its sales goal of 10 million phones by the end of 2008. The second bit of fiction I read was from Silicon Valley Insider claiming that at current prices, Apple is subsidizing Apple TV purchases through movie rentals, because iSupply claims the parts cost of the 40 GByte device is $237 and the device now sells for $229.

Based upon these articles, an uninformed reader might conclude that Apple has a new strategy of selling loss-leading devices and relying on revenue from services to keep its profits aloft. That uninformed reader would also be horribly wrong.

Read my lips: Apple doesn't sell products at a loss. Why? Because its a very risky and largely unprofitable marketing strategy, for one. And even worse, it would undermine the marketing value of their products that they have labored for decades to build up. Frankly, it would be a stupid move, and Apple isn't stupid.

So where do these analyses claiming that Apple is doing stupid marketing come from? Well, theStreet.com seems to lay the blame at the feet of "some analysts", although the quotes cited are more muted about price cuts than the title implies, only claiming that there is room for a price cut. And in an attempt to balance the coverage, the second page of the article does note that the sales to date don't imply there's any lack of demand:

"The 4 million phones sold in the first six months is also double the initial run rate of the Motorola Razr," says Abramsky. "From our perspective, the early performance of the iPhone is nothing short of remarkable relative to other historic phone launches."

So if the iPhone sales are arguably the best phone launch in history, why does Apple have to cut prices? To become like Motorola (given Motorola's trajectory, I don't think that's a good idea)? And why is $399 so high a price for an 8 GByte Apple product when 8 GByte Nokia N95s are selling for $599?

What about the Apple TV article? Well, the key to that article is to read the footnotes on those parts costs. While iSuppli does claim that the parts and manufacturing cost of the 40 GByte Apple TV are $237, the analyst specifically notes that "the processor is a big unknown for us." I argue that the entire motherboard/processor combination, which iSuppli costs at $138.10, is overpriced by about 50%. If I surf over to NewEgg.com, I can find Intel micro ATX motherboards with 1.8 GHz processors and graphics controllers for $67; the Apple TV processor is only a 1 GHz Crofton, so its price is presumably lower. Add on the 256 MBytes of DDR2 memory for $10, and I'm at $77. And those are retail prices; I guarantee that Apple doesn't pay Intel retail prices. Subtract that $62 from the parts cost, and you're looking at a total parts cost of $176 and 24% gross margins for Apple. And that parts cost is probably too high because of the older and slower Crofton processor Apple actually uses.

I've argued before that the number of examples of companies buying market share profitably are nearly nil. The best counterexample is the Playstation 2, which Sony sold at a loss for a year or so while making a profit on the games it sold. But to the hundreds of other product managers who plan to sell their product at a loss and make it up in volume, I have a news flash: you aren't Sony. Most businesses using loss-leaders don't make profits, but simply reduce the amount of money they are losing.

The bottom line: Good businesses focus on making money overall. Great businesses make money on every single product and service. Apple didn't get to where it is today by settling for "good."

Technorati Tags: Apple, Apple TV, Business, iPhone, Marketing, Pricing

Deliver a Presentation like Steve Jobs

2008-01-27T21:10:00.000-05:00

Business Week provides 10 easy steps that it claims would help
anyone present like Steve Jobs. Would that more high-tech executives tried.

Technorati Tags: Apple, Steve Jobs

A punishing market shouldn't detract from Apple's value

2008-01-22T23:42:00.001-05:00

I've been at another site all day in my new job at Yankee Group, so I only caught up with Apple's record earnings announcement a few hours ago. The short version: the company set a new record for both revenue at $9.6 billion and profit of nearly $1.6 billion for its first fiscal quarter. The company also provided guidance for the second quarter of $6.8 billion in revenue. Earnings reports don't get much better than that. Yet as I write these words at 11 pm EST, the stock is down more than 17 points or about 11%. I suspect a lot of Apple investors are screaming why, why, why?

Here's my take: international markets were down significantly in overnight trading. Apple stockholders waited until earnings were out before selling just in case Apple announced a cure for cancer, Steve Jobs being elected Pope, and an acquisition of Wal-Mart. Failing those events, when Apple only reported records, it joined the rest of the market.

Let's face it. Apple is a consumer electronics and computer company, not a miracle worker. It's growing rapidly, but it can't insert another Christmas shopping season in the spring to boost fiscal Q2 sales, nor can it ensure that recessions are banned from its stores. Steve Jobs' reality distortion field is strong, but it's not perfect.

But any way you slice it, more people are buying Apple products than ever before. Apple is offering customers more products than ever before. Ten years ago, Apple only sold computers. Now the company sells computers, music players, movies, phones, software, operating systems, and has a pipeline of even more to come. Apple operates the most efficient and most profitable retail stores on the planet. It has no debt and has tens of billions of dollars in the bank. By any rational metric, that's a good investment.

Yes, Apple's value is bound to fluctuate with its earnings announcements, with the doom and gloom in the markets, and yes, even with the loss of confidence from the credit crisis. But when I look into the future of always-connected mobile consumers and businesses, what we at Yankee Group call the anywhere economy, someone is going to be making the devices that consumers carry with them. Those devices will keep them connected with their families and businesses, keep them entertained as they travel, and will make a statement about them as people. To me, just as I saw on the subway this evening, many of those ubiquitous devices will have Apple logos, because that's what Apple does better than anyone else in the consumer electronics business. The only question is whether only a few of them or a lot of them have those logos.

Given today's reports, every indication I see says that a lot of them will have Apple logos. And that, not what Apple projects for its second quarter revenue, is why I think Apple is going to be growing and thriving for a very long time to come.

Full disclosure: these opinions are mine alone, and do not reflect the official position or analysis of Yankee Group. The author also holds a long position in Apple at the time of writing.

Technorati Tags: Apple

The MacBook Air is an ideal product -- in the right market

2008-01-18T09:42:00.000-05:00

Blogs worldwide are moaning about the MacBook Air's deficiencies, ranging from its slow processor, its lack of an optical drive and wired ethernet, its lack of a user-replaceable battery, and of course, its high price. All we need now is someone predicting that it will be the death of Apple and the second coming of Microsoft, and the moaning will be complete.

Frankly, it strikes me that these people who about the feature set are a bit like the thsose who complain that Ferraris don't have enough trunk space. Apple's going to sell if not a gazillion, at least a few million MacBook Airs in its first year. Why? Because Apple has identified an untapped and very profitable market niche for the MacBook Air that will expand its market share: fashion designers and luxury hospitality companies.

If you're an executive at Ralph Lauren or Prada, the ugliness of carrying around a Dell laptop would give you hives. For these people, style and design isn't a luxury; it's an essential job requirement. And its a category of people whom the computer industry has not served well to date with boxy designs, techie jargon, and a general rejection of the value of fashion. Said another way, how many computers look good with an Armani suit?

The same could be said for the concierge desk at the Four Seasons, or the reception area at the W Hotel. In the hospitality industry, there are two types of products: those for the front of the house (customer-facing) and those for the back of the house (production). Most computers are designed for the back of the house. But you could put a MacBook Air on a glass desk in any one of those front of house environments, and it would fit right in. It's a product designed for this market.

To give you a better concept of this target market, let's do a quick rundown of the published MacBook Air deficiencies with a synthetic fashion executive who is looking for a new laptop, and has admired the design of a MacBook Air:

Slow processor: "Seems fast enough to me. I have people who can do spreadsheets if it doesn't suit my needs."

No optical drive or wired ethernet: "I don't want to have to lug around extraneous baggage, and wires and physical media are so last century."

No user replaceable battery: "If I need it replacing, I'll send it out. I like the fact that the Apple store will service it for me."

High price: "Expensive? It costs less than my suit."

Fashion isn't about gigahertz and feature sets. It's about design, elegance, and lifestyle -- said another way, it's about focusing on a few, essential and beautiful things, and leaving everything else out. And for the fashion industry -- and the hospitality industry and TV shows and countless other image-driven businesses -- the MacBook Air will be right at home.

Technorati Tags: Apple, Fashion, MacBook air, Marketing

The benefits of a controlled ecosystem

2008-01-17T01:17:00.000-05:00

This week, Apple released two brand-new products and various significant upgrades to existing products. In releasing the MacBook Air to the world, an almost unbelievably thin notebook, it re-ignited an age-old debate over openness and user-friendly expansion. The MacBook Air is perhaps best described as a really big iPod nano with full computing functionality added. It's a Mac notebook complete with keyboard, screen and Mac OS X Leopard, but it lacks an optical drive, the hard drive (be it HDD or Solid State Disk) is not user-replacable nor is the battery.

You can already hear the tech journalists, pundits and bloggers scream and shout that this product is doomed to fail.

Just like the iPhone and iPod before it, two other disastrous products Apple released to the world that serve distinct purposes and have no user-replaceable batteries or disk drives / flash storage units. But I'd rather not spend too much time explaining the beauty of the MacBook Air when Wil Shipley has defended the Air so well already. Suffice to say, if you think about the intended purpose of the MacBook Air, you'll soon realize that Apple did a fantastic job here.

Then there was the announcement of iTunes Movie Rentals, paired with Apple TV "Take 2" — a version of Apple TV which forgoes the need of a computer (Mac or Windows) running iTunes and hosting your content in primary form. Apple TV is now a fully independent media player for the digital age, driven entirely by a broadband connection, opening up that market at last. Time will tell how much (or little) consumers want this market to exist. Given the ever-increasing shift towards digital everything, we suspect the answer to that question to be "very much."

And then there's Time Capsule.

Wireless Time Machine-driven backups of all your Macs (running Leopard) for every hour of the last day, every day of the last week, and every week for as long as storage permits? Without any configuration needed? I'd love to see Microsoft try that. Or Dell, or HP or Sony.

Integrated, seamless services that greatly add value (or stability or security) to your entire lifestyle without getting in the way or taking up any of your time at all are not just fantastic, they are the way of the future.

The iPod was the first home run by Apple that showed the world that a seamless and tightly-integrated experience is what consumers want. Not all of them perhaps, certainly not every tech geek that just can't stop fiddling with things by hand, but very clearly most of them.

The iPhone took that concept and drove it further, merging all electronics we tend to carry with us every day into one device and integrating it with our computer, giving us all of our most important needs on the go without the need of any instructions to the end user. The user-friendliness of the iPhone is the reason behind its incredible success; no tech product has ever scored higher satisfaction ratings amongst its users.

Time Capsule may not be as sexy a device as the iPhone or as commonly used as an iPod, its function and use will be more constant than either of those products. It will be backing up your data safely and securely every hour while you're at home or at the office, wherever you may have a Time Capsule plugged into the wall, and be there when you need it.

Paired with Apple's .Mac service and Leopard's (.Mac-driven) "Back to my Mac", Time Capsule now offers you access to your data in a very handy backed up way, easily accessible even if you've left your files at home and have only your laptop with you at work. You can go Back to your Mac at home with the click of a button, and if you accidentally deleted something or saved the wrong version last, you can go back in Time on your home Mac to retrieve it, then send it over via Back to your Mac.

But Time Capsule's true shine is in its invisibility to the user: no cables to plug in (beyond power of course, but nothing into your Mac(s)), no configuration needed beyond simply selecting the unit on your Mac to use as the Time Machine backup drive, and everything… just… works.

Apple has moved itself into a fantastic position within the technology industry where it can innovate in ways and at a pace that no other company can. By controlling a large ecosystem of computers and portable devices it can integrate products and services that delight consumers and create increasingly compelling user experiences, all the while extending or improving functionality of some or all of your devices.

If you think that Time Capsule is the extent of the possibilities that are slowly opening up for all-Leopard households or offices, then "you ain't seen nothin' yet!" We're confident that we'll see many more great products that have Leopard at the heart of it all, not just from Apple but also from its third-party developers.

Like Jobs said at the end of his Keynote earlier this week: there's 50 more weeks to go in 2008.

iTunes Movie rentals officially announced

2008-01-15T12:51:00.001-05:00

Steve Jobs' Macworld keynote is still going on, but he's already confirmed one feature I've been expecting Apple to announce for more than six months: iTunes movie rentals. The terms are interesting: you rent a movie for 30 days, but you have to watch it within 24 hours of when you begin playing it. Movie rentals will appear 30 days after DVD release, and Apple signed all major movie studies. And of course, that means that Apple TV now has a whole lot more content. Movie rentals are $2.99 and $3.99 depending on the movie.

But that's not all -- Jobs also announced Apple TV2, which works without a PC to host the content on. Apple TV2 can buy content directly from iTunes and also play podcasts, Fickr photos, .Mac photo galleries, etc. Oh, and it supports high-definition and Dolby 5.1 sounds. HD movie rentals are $4.99.

Apple TV may have been a sleeper last year; I doubt it is going to be one this year. Oh, and the best part? The Apple TV2 software is a free upgrade for existing Apple TV owners. That just shows what accrual accounting does for you.

Technorati Tags: Apple, Apple TV, Movie rentals, Movies, Steve Jobs

Christmas iPhone traffic spikes above all other mobile devices

2008-01-14T10:07:00.000-05:00

For a few days around Christmas, iPhone traffic at Google exceeded that of any other mobile device, at least so says the New York Times. Research in Motion and Nokia must be looking at those numbers and saying, "Yikes!" -- especially given that iPhones comprise less than 2% of the global mobile phone market.

Technorati Tags: Apple, Google, iPhone, Nokia, Research in Motion

A new beginning for me in 2008

2008-01-07T06:30:00.001-05:00

Happy New Year all. I hope everyone is starting 2008 with optimism about the fresh new year. I know I am. I am leaving Blackfriars and joining Yankee Group in downtown Boston as of today, Monday January 7, as Director for Enterprise Software Research.

I'm excited about this opportunity to return to the commercial analyst business, which I discovered late in my career was probably the best fit for my personal interests that I've ever found. Some of the analysts and executives at Yankee are people I've previously worked with, while others will be new people to discuss and bounce ideas off. But overall, I've been impressed with their work since CEO and former Forrester colleague Emily Green took over the business, and I'm looking forward to seeing what I can do to contribute to their success.

But at the same time, I feel great sadness about leaving Blackfriars, which Joe and I started more than five years ago and built into a profitable and enjoyable small business. Blackfriars was my first start-up that I helped found (at the age of 50, no less), and one that I will always remember fondly. We've probably had the best clients we could ask for, clients who took chances on engaging our company, challenged us to deliver our best, and made us stretch our skills. Joe will continue to serve those in the future as he continues the company, but I will miss them greatly. And all the while, Blackfriars has given me the time flexibility for me to see my children's school concerts, attend their student teacher conferences, and generally not be away on business trips for many of their younger years. And of course, I've had the opportunity to devote endless hours to writing the more than 1,350 posts I've made to this blog and to engage with my wonderful readers.

Monday will be a big change for me. My commute will go from 10 minutes to about and hour and a quarter each way. Joe will be continuing Blackfriars here, but I'll sorely miss his good humor and marketing wisdom. And sadly, I won't be able to post significant analysis here anymore; my employment contract requires that I devote my writing and efforts to my new clients at Yankee. I'm hoping to emerge with a new blog related to that effort there; if that happens, I'll post a link to it here. Regardless, I do hope to contribute an occasional non-work-related observation here from time to time. I know I would miss it if I didn't.

So thank you to all the Blackfriars readers out there for your time, your attention, and your interest. I'll try to contribute a few more posts as I wind up loose ends here (with MacWorld coming up, I'm not sure I could resist), but they'll rapidly become more of the once-a-week or month variety than the daily posts you've come to expect. But I hope everyone will look for my reports and quotes at Yankee Group and in the press. And if you need research or consulting on Enterprise Software and Mobility (or even if you just want to tell me something cool that's going on), I hope you'll contact me there. I expect my email will be chowe@yankeegroup.com and you can reach me through their main number at (617) 598-7200. And regardless, you can always get my latest contact information from http://www.carhowe.com and write me at carlhowe@mac.com.

Thank you again to all. And Happy New Year.

A consumer discovers the ticking DRM time bomb in Windows Vista

2008-01-04T10:50:00.000-05:00

Despite lawsuits that Apple is abusing its monopoly in digital music (a lawsuit which should do reap damages comparable to snow cone sales during the near-zero temperatures this week in Boston), the real unrestrained monopoly out there remains Microsoft Windows, now sporting new and improved high-definition digital rights management (DRM) in Windows Vista courtesy of the digital ignorati in Hollywood. The particular issue at hand is that because Windows Vista is capable of streaming and playing high-definition content, Microsoft felt it necessary to prevent this high-value content from being copied through what is known in the industry as "the analog hole" -- that is, by converting the signal from digital to analog, thereby stripping DRM restrictions that existing in the digital stream. So Microsoft implemented a feature in Windows Vista that prevents consumers from viewing high-definition content unless it detects a digital video monitor that it acknowledges as being able to prevent copying.

Well, this week, the implications of that flawed strategy became apparent. Computer owner David Freeberg bought a new high-definition monitor to edit home videos on his Vista computer. Being a law-abiding consumer, David purchased digital movies from Amazon Unbox and wanted to stream digital movies from NetFlix, both services that he paid for. And on New Year's Eve, he entered the following DRM Twilight Zone (note: the original site has exceeded its bandwidth, but this link points to a copy of the article on Seeking Alpha):

I first found out about the problem on New Year’s Eve, when I went to log into my account. When I tried to launch a streaming movie, I was greeted with an error message asking me to “reset” my DRM. Luckily, Netflix’s help page on the topic included a link to a DRM reset utility, but when I went to install the program, I stopped dead in my tracks when I saw this warning.

The minute I saw “this will potentially remove playback licenses from your computer, including those from companies other than Netflix or Microsoft” I knew better than to hit continue. Before nuking my entire digital library, I decided to call Netflix’s technical support, to see if I could get to the bottom of my C00D11B1 error message.

When I called them they confirmed my worst fears. In order to access the Watch Now service, I had to give Microsoft’s DRM sniffing program access to all of the files on my hard drive. If the software found any non-Netflix video files, it would revoke my rights to the content and invalidate the DRM. This means that I would lose all the movies that I’ve purchased from Amazon’s Unbox, just to troubleshoot the issue.

Technically, there is a way to back up the licenses before doing a DRM reset, but it’s a pretty complex process, even by my standards. When I asked Netflix for more details, they referred me to Amazon for assistance.

Perhaps even worse than having to choose between having access to Netflix or giving up my Unbox movies was the realization that my real problems were actually tied to the shiny new monitor that I’ve already grown fond of.

Netflix’s software allows them to look at the video card, cables and the monitor that you are using and when they checked mine out, it was apparently a little too high def to pass their DRM filters.

Because my computer allows me to send an unrestricted HDTV feed to my monitor, Hollywood has decided to revoke my ability to stream 480 resolution video files from Netflix. In order to fix my problem, Netflix recommended that I downgrade to a lower res VGA setup.

As part of their agreement with Hollywood, Netflix uses a program called COPP (Certified Output Protection Protocal). COPP is made by Microsoft and the protocol restricts how you are able to transfer digital files off of your PC. When I ran COPP to identify the error on my machine, it gave me an ominous warning that “the exclusive semaphere [sic] is owned by another process.”

My Netflix technician told me that he had never heard of this particular error and thought that it was unique to my setup. When I consulted Microsoft, they suggested that I consult the creator of the program. Since Microsoft wrote the COPP software, I wasn’t sure who to turn to after that.

I wrote two and a half years ago that Microsoft's HDTV DRM features were a volatile customer relations disaster waiting to happen. Why? Because Windows Vista actually disables viewing content you already have bought and paid for and been able to view on prior systems. This is rather like your new CD player deciding it won't play your CD collection because it might sound too good. It's just absurd marketing.

Aggressive DRM didn't work for Sony Music with its root kit CDs that infected user PCs with spyware; now Sony is on the verge of ditching music DRM altogether. It hasn't worked for the DVD industry, whose high-definition DVD formats are being ignored by consumers and whose copy protection has already been broken anyway. And it won't work for Windows Vista either, particularly now that consumers can "upgrade" to the more svelt and less-DRM-laden Windows XP for the foreseeable future.

Technology vendors need to remember a simple rule: the people who pay them for their products are their customers, not hardware OEMs, Hollywood studios, or music labels. Tech vendors who ignore that rule -- no matter how big they are -- risk the future of their business. It's that simple.

Let me return to the place where I started this article: Apple's so-called monopoly of digital music. Microsoft has already seen Apple eclipse its efforts in music because of its OEM friendly and customer-hostile DRM. With Windows Vista, Microsoft has opened the window for Apple to do the same to it with high-definition TV. If Microsoft doesn't want to have to compete with sleek Apple-branded HDTV systems delivering TV content along an Apple-managed digital turnpike, Microsoft has to deliver an alternative that works reliably and that customers will pay for. The question is how many years consumers will wait for Microsoft to figure that out.

Technorati Tags: Apple, Certified Output Protection Protocol, COPP, Digital Rights Management, DRM, HDTV, High-definition TV, Marketing, Microsoft, David Freeberg, Windows Vista, Windows XP

Apple gains market share again -- as if that mattered

2008-01-03T11:12:00.000-05:00

Yesterday, Bryan Gardiner over at Wired noted Apple's recent market share gains reported by Net Applications (which personally, I don't put much stock in, since they are largely browser-based). But Bryan was also kind enough to also reference my recent article citing Wharton's study debunking of market share strategies (Thanks Bryan).

Here's a quick question that will demonstrate how little effect market share has: Think about the manufacturer of the most expensive product you own, which is probably your car. What market share does that manufacturer have? If you're like most people (i.e., not a marketing and technology geek like me), you probably have no idea; you bought the car because it met your needs. So why should products that let you drive on the Internet be any different than those on the highway?

But forget cars and browers; anyone wanting to figure out Apple's influence has only to look at 1) how crowded the Apple stores were over the holidays, 2) how many white headphones they see in crowds, and 3) how many Apple laptops they see at conferences. This is a company making 14% net profits on revenues growing 40%+ a year, while competitors like HP and Dell are living on single-digit profit margins and much flatter growth. I predict we'll see Apple report fiscal Q1 earnings of more than $1.3 billion on $9.6 billion in revenues. And with a strong new product pipeline ahead, including a 3G iPhone, new Macs, and a host of new media services, 2008 is going to be a very good year for Apple -- regardless of what its market share numbers look like.

Full disclosure: the author is long Apple at the time of writing.

Technorati Tags: Apple, Forecast, Marketing, Market share myth

Could Microsoft's Office 2003 update strategy be any more user hostile? Office update disables MS files | The Register

2008-01-03T09:37:00.000-05:00

Microsoft cleverly disabled old file compatibility in Microsoft Office 2003 because it claims, "...these formats are less secure. They may pose a risk to you."

The funny part: Microsoft is blaming the file formats, but those files don't actually contain executable code. What Microsoft is actually saying is that they didn't fix the vulnerabilities in its own Office software that occur when it reads these file formats, but to live up to its security claims, it is prohibiting users who paid for their software from opening up their own files. Ironically, this includes some files created by the Office 2003 suite itself. I think that makes this service pack a trifecta: bad software practices, bad marketing, and bad customer experience, all rolled into one.

Yes, Microsoft has published a workaround, provided you are comfortable editing your registry. But here's a better one: download a copy of OpenOffice and continue to compute normally. Sheesh.

UPDATE: Scott Gilbertson has a similar article at Wired.com noting the big problems that this update poses for corporate customers. Notable among them: there's no way to identify which files won't open without trying and failing to open them. Perhaps user-hostile was too kind a description.

Technorati Tags: Microsoft, Office 2003, Security

CES madness begins with a multitouch puzzle

2008-01-02T08:21:00.000-05:00

As I perused Techmeme over the last few days, I noticed that Consumer Electronics Show announcements are already coming fast and furious. Nearly every consumer electronics company on the planet is announcing a new GPS navigator, Panasonic is prepping a new 150-inch plasma display (because the 103-inch one it introduced last year wasn't big enough), and so on. And gadget gurus like Wired.com, Engadget, and Gizmodo have already started their CES coverage.

But two products that really caught my eye were the new 52- and 84-inch multi-touch LCD displays that LG is introducing. These are liquid crystal displays with infrared detectors built into them, allowing them to be used in nearly any place or orientation that a traditional monitor might be used. LG notes that the displays are largely targeted at commercial applications. And that poses a question in my mind about another product that was much touted in 2007 but hasn't actually been deployed yet:

With multi-touch flat panels on the market, why would any commercial customer want to deploy a multi-touch system that only works horizontally, is more than a foot deep, and comes from a vendor with no track record in displays or commercial hardware products?

All I can say is that it's going to be a very interesting year for display products incorporating new user interaction ideas.

Technorati Tags: CES, Consumer Electronics Show, Microsoft, Surface computing

Media companies awaken to find Apple way ahead of them

2007-12-28T07:38:00.000-05:00

A couple of news stories this morning said to me that any company planning to beat Apple in media distribution had better bring their A game.

First, was the news that Wal-Mart has cancelled its movie download service announced with much fanfare last year. I had predicted the service wouldn't get any traction when it was announced because it tied downloads to DVD sales (a market category that Wal-Mart makes a lot of money at and was reluctant to cannibalize) and appeared to have no regard for how the customer would actually use it. But even more amusing was the reason Wal-Mart gave for canceling the service: HP discontinued the technology that powered it. If that reason is true, it says as much about Wal-Mart's technology decision-making as it does about its media business savvy. I doubt anyone will miss Wal-Mart's service; it was actually discontinued before Christmas, but the story didn't come out until after the holiday.

Secondly, the New York Times, the Boston Globe, and the major news wires are breathlessly noting that Amazon has signed on Warner Music to provide digital rights management-free MP3 music to its download service. The Times article does provide some interesting color starting around the fourth paragraph, quietly noting that Apple actually backs DRM-free music:

Warner, which releases music by artists including Josh Groban and Matchbox Twenty, was considered to be particularly reluctant to drop restrictions on copying. In February, after Apple’s chief executive, Steven P. Jobs, called on the major record companies to abandon D.R.M., Edgar Bronfman, Warner’s chairman, retorted that since movies and games carry copy protection, the notion of withdrawing it from music was “completely without logic or merit.”

The music companies had argued that Apple, which dominates the digital music market with its iPod player and iTunes service, should license its copy protection software to rivals. But Mr. Jobs has refused, saying that such a move would invite several problems, including the possibility that hackers would crack the technology. EMI Group broke ranks with the other major labels and agreed to sell unprotected music through iTunes in April.

Now, some music executives are privately backing the idea of dropping the software from music sold through virtually every service except iTunes, in order to strengthen Apple’s rivals and potentially diminish Mr. Jobs’s advantage. The major labels have been upset with Apple’s inflexibility on music pricing, among other issues.

So this announcement is being spun as a snub of Apple's approach, despite the fact that Steve Jobs asked the music companies to abandon copy protection in February. All I can say is that despite the spin, Warner has come around to embrace Apple's approach. And in fact, the article admits as much in the third to last paragraph:

Warner’s move comes roughly four months after the industry’s biggest company, Universal Music Group, part of Vivendi, said it would sell music without restrictions through an array of services, including digital stores run by Wal-Mart, Real Networks and Amazon, but not iTunes.

Warner may not adopt the same approach. A person briefed on Warner’s plans said the company was seeking to negotiate a deal to sell unprotected files through iTunes.

The bottom line: Bad music results just woke Warner Music to the fact that consumers don't want DRM. But there's another wake up call coming, just as it came to Wal-Mart: competing with Apple will still only reach a small part of the digital download market. It sounds like Warner understands that fact and is working to fix it; it's only a matter of time before Universal gets with the program too.

And what about movies? That market is still developing. But with yesterday's news that Apple has signed Fox for movie rentals, I think Apple is using an old advertising slogan as its strategy to succeed in that market too: rinse and repeat.

Technorati Tags: Apple, Downloads, iTunes, Media, Movies, Music, Universal Music, Wal-Mart, Warner Music

Finally: Apple signs Fox for movie rentals

2007-12-27T06:20:00.001-05:00

Speaking of digital TV, the Wall Street Journal today notes that according to its sources, Apple will offer Fox movies for rental through iTunes. I've been predicting Apple would offer movie rentals since this summer, but negotiating these contracts has been much harder than Apple expected, largely because the movie studios don't want Apple to have the power over their businesses that it currently wields over music. Fortunately, in this era of $200 million movies, the promise of new revenue streams cures a lot of studio objections.

Technorati Tags: Apple, Movie rentals, Movies

With over the air HDTV like this, who needs cable?

2007-12-27T06:14:00.001-05:00

With Christmas past us now, I thought I'd write a bit about an old technology that is becoming very new in our house: TV. Not video, but real, honest to goodness, over the air TV.

My wife and I gave our two sons somewhat geeky presents for their MacBooks: Pinnacle analog and HDTV USB tuners (I bought Mac versions, but PC versions with different and apparently somewhat poorer software are here). For those of you not familiar with TV alphabet soup, these tuners receive not only ordinary standard definition (abbreviated NTSC) TV stations numbered 2 through 82, but also receive digital television signals using the new digital standard (abbreviated ATSC). These new digital television stations typically have numbers like 5.2 or 44-1 on modern TVs. Woot.com offered these USB tuners on sale during the holiday shopping season for about $80, so I figured it might be fun for them to be able to try receiving television over the air, just as we did when we were growing up. We live on the side of a hill with a nice southern exposure, so I figured we ought to be able to pull in a few stations to watch.

So the boys and I plugged in these little gizmos on Christmas Day. We installed the ElGato EyeTV Lite software that provides a nice online TV guide, allows you to switch channels, and record programs like on a TiVO. And then we hooked up the wimpy little monopole antennas -- not even rabbit ears, but just a single pole -- that came with the tuners. With such lightweight hardware -- just a little USB plug and an indoor antenna, we didn't expect much, but we hoped we could watch and record a few programs.

Boy were we wrong. Because while the analog TV signals we got over these little adapters were just OK -- they were a little snowy with ghosts and color rainbows -- the digital signals were crystal clear, and the HDTV signals were breathtaking. While the tuners picked up only about eight analog TV stations, we had 23 digital stations to choose from, of which most were offering true HDTV programming in the evening.

Admittedly 31 stations isn't the 125 or more stations you get from your local cable TV company. It's only about the number of channels you get from your basic, $14.95 a month cable TV subscription. But instead of the $180 you'd pay each year for basic cable, these over the air stations are free of charge. If you're like me, you actually don't watch the Golf and Home and Garden channels anyway, making most of those 125 channels of additional programming irrelevant. And that basic cable price doesn't include any HDTV channels, which typically are only available as a $3 a month upgrade to a $45 per month digital service, making the annual cost more like $600, or about half the price of a nice, flat screen TV. And what about cable extras like electronic program guides (EPGs)? The EyeTV software provides its own EPG over the Internet through a service called TitanTV.com. And EyeTV further provides you with personal video recorder functions so you can select a show from the EPG and have your computer to record it in all its HDTV glory. Cable companies would charge you about $10 a month additional for those functions, would also charge you about $5 a month for your cable box and another $1 a month for your remote too. Oh, and did I mention that if I bought the full version of ElGato's software (about $75), it would let me put all my recorded TV shows on my iPhone and iPod? No service from the cable TV company lets me do that.

Now I've been thinking about getting a nice big flat panel HDTV for quite a while now, and I had ATSC reception a requirement before we tried out these computer tuners. But given what we saw on my kids computers this Christmas, I'm now thinking more radically. With over-the-air ATSC TV, TiVO HD, and a NetFlix subscription for movies, I could drop cable TV service and never miss it.

The fact of the matter is that the problem that cable TV was created to solve -- that of snowy, ghosting pictures due to weak signals and reflections -- now has been solved by digital technology. The US Federal Communications Commission has mandated that all TV signals will be digital by February 2009, meaning that consumers will have access to crystal clear TV throughout the US in just over a year. ATSC tuners are now standard for all TVs sold in the US. And these trends are bad news for cable TV and telecom companies whose story to Wall Street has been to expect annual price increases and always rising average revenue per customer from their bundled TV services. After all, with free TV like this, who really needs cable TV?

Full disclosure: the author has no positions in any of the companies and categories mentioned in this article at the time of writing.

Technorati Tags: Cable, ElGato, HDTV, Pinnacle, TitanTV.com

Apple passes $200 a share again

2007-12-26T14:08:00.000-05:00

As of 1:43 pm today, I saw Apple's stock price pass $200 a share again (it had done so momentarily last week), and it is now up around $200.24 a share. While Apple is only 29 years old, the stock is now entering its third century -- at least in terms of dollars.

Conventional wisdom from technical analysts is there is typically a lot of resistance at century marks. Option strike prices that end in double zeros often have very large open positions as well. The fact that Apple has broken the $200 mark indicates some short-term strength for the company, since those barriers have now been broken.

Full disclosure: the author is long Apple Inc. at the time of writing.

Technorati Tags: Apple, Stock prices, Stocks

Will the public or Google own future maps of the world?

2007-12-26T10:22:00.000-05:00

On Morning Edition today, National Public Radio had a thought-provoking piece on how GPS receivers are changing the relationships that consumers have with geography. Avid hikers and map-readers use GPS to explore new routes and vistas. The directionally-impaired, on the other hand, now have new confidence they can actually get to their destinations without getting hopelessly lost.

But most interesting, I thought, was a question posed at the end of the piece about the mapping databases behind these GPS navigation systems. Who will own our geography? Will latitude and longitude mappings to businesses, points of interest, historical landmarks, and natural wonders be a public resource (like today's Internet), or will those mappings be for sale to the highest bidder? Said another way, when you ask for directions to the best outlook over the Grand Canyon, will you hear about the wonders of the view or will it be brought you by Fedex or the local Burger King?

Perhaps it's time to revisit to proposal made at the turn of the decade for a .geo top level Internet domain. Internet domain names created an international database of Internet addresses without any one central controlling agency. We could do worse for a public way to map our real world. And if we don't? With Google Maps and Google Earth already compiling much of this data, Google might end up owning our world instead.

Full disclosure: the author is long Google at the time of writing, but doesn't want them to own the master database of world geography.

Technorati Tags: .geo, Domain names, GPS, Internet, NPR

Wharton Business School profs debunk the market share myth

2007-12-26T09:38:00.000-05:00

Regular readers know that I've always been a skeptic regarding business strategies that use loss leaders and other techniques to maximize market share instead of profits. Well, astute reader Marc points out that Wharton Business School professor J. Scott Armstrong now has data that demonstrates that market share maximization strategies provide poorer long-term business results than profit maximization strategies, both in the lab and in the field. One of the things I like about the article is that they cite the video game business as one of the worse offenders in chasing the wrong metrics:

The harm that competitor-oriented objectives can cause the companies that pursue them was the subject of a December 4, 2006, article in The New Yorker by James Surowiecki, the magazine's business writer. Surowiecki describes how Sony, with its PlayStation 3, and Microsoft, maker of the Xbox 360, are beating each other's brains out trying to capture the biggest share of the video-game market. Meanwhile, third-place Nintendo, with its new game console called Wii (pronounced "wee"), has quietly become the most profitable game console company in Japan.

Nintendo "has not just survived out of the spotlight; it has thrived," Surowiecki writes. "It has $5 billion in the bank from years of solid profits, and this past year, though it has spent heavily on the launch of the Wii, it made close to a billion dollars in profit and saw its stock price rise by 65%. Sony's game division, by contrast, barely eked out a profit and Microsoft's reportedly lost money. Who knew bringing up the rear could be so lucrative?"

So now if anyone asks why Apple's business value and stock price keeps going up despite its small market share, we now have an answer: it's because they focus on customers and profits, in that order, rather than market share. For over a decade now, they've been the most profitable computer maker in the US. And while Apple has since diversified into other markets, that one metric says more about their success than any other.

Full disclosure: the author is long Apple Inc. at the time of writing.

Technorati Tags: Apple, Business, Games, Gaming, Microsoft, Nintendo, Wharton, Sony

iPhone: capturing nearly 0.5% global mobile phone market share in six months?

2007-12-22T10:18:00.000-05:00

9to5mac.com rumors that it expects Apple to announce sales of 5 million iPhones at Macworld. If that's true, it would put Apple at half of its 2008 sales goal before 2008 even starts. It also means that despite Apple only selling one model of GSM iPhone in four countries with four carrier dedicated carriers, Apple's shipments in this quarter -- around 3.5 million -- will be very close to the 3.9 million Blackberry smartphones Research In Motion shipped in its most recent quarter across more than 100 carriers and 13 product lines (N.B. RIM's quarter ended Dec. 1, while Apple's will end Dec. 31, so the unit shipments are not precisely comparable, since RIM didn't count the holiday shopping season. On the other hand, consumer products only make up only a fraction of RIM's business too).

So what do I take away from this trend? If Apple actually will sell 5 million units by MacWorld AND it keeps up its aggressive deployments AND it makes no serious missteps with new products (like its 3G iPhone), the iPhone could pass the Blackberry to become the best-selling smartphone on the planet in 2008, and possibly the most rapidly adopted phone in the world. Not bad for an entry product in a market that most pundits claimed was impossible for a new manufacturer to enter.

Full disclosure: the author is long Apple Inc. at the time of writing and expects Wall Street's Santa Claus rally to be very good to that position.

Technorati Tags: Apple, Blackberry, iPhone, Mobile phones, Smartphones, Research In Motion

Apple TV's "failure" depends on your yardstick

2007-12-21T10:59:00.000-05:00

It's a slow news week. So what better to add spice to your life than
Phillip Swann, president of TVpredictions.com, who claims that Apple will dump Apple TV by the end of 2008. He also doesn't put any facts behind this prediction, relying instead on estimates of 400,000 units sold as the basis of his argument. He also complains about the $300 price tag which he seems to think is excessive considering that it only lets you buy videos from the iTunes store.

Now I'll be the first to admit that the Apple TV value proposition is incomplete; I've been expecting Apple to offer high-definition movies and rental content for the Apple TV for more than six months now. And why haven't they done so? That's simple: for Apple to provide HD content and movie rentals, they need deals signed with the movie studios, and the movie and TV studios fear Apple having as much power in their industry as it now does in music. So instead, Apple now has hardware in the field waiting for the content that makes it valuable to the consumer.

But that 400,000 estimated sales number isn't the damning evidence that Swam thinks it is. That number is from a Forrester Research report that we've noted has some logic flaws before, and follows up on its earlier incorrect claim that paid media can't ever compete with free TV (Comcast, HBO, and Showtime will be very upset to hear that given the billions they make from paid media) and Forrester's incorrect claim that iTunes music sales were slowing back in January). Quick quiz: how many dedicated HD DVD and Blu-ray high-definition players have been sold in the US, excluding game consoles? Turns out that the TOTAL number of HD-DVD players sold to date after almost two years is about 750,000, of which 269,000 were sold as attachments to XBox 360 game players, leaving only about 580,000 as pure high-def TV players. The Blu-ray numbers are similar: There have been about 2.7 million Blu-ray players sold to date in the US, but those include all Sony Playstation 3 gaming consoles. Subtract out the roughly 2.5 million PS3s in the US, and Blu-ray is left with only 200,000 or so stand-alone players. Suddenly 400,000 Apple TVs doesn't look bad, not bad at all. Oh, and last time I checked, consumers had to pay hundreds of dollars for those devices that allow them to play high-definition content, a flaw which Mr. Swammi claims dooms Apple TV

One more point: I was in a recent brainstorming session for a client with about 20 or so other consumers. At one point, one gentleman from the audience struggled to articulate what he wanted an upcoming product to work like, and he ended up raving about his Apple TV, which was small, easy to use, and produced beautiful results, particularly with his home photos, on his HDTV (he didn't get the memo that the lack of HDTV content made it a failure). So even without HDTV content, Apple TV isn't a failure in consumer minds; Apple adding HDTV content could be as explosive a boost to its fortunes as the iTunes store was to the iPod.

The bottom line: Yes, Apple could decide to cancel Apple TV. But my bet is that they won't, since by my analysis, they will be #2 in the high-definition TV movie player market when they release high-definition content. The only thing that could stop them would be the movie studios deciding that they don't want their content distributed by Apple to consumers. And given that Apple customers have been proven to provide more revenue to music labels than the general population, that would be the movie studios' loss, not Apple's.

One final bit of irony: Phillip Swann, the analyst who posted this prediction, didn't write it. He posted the prediction on YouTube. So far as I know, the only way you can easily sit down at your HDTV, pick up your remote, and watch Mr. Swann's predictions without firing up a computer is, you guessed it, to use an Apple TV.

Full disclosure: the author was a Forrester analyst until 2002 and is long Apple at the time of writing.

Technorati Tags: Apple, Apple TV, Blu-Ray, Forrester, HD-DVD, HDTV, TVpredictions.com

John Gruber dissects Fast Company's Apple doomsaying

2007-12-20T10:05:00.000-05:00

John Gruber at Daring Fireball does a spectacular job today
taking apart the latest Fast Company article predicting that Apple has had its day. Not only does he point out the many inaccuracies and straw men in the article, but he does it with great style. You've got to love it when you get real thinking, great writing, and cutting sarcasm all in the same article.

I'll add one more point the Fast Company article misses: their doom and gloom is running contrary to what I would claim is the consensus view on Apple currently, namely that not only is it not fading, but that most analysts have underestimated how successful its business results are (a point of view I concur with).

Full disclosure: the author is long Apple at the time of writing.

Technorati Tags: Apple, Daring Fireball, Fast Company, John Gruber

Personal GPS navigation to grow to about half the iPod market this year

2007-12-18T09:26:00.000-05:00

Digitimes notes that for the first time, GPS makers Garmin and TomTom will both ship over 10 million personal navigation devices this year. That puts total production this year for those two manufacturers at around 22 million units. To put that in perspective, that's about half of the 55 million iPod music players we expect Apple to sell in calendar 2007. That's huge.

One comment about GPS units: just like in music players and Web sites, there is a lot of variation in how usable different brands are. If you're considering buying one, find a store where you can actually play with a real, operational unit. Try entering addresses and routes and listening to the output. And finally, ask the sales rep, or better yet, take a couple units outside, and see how long they take to sync up to your location. You'll quickly find that some units will suit you better than others -- and some will have you scratching your head in frustration trying to figure out how to use them. The market will eliminate the worst units in a few years, but meanwhile you don't want to be stuck with one.

UPDATE: There was a lot of volatility in GPS stocks today, specifically with Garmin, due to a Banc of America analyst stating that NPD reported Garmin's market share had dropped to 29% in November from 47% a month earlier. Yet, NPD itself wasn't able to confirm those figures, and other analysts have noted that the data cited excluded some large retailers of Garmin products. However, if we ignore the market share squabbling, the most important note of the story is in the third paragraph:

Analysts said overall sales of the devices were up about sevenfold from a year ago.

It's hard to go wrong with an industry growing 700% a year.

Full disclosure: the author has a long position in Garmin at the time of writing.

Technorati Tags: Apple, Garmin, GPS, iPod, Tom Tom

Summize: a way to consider many product reviews at once

2007-12-18T09:17:00.000-05:00

Regular readers know that we're always looking for ways to cope with what we call The Tyranny of Too Much. That tyranny becomes particularly difficult to handle when considering products to buy, movies to see, or books to curl up with. Yes, there are gazillions of online reviews of such. The bad news: there are gazillions of online reviews to wade through.

Enter Summize.com. It lets its robots do the Google-like Web walking of all those reviews and boils those reviews down to a single graphic called a "snip" that reflects the overall sentiment about that product. Green is positive, red is negative, just as you'd expect. So if you look up digital cameras, you get a nice overview of all the popular models. Already decided you want a Canon camera? Search for that and you get a quick comparison of all those models.

Now if you're one of those who doesn't like to go with the populist opinions (I know you are out there; you know who you are), there are other options. You can, for example, only look at products that others dislike or that reviewers disagree on. And in fact, the only feature I've found myself missing off the bat is the ability to sort the results by the number of reviews summarized (or summized, as I suspect summize.com would want me to say, even though it isn't a word). I thought the site also was missing the ability to sort by the overall rating, but it turns out that if you only display products people like, it is sorted by rating (which becomes more evident if you display by "star" ratings rather than "snips").

But regardless of that nit, in this crazed holiday buying season, Summize.com deserves a place in your bookmarks for that emergency last-minute decision on which book Uncle Henry really would like best or which holiday movie you should go see to get out of the house. It really does a good job of taming the tyranny of too many reviews and leaves you more time to focus on enjoying the holidays too much instead.

Thanks to TechCrunch for recommending Summize.com.

Technorati Tags: Product reviews, Reviews, Summize.com

More information doesn't drive better decisions

2007-12-17T11:26:00.001-05:00

Bloomberg has a very interesting article noting some academic studies that show that more data doesn't necessarily help people make better decisions, and, in fact, may simple distract decision makers from focusing on the most important factors. I particularly like their conclusion:

Need a New Year's resolution? One word: Simplify.

Technorati Tags: Bloomberg, Less is more, Decision-making, Tyranny of too much

Multi-core software thrust neglects the real challenge: killer apps

2007-12-17T11:06:00.000-05:00

Today's New York Times cites an ongoing claim by Microsoft that
faster chips are leaving programmers in the dust. Surprisingly for the Times, it is somewhat breathless in its admiration for the work that Microsoft is doing in this area, to the point where it cites no other software companies in the article.

To accelerate its parallel computing efforts, Microsoft has hired some of the best minds in the field and has set up teams to explore approaches to rewriting the company’s software.

If it succeeds, the effort could begin to change consumer computing in roughly three years. The most aggressive of the Microsoft planners believe that the new software, designed to take advantage of microprocessors now being refined by companies like Intel and Advanced Micro Devices, could bring as much as a hundredfold computing speed-up in solving some problems.

Microsoft executives argue that such an advance would herald the advent of a class of consumer and office-oriented programs that could end the keyboard-and-mouse computing era by allowing even hand-held devices to see, listen, speak and make complex real-world decisions — in the process, transforming computers from tools into companions.

The flaw in Microsoft's strategy around parallel processing becomes apparent toward the end of the article.

Microsoft sees this as the company’s principal opportunity, and industry executives have said that the arrival of manycore microprocessors is likely to be timed to the arrival of “Windows 7.” That is the name the company has given to the follow-on operating system to Windows Vista.

The opportunity for the company is striking, Mr. Mundie said, because manycore chips will offer the kind of leap in processing power that makes it possible to take computing in fundamentally new directions.

He envisions modern chips that will increasingly resemble musical orchestras. Rather than having tiled arrays of identical processors, the microprocessor of the future will include many different computing cores, each built to solve a specific type of problem. A.M.D. has already announced its intent to blend both graphics and traditional processing units onto a single piece of silicon.

In the future, Mr. Mundie said, parallel software will take on tasks that make the computer increasingly act as an intelligent personal assistant.

“My machine overnight could process my in-box, analyze which ones were probably the most important, but it could go a step further,” he said. “It could interpret some of them, it could look at whether I’ve ever corresponded with these people, it could determine the semantic context, it could draft three possible replies. And when I came in in the morning, it would say, hey, I looked at these messages, these are the ones you probably care about, you probably want to do this for these guys, and just click yes and I’ll finish the appointment.”

So here's a question for skeptical readers: how long do you think the above email response example cited by Mr. Mundie would take on today's dual-core Intel processors? The answer: a few seconds at most. No matter how much semantic analysis you layer in here, email is not by any stretch of the imagination constrained by processor speed. So why does Mundie cite this example? Because Microsoft sells email systems.

The problem articulated in the article isn't with chip technology, software design, and parallel processing development. The real underlying problem is marketing. Microsoft and other technology companies haven't identified a consumer segment or application that desperately needs high-performance computing. Said another way, there's no killer consumer application for ten core processors, to say nothing of the 60 or 100 core processors currently on the drawing board.

Now this revelation isn't exactly new. The technology industry was struggling a decade ago to find a killer application for faster processors. And some killer applications emerged, but each had some issues about driving demand for faster processors:

Internet browsing and email. As noted above, these applications are not exactly processor-intensive. Rather, these apps spend most of their time waiting for either the user to input something or for an Internet web server to respond over a broadband connection. Today's multi-gigahertz processors deal with these applications just fine, so fine, in fact, that nowadays mobile phones are nearly as responsive on fast networks as computers are.

Advanced photo and video editing. These applications can be very processor intensive, as can be validated by anyone who runs Photoshop, Aperture, Final Cut, or Adobe Premiere. But the challenge here is that these applications don't have a broad base of users. Yes, professional photographers, TV stations, and movie studios need them. But those uses account for sales of a few million computers at most, not the hundreds of millions needed to justify a decade of new software development.

Computer gaming. This application is today probably the biggest consumer of PC computing cycles. Ask any gamer, and they'll tell you that they'll buy as much computing power as they can afford. But because of the high cost of computing power to date, this industry segment has moved toward dedicated gaming hardware, since gaming console manufacturers can optimize their hardware for this specific task. The result: Computer gaming is only a weak driver of parallel processing software development, despite its need for as many gigaFLOPS as possible.

Vendors won't crack the problem of parallel processing software by focusing on broad "everyone needs them" applications like email. Instead, they need to identify early adopter market segments -- communities who today are desperate for more computing power and are already rolling their own multi-core software to get that power. Some of those communities are obvious, such as pharmaceutical companies who need to explore countless chemical compounds to come up with new drugs, and Wall Street trading firms and hedge funds who model financial markets for profit.

As Geoffrey Moore noted in his classic book, Crossing the Chasm, products never hit a broad-based majority right out of the gate. Instead, they evolve through much smaller market segments of technology enthusiasts and pragmatic early majorities who demand a whole product that solves a significant problem. Even Microsoft Excel wasn't originally used by most computer users; its early adopters were Mac users (where the product was released first) and accountants who really needed spreadsheet functions that ran under Windows. Why would anyone think multi-core software would be different?

I assume that with such a star-studded group of parallel processing researchers, Microsoft will figure out the technical issues fairly quickly. And if it wants some suggestions about some very important, highly parallel applications, here's some food for thought: Google was so unsatisfied with the price, performance, and physical density of PCs for its highly parallel applications that it designed and built its own machines for its data centers. Unlike today's PCs, those processors and cores get used whenever and wherever there is demand. And when you have billions of requests per day for your services and applications, as noted by this article in the New York Sunday Times, parallelism is pretty easy to find.

Full disclosure: the author is long Google at the time of writing.

Technorati Tags: Crossing the Chasm, Geoffrey Moore, Google, Microsoft, Multi-core, Parallel processor, Processors

Apple stock hits $200 a share momentarily -- at least according to some tickers

2007-12-14T13:18:00.000-05:00

For those Apple stock watchers out there, Apple stock momentarily hit $200 a share today, which is an all-time high as well as a century mark (note to skeptics: check the daily high on Yahoo Finance and Google Finance as well as the 52-week high on Google; all these have been updated to $200. Apparently Yahoo Finance doesn't change its 52-week high based on intraday numbers, so it is still at $196 and change. Sounds to me like someone started their Christmas celebration a bit too early and hit the wrong key on their trading computer, given that the price sank back to its more mundane $190 mark. But perhaps it's an indication of what may be a very nice Santa Claus rally next week.

UPDATE: Some are questioning whether the $200 figure was a real trade or not. Others say that there was a single large trade (150,000 shares?) at 10:39, which would imply that someone wasted about $1.5 million by trading at the non-market price. I will say, though, that Fidelity now reports the daily high as $200 as well.

Technorati Tags: Apple, Stocks

Real business owners don't let IT dictate what phones they use

2007-12-14T08:43:00.000-05:00

Forrester released a rather poorly argued report yesterday describing why IT shouldn't support Apple's iPhone. Why do I claim it is poorly argued? Because the summary promptly contradicts the lede of the article saying that C-level executives will insist on deploying iPhones anyway. So why should IT be fighting that process? To make matters worse, Fortune picked up the story and and retitled it as "Top 10 reasons IT won't support the iPhone".

Well thankfully, a reporter over at the Wall Street Journal did what Forrester should have: they dug up a senior executive of a company who had deployed iPhones as business tools, and ran Forrester's 10 reasons past him. That produced a nice rebuttal story that proves many of Forrester's reasons false or at least moot for real applications. Admittedly, one point does not make a sample, but for anyone who has actually used an iPhone in a business setting, the Journal article is much more credible than Forrester's was.

My two cents: Forrester got it wrong for the second time this month. Whoever is in charge of research now at Forrester now needs to take a look at its research and editorial methods. Something is broken.

Technorati Tags: Apple, iPhone, Wall Street Journal

The top Christmas electronics brands

2007-12-13T10:18:00.000-05:00

With only 11 shopping days left until Christmas, it's always kind of fun to surf over to Amazon.com and see what is selling in the realm of electronics. As of nearly 10 am on Thursday, December 13, here are the top 5 best selling electronics products on Amazon:

#1: Apple 4 GByte iPod nano
#2: Garmin nuvi 350 GPS
#3: Amazon Kindle ebook reader
#4: Garmin nuvi 200 GPS
#5: Canon Powershot A570IS camera

I'm not going to keep running down the list because what you get after the top five are largely repeats of those categories. In the top 25 products, there are 7 Apple iPods, 8 GPSs, and 8 digital cameras. The only two odd ducks that don't fit into these categories are the Kindle eBook reader and a Toshiba HD DVD disk player at #18.

If we think in terms of brands, then the buying consensus gets even more interesting. Of the brands in the top 25 Amazon.com products, we get:

7 Apple iPods
6 Canon cameras
6 Garmin GPSs

and then a bunch of one-product brands, mostly from different manufacturers of cameras and GPS systems.

The first non-Apple music player that shows up is the 80 GByte Microsoft Zune at #35, followed by the SanDisk Sansa e250 2 GByte player. Oh, and three more iPods show up in the second 25 products as well as four more Canon cameras and a Garmin GPS.

My biggest surprise is that video games don't appear to be big sellers at Amazon this year. No video game consoles show up on the top 100 best sellers; I'd have thought at least the Nintendo DS Lite would be there. And only one video game -- Dance Dance Revolution SuperNova 2 Bundle for the Playstation 2 -- shows up at #27. Go figure.

The bottom line: if you're looking to follow the crowd in buying Christmas electronics, you'll be in good company if you buy a GPS navigation system, a digital camera or a music player. And if you want to buy the top-selling electronics brands, at least as recorded by Amazon, buy Apple, Canon, and Garmin.

Full disclosure: the author is long Apple and Garmin at the time of writing, for exactly the reasons noted in this article.

Technorati Tags: Amazon, Apple, Canon, Garmin, GPS, Holiday shopping, cameras

A really bad marketing idea: redefining PlaysForSure as Certified For Windows Vista

2007-12-12T15:59:00.000-05:00

It's bad enough that Microsoft's Zune now competes with and is incompatible with Microsoft's PlaysForSure hardware suppliers, but Microsoft redefining the PlaysforSure DRM brand to promote Windows Vista is just partner hostile. And forget about consumers; they now have no chance of knowing if their Microsoft music will play on any vendor music player. Whoever thought up this rebranding program should be banned from ever doing marketing again.

Technorati Tags: Marketing, Microsoft, PlaysForSure, Windows Vista

Speculations on the MacBook tablet

2007-12-12T13:15:00.000-05:00

After I browsed through Time Magazine's top 10 gadgets of 2007 today and noted its selection of Apple's iPhone as the #1 gadget, I came across this Toshiba subnotebook with solid-state storage as Time's #7 pick. The more I looked at it, the more I thought, "Gee, that could easily be a next-generation MacBook." Why? Well because it:

Weighs half of what existing MacBooks do. With an optical disk drive, this notebook weighs in at a mere 2.4 pounds. Now that's a product any road warrior can carry, without sacrificing the ability to watch DVDs on a plane or make backups of an important presentation.

Boasts a solid-state disk. The press has been abuzz about the potential for Apple eliminating spinning disk drives in its notebooks just as it has in the iPod touch and iPhone. The Toshiba Portege proves such a feature makes sense in a production device.

Sports a design reminiscent of the latest generation iMacs The black screen combined with the silvery pseudo-metalic finish on the rest of the notebook resonates nicely with the latest black-and-aluminum iMac designs (see picture above).

Now I can hear the groans noting that a simple MacBook update that mimics a six-month-old Toshiba isn't exactly the stuff of MacWorld keynotes. And that's why I expect that this MacBook replacement that Apple will introduce will have some nice little differentiators that will still generate some oohs and ahs from users. Specifically, I believe that Apple will include:

Sexier packaging and materials Walt Mossberg panned this Toshiba Portege because it felt fragile as glassware. Apple has moved to colored aluminum enclosures for its current generation iPods; I expect to see similar materials and packaging attention to detail that will make this new MacBook feel solid and attractive to consumers, despite its light weight.

A reversible touch-enabled display. Already the hallmark of Windows-based tablet computers, I believe that Apple will incorporate new LED-backlit displays that can be folded over to create a flat, touch-enabled surface. When set up in this way, the computer will look like a giant iPhone-like display with similar interaction modes. When opened the other way, the MacBook will work like a normal notebook computer.

A multi-touch keyboard. Apple has noted publicly that unlike the iPhone, you need more than a touch screen for great user experience on a notebook or desktop computer. Fortunately, Apple already has a patent on a keyboard that allows multi-touch gesturing as well as providing haptic feedback necessary for touch typing for long periods of time. This multi-touch keyboard surface would be an ideal bridge between the iPhone and sub-notebook experience -- and would eliminate the need to clean fingerprints from the notebook screen several times a workday when you are sitting at your desk working.

New Mac OS X multi-touch-enabled applications. Expect to see notebook applications that have the same radical one-touch simplicity that users have come to expect on the iPhone. These won't be heavy-lifting computing apps like Pages or Numbers, but more lightweight apps like we see on today's Leopard Dashboard. In fact, these may actually be Dashboard Widgets given one-touch icons for casual use without opening the laptop or using the keyboard.

Such a product would be a worthy follow-on to Apple's successful, yet 18-month-old MacBook line. It would also be the first real packaging revision to its notebook line since Apple converted to Intel processors. We'll find out how close this is to the truth in just over a month from now when Steve Jobs takes the stage at MacWorld San Francisco. But speaking as someone who will be in the market to replace his nearly five year old PowerBook in January, I'd be first in line to buy one.

Full disclosure: the author is long Apple Inc. at the time of writing.

Technorati Tags: Apple, Mac OS X, MacBook, Portege, Toshiba

Changewave Research: Apple laptops now top brand in buying intent for consumers

2007-12-11T09:05:00.000-05:00

Ben Worthen put up another great post yesterday about Apple Macs making inroads in business. But most interesting is a statistic he cites at the bottom of his entry:

Just in case there’s any doubt where that momentum is coming from: The study found that more consumers will buy Apple laptops than any other brand. Twenty-nine percent of consumers who are buying a laptop next quarter said they’ll buy a Mac, ahead of Dell (28%) and H-P (21%). Among consumers who plan to buy desktops, Macs came in at 29%, just behind Dell (31%) and ahead of H-P (24%).

So you read it first in the Wall Street Journal: Apple is now the number one laptop brand for consumers.

Technorati Tags: Apple, Computers, Laptop, Changewave Research

When enterprise software will finally get respect

2007-12-11T08:52:00.000-05:00

I was going to weigh in on the Bill Gates/Robert Scoble/ Michael Krigsman debate on whether enterprise software can or should get respect, but happily, Wall Street Journal reporter Ben Worthen chimed in this morning with exactly the response I was going to write. So the next time you hear Bill Gates complain that Microsoft gets no respect for the great work it does, think about this:

Nick Carr is next to weigh in, saying that reliability versus ease of use is a false choice. Good software should be both, and he points to Amazon.com’s Web site as an example of something that’s reliable, secure, and intuitive. Carr seems to think that people would care about business software if it was designed better.

Our feeling is that people do care about business software – if you spend eight hours a day in front of a computer, the quality of the software you use is going to have a big impact on your day. It’s just that much of this software is so frustrating to use that all the thoughts people have about this software is negative. Another factor: Most people who write about business software use language that you’d need a PhD in engineering to understand, turning away any non-techie.

If tech departments don’t find a way to make people care about the software their companies choose – and we think that ease of use is the factor that makes people care – then workers will start choosing their own software. Think salespeople buying subscriptions to Salesforce.com, when the company is supposed to use Siebel for salesforce automation.

A decade ago, the average worker was impressed when software worked. Today, people expect software that’s easy to use – you can blame the rise of consumer software (i.e. the stuff Gates thinks people care about) for that.

Said another way, the consumerization of technology -- created by consumer experiences with digital video recorders, iPods, and mobile phones -- has raised all our expectations way above breathless declarations of, "The Wow Begins Now.", especially when we confront real systems at work that increase workloads, enforce meaningless restrictions that don't help customers, and sport user interfaces that feel Kafka-esque in their user hostility. It's not surprising that enterprise software gets no respect; it is surprising that there aren't more cases of employees throwing their computers out windows in frustration.

Consumers and employees now expect technology to look good, help them do their jobs, and not make them feel dumb. Too much enterprise software does none of the above. Almost no software does all three. That's going to change, whether Bill Gates gets on board or not. And when it does, enterprise software will be sexy -- and that moment can't get here a moment too soon.

Technorati Tags: Ben Worthen, Bill Gates, enterprise software, Microsoft, Michael Krigsman, Robert Scoble, Software, Wall Street Journal

iPhone EDGE browsing comparable to Nokia 3G Web

2007-12-11T08:32:00.000-05:00

There were a lot of readers who said I was nuts to claim that the iPhone's EDGE service was at all comparable to a real 3G experience on my Nokia E61i. Now MacDailyNews has uncovered data to show that I am not crazy. German Web site iPhone Infoblog videotaped both phones with WiFi turned off and raced the iPhone's EDGE service experience against a Nokia E61i using UMTS. The video, shown above, demonstrates that in fact, the two experiences are nearly identical in speed, largely because the iPhone's much faster processor and quicker rendering compensates for the E61i's multi-megabit UMTS bandwidth on real Web pages.

This experiment demonstrates the power of mobile phone carrier marketing. The ideal business model is one where a vendor can bill for a service that people don't or can't actually use; ask anyone who owns a gym. Mobile phone carriers have been pushing multi-megabit 3G mobile phone services, knowing full well that most mobile phones actually can't keep up with them. And that's why data service for laptop 3G adaptors is so much more expensive than 3G mobile phone services. Laptops with multi-gigahertz processors actually use significant portions of 3G bandwidth, requiring mobile carriers to incur more provisioning costs to support those platforms.

But it also proves that raw bandwidth isn't the be-all and end-all of a mobile Internet experience, just as my prior article claimed. Processor speed, memory capacity, battery life, latency, and cost all affect the consumer's experience in different ways. Good product design strikes a reasonable compromise among those constraints. Great product design creates user experiences that transcend them. And the iPhone appears to have done just that, despite its lack of 3G bandwidth.

Full disclosure: The author is long Apple at the time of writing.

Technorati Tags: 3G, Apple, EDGE, iPhone, Nokia, Nokia E61i, UMTS

Nokia: looking for revenue sharing in all the wrong places

2007-12-10T14:20:00.000-05:00

MacDailyNews has a great note on how Nokia wants an Apple-style cut of service revenues from its handsets. While I think that type of deal unlikely on top of Nokia's existing subsidy stream for many of its handsets (note to Nokia: who do you think pays those subsidies for your handsets? Hint: it's not the carrier), what's more interesting is the color provided by long-time Nokia veteran Mike from Helsinki about a conversation he had two years ago with a Nokia SVP:

I flatly told him that Nokia should considered Apple to be a very serious threat.

With a straight face, this SVP told me that I was hallucinating.

He proposed that iPod and iTunes was an exception, and would be eclipsed by a Nokia/Microsoft partnership in short order. Why wouldn't he believe that? The largest maker of consumer devices in the world teamed up with a company that has 95% market share of the computer OS business [seems like a sure thing].

He further pointed out to me that Apple could never match Nokia's legendary and titan logistics chain throughout the world, and that Apple, an MP3 device maker, had no clue as to the complexities of the mobile phone world, how mobile phones should be built, how to deal with operators, etc. Apple, said this SVP, was simply out of their league.

He also pointed out to me that Nokia already had umpteen gazillion MP3 players existing on their phones (never mind that NO ONE used them), and that they had just acquired white label music aggregator Loudeye and would parlay the Nokia/Microsoft/Loudeye team into a competitive offering - be damned their operator customers.

This SVP is a keenly smart, competent, accomplished guy, supremely educated and also a person who I consider a friend. And he was utterly clueless.

That conversation echoes the one that nearly every music player manufacturer on the planet has had to date. And Microsoft's DRM and poor business decisions has managed to undermine the business of every single one of them, especially now that Microsoft's Zune competes with them and yet isn't compatible with Microsoft's own PlaysForSure music software. If Nokia continues to pin its hopes on Microsoft and rights-managed music -- which, by the way, fights the DRM-free trend that Apple, Amazon, and now Wal-Mart have successfully deployed -- there's no limit to the revenue cuts it could negotiate with the carriers. After all, 20% of zero is still zero.

Technorati Tags: Amazon, Apple, iPod, iTunes, Microsoft, Mobile phones, Music, Nokia

14th Street Apple Store opening leads to near riot?

2007-12-10T11:18:00.000-05:00

Kenn Marks over at PowerPage.com was at the New York 14th Street Apple Store opening on Friday while we were enjoying our first skiing and boarding of the season out at Wachusett Mountain. And what an opening it was; Kenn observes that unlike the typical well-behaved crowds, this one had line jumpers, pushing, shoving, and generally unruly crowd behavior. What was everyone jockeying for? Some posters and chances to win some gear. Kind of sad.

Pro photographer Mark Forman has some great photos of the event, including the spectacular glass and stainless steel spiral staircase that is the 14th Street store's hallmark. That said, I'm glad I wasn't there; I really don't like crowds of that magnitude. But looking back at the predictions of failure bandied about when Apple opened its first store in 2001, who'd have ever thought that Apple store openings in 2007 would draw crowds like rock concerts? And with 40 new stores planned for 2008, including one in Beijing, I doubt the crowds are going to thin any time soon.

Technorati Tags: Apple, Apple Store, Kenn Marks, Mark Forman, Powerpage.com

Today's physics experiment

2007-12-07T08:30:00.000-05:00

My boys and I are going to do some research today on the dynamic interactions of linear planes and crystalline H2O in the presence of a gravitational field. Yup, we're going skiing and snowboarding for the first time this year. Besides, it looks like a dull day in the market anyway. Have a great weekend everyone.

Technorati Tags: Skiing

Employees vote with their wallets for iPhones in business

2007-12-07T08:25:00.000-05:00

Let's see, the iPhone 'may never be secure' (from Computing Business), there are five reasons the iPhone won’t infiltrate your business (from CIO magazine), Microsoft says that the iPhone lacks business savvy (from CNET.com), and enterprise hurdles await iPhone (from eWeek.com). Gee, Apple must be distraught from its complete failure in the enterprise, huh?

Well, not so much. Reuters notes today that the iPhone is winning corporate fans anyway, despite its supposed lack of security, enterprise flaws, poor business savvy, and hurdles to overcome. It turns out executives like it, and guess what -- they actually have some sway in deciding which technologies they use. Think of that.

There's a pretty big sea change going on in the IT world. Consumer technology built to be simple use is catching on with knowledge workers. It's how the PC ended up in corporations despite the prohibitions of the MIS organization in charge of mainframes -- when MIS prohibited them, executives just brought them in from home. The only difference: today, the PC is an iPhone.

With the latest estimates from IDC saying that IT spending is declining going into next year, should we be surprised that employees are bringing their own technology to the party?

Technorati Tags: Apple, Business, iPhone

Now with video: Forrester Announces the Death of iTunes again

2007-12-06T11:18:00.000-05:00

Sigh. First it was Josh Bernoff at my corporate alma mater Forrester Research predicting the death of iTunes, now it is James Mcquivey. Daniel Eran Dilger does a nice job of taking apart James' argument again this year, so I won't do that again (see here if you want to read my article from last year). The basic story: just because the networks have rebelled doesn't mean Apple will fail to sell a ton of video content, any more than the availability of free TV prevented HBO from being hugely successful.

But just as I said last December about music, analysts have to be very careful about extrapolating proprietary data into any type of "Death of iTunes" scenario. After all, you're talking about the third largest retailer of music in the US. It's not like Apple has no clue about how to sell digital media. Further, just because Apple charges money for video when the networks don't doesn't mean they will fail. Apple's success in music was also discounted by analysts because it was competing against free P2P downloads. And somehow, DVDs have done very well competing against ad-supported free TV for about 20 years.

There's one big problem with free TV shows: consumers don't value them at all the same way they value things they pay money for. That's why the Motorola, the provider of seemingly free mobile phones to AT&T and other carriers, is replacing its CEO, while Apple, selling phones for list prices of $400, is making money hand over fist. No, it doesn't make sense to an those schooled in least-cost economics. But then again, who said consumer behavior had to make sense?

One final note: if you want a great reference to prove to you how little consumer behavior actually correlates with economics and other rational decision-making, read Robert Cialdini's classic book Influence: The Psychology of Persuasion.

Full disclosure: The author is long Apple Inc. at the time of writing.

Technorati Tags: Apple, Forrester, iTunes

Massive Apple holiday sales across product lines

2007-12-06T10:45:00.000-05:00

At least, that's what what RBC says. But Bear Sterns has an even better story and higher estimates. The short version: retail checks say that Apple products ranging from Macs to iPhones are flying off the shelves. I've also seen data predicting more than 25 million iPods to be sold over the holidays. A good indicator: iPod nanos now occupy Amazon's #1 and #3 positions, separated only by Amazon's Kindle book reader.

Technorati Tags: Amazon, Apple, Holiday shopping, iPod, Macintosh

AT&T opens its network -- by doing nothing

2007-12-06T09:16:00.000-05:00

USA Today has a rather breathless story today titled, "AT&T flings cellphone network wide open". Here's the lede:

Starting immediately, AT&T (T) customers can ditch their AT&T phones and use any wireless phone, device and software application from any maker — think smartphones, e-mail and music downloading. And they don't have to sign a contract.

"You can use any handset on our network you want," says Ralph de la Vega, CEO of AT&T's wireless business. "We don't prohibit it, or even police it."

AT&T's push to give consumers maximum control of their wireless worlds is being driven, in part, by Google. The tech giant is a monster in the Internet search business for personal computers, and is hoping to replicate that success in the wireless market.

Google (GOOG) recently announced plans to link arms with more than two dozen wireless companies, including Sprint (S), with the goal of developing an operating system that lets consumers use any application on mobile devices, much as they now do on PCs. Other partners include Japanese cellphone giant DoCoMo and handset maker Samsung.

Everything that Google has promised to bring to the wireless market a year from now AT&T is doing today, de la Vega says. "We are the most open wireless company in the industry."

The funny part about this openness by press release is that nothing has changed. AT&T's network allowed unlocked GSM phones to use AT&T SIM cards just as much yesterday as it does today. The major difference, as noted in the article, is that AT&T salespeople will be trained to tell consumers that they can buy unlocked phones and a SIM instead of buying a phone from ATT.

All this said, I can't complain about the trend that AT&T is jumping on. As I predicted when they were announced, Apple's gutsy iPhone marketing and Google's Android open handset software are forcing US wireless carriers to embrace a more open model. Carriers are beginning to recognize that open networks may actually be better for their businesses than the closed monopolies they have traditionally run, where the carriers told you what handsets to buy and what software to run.

The US mobile phone world is changing. But who knew that change would come by press releases instead of technology?

Full disclosure: the author owns Google and Apple stock, but has no positions in mobile carriers.

Technorati Tags: Android, Apple, at&t, Google, Mobile phones, Open networks, USA Today

iPhone browsing market share demonstrates usability drives use

2007-12-05T10:57:00.000-05:00

Net Applications reports that in November 2007, iPhone browsing market share was 0.09% -- nearly 0.1% -- of all browsers in their sample. Now that may not seem like much until you compare it with the share for all Windows Mobile/Windows CE devices, which only tip the scales at 0.06%. Said another way, the approximately 2.5 million iPhones sold to date are being used about five times more than the nearly 7 million Windows Mobile phones sold over the past six years.

Don't think this usability matters? SAP does; it is delivering its new CRM package to iPhones ahead of more business-oriented phones like RIM's Blackberry. And I think that's smart -- after all, SAP is simply targeting the platform that gets used more on the Web. And usability drives use.

Technorati Tags: Apple, iPhone, SAP, Windows Mobile

GPS navigators: the iPods of Christmas 2007

2007-12-05T10:32:00.000-05:00

Today's New York Times Circuits section is chock-a-block with articles about the current hot gadget for the holiday season: Personal GPS naviagation systems. With entry level and sale prices on these devices occasionally dipping below $100, these satellite navigation systems have become the hot gift idea for commuters, road warriors, hikers, and joggers.

I'm a big fan of these devices and believe they will do amazingly well over the holiday season, eclipsing nearly every other category of device other than MP3 music players like the Apple iPod (and by the way, some GPS systems do that too). But for people thinking that these are great replacements for a built-in navigation system in your car, you might still want to consider the built-in systems. Many built-in GPS systems have more inputs to the navigation system than just GPS; some will actually use information from steering and speedometer readings to maintain navigation in areas where satellites aren't visible (for example, in skyscraper canyons in New York or in the Ted Williams tunnel here in Boston) and to improve the accuracy of the navigation, perhaps avoiding embarrassing flubs such as these. Further, many built-in systems have access to traffic data too, which can make a big difference in commuting.

But these are all nits. GPS navigations systems are one of those technologies that once you find a product you like, you'll ask yourself how you ever lived without it. I always recommend them as the ideal Christmas present for men, because, to paraphrase the cliché from the old movie "Love Story,"

"GPS means never having to stop and ask for directions."

And for guys, you can't put a price tag on that.

One final useless trivia fact: GPS navigation systems are the only consumer technology I know of that includes corrections for both general and special relativistic effects.

Full disclosure: the author is long Garmin, a GPS navigation manufacturer, at the time of writing.

Technorati Tags: Global Positioning System, GPS, New York Times, Relativity

Long Tail products create demand for social networks

2007-12-04T07:43:00.001-05:00

Bokardo.com has an interesting article today titled, "Did the Long Tail Beget Social Design?", arguing that digitally delivered products without the constraints of shelf space create a paradox of choice for consumers

When content is digital, a public good, it is freely distributable by electronic means. It is infinitely copyable at 100% fidelity. Moreover, as the Long Tail shows, libraries of content can be built cheaply which provide value for the long term. Once Google digitizes all the books in the world they won’t ever have to again.

In other words, all content is available at all times.

What does this lead to? The Paradox of Choice! There are simply too many things to choose from. Which of the thousands of movies on Netflix do I rent? Which of the books on Amazon do I read? Which of the songs on iTunes do I listen to?

Ironically, the article posits that the answer to the plethora of digital products is people.

Social design is thus forced upon the marketplace. The Long Tail begets social design. The only way for people to find out what’s best for them is to route around the system in the way they’ve always done.

Ask other people. Have conversations. Give and get recommendations. Tell someone what your preferences are, and they’ll give you their best guess.

And that’s what Netflix and Amazon and iTunes have done. They were forced to, in a sense, for they had no other way to give recommendations to their customers. The old constraint of shelf space is gone.

I've argued similarly here in the past, so it's always nice to hear someone else come to a similar conclusion. I pose one final question though: what will we do when we are overwhelmed with social networks ranging from Facebook, MySpace, LinkedIn, NetFlix, Amazon, and countless others? Who will guide our choices then, when we must choose among the wisdom of multiple crowds and communities?

Technorati Tags: Paradox of Choice, Bokardo.com, Social networking, Tyranny of too much, Wisdom of crowds

A not so merry Christmas for Madison Avenue

2007-12-04T07:32:00.001-05:00

All year, we here at Blackfriars have been bemoaning deep cuts in marketing spending. But advertising, the most conservative and cut-resistant type of marketing spending, has been pretty resilient. But now, bellweather advertising sizer Robert J Cohen has cut his growth forecast for ad spending for 2007 to an anemic 0.7%, according to the New York Times. That's down significantly from his forecast last December of 4.8% growth, and his June forecast for 3.1% growth. And these numbers include one category that's been growing dramatically: Internet advertising. The result: spending on all other types of advertising and marketing is suffering, particularly since our survey of senior executives says that marketing budgets are down sharply this year.

And 2008? Don't even ask.

He [Coen] is also crunching his forecast for next year. Last June, Mr. Coen predicted American ad spending in 2008 would be 5 percent higher than in 2007. Yesterday, he revised his estimate downward to an increase of 3.7 percent, to $294.4 billion, which would represent an anemic 2.04 percent of the gross domestic product expected for next year.

Again, the standout medium for ad growth will be the Internet, Mr. Coen predicted, up 16.5 percent from 2007. In contrast, national newspapers will fall 1 percent, he estimated, and local radio will be flat with this year.

“We don’t see a great deal of improvement immediately ahead,” Mr. Coen said, which “doesn’t make me very optimistic about 2008.”

Technorati Tags: Advertising, Marketing, Marketing 2007, Marketing spending

How everyday tasks sell iPhones

2007-12-03T10:53:00.000-05:00

I'm often using my iPhone to do routine things, like checking the weather, stock prices, and Internet sites. In fact, just yesterday, I was in the supermarket with my shopping list on my iPhone and saw Eye of Round beef on sale. So I googled, "Cook eye round roast beef", found a recipe titled "Burgundy Eye of Round" on Cooks.com, bought the other ingredients, and got a great Sunday dinner with leftovers for about $10, all in about 5 minutes. It was so easy -- and something I wouldn't have bothered with on my Nokia E61i, just because that machine was so hard to make work properly on the Internet.

Well, the simplicity of doing everyday tasks on my iPhone hasn't been lost on observers either. I now have run into two people at my church who have decided to get iPhones after seeing how easy it is for me to use mine for seemingly ordinary tasks. Both people already own either a Palm PDA or a Blackberry, but don't use most of the functions because they are just too hard to master. They see me do a quick weather lookup or Google search with a couple touches, and you can see the light bulb go on over their heads saying, "That's so easy; I'd love it if my phone were that easy."

I'll be interested to see how this plays out in a larger community of people. But if my experience is any indicator, we may see the 1.5 million iPhones sold to date exhibit a powerful multiplier effect on future iPhone sales.

Full disclosure: the author is long Apple at the time of writing.

Technorati Tags: Apple, iPhone, Mobile phones

China Mobile playing off rumors and Blackberry deals to negotiate better iPhone terms

2007-11-30T11:00:00.000-05:00

Rumors about the Chinese mobile phone market are flying fast and furiously today. First was the claim by Chinese newspaper Nanfang Daily that according to unnamed sources, talks to allow China Mobile to carry the Apple iPhone have broken down because of China Mobile's unwillingness to share mobile revenue and Apple's unwillingness to remove WiFi from the iPhone. Then rumors surfaced that Chinese distributor Dixintong would distribute the iPhone, a rumor that Apple denied since it was only talking with operators. And then we hear that according to China Mobile's customer service department, Research in Motion's CEO will announce pricing and launch dates for the Blackberry in China on December 11 and 12. Meanwhile, Apple is claimed to be setting up its own Apple Retail Stores in China for phone distribution.

So what's really going on? My guess is that China Mobile is using the press to try to win concessions from Apple. It knows that Apple is talking to all the Chinese carriers. So it spreads rumors that the talks have broken down and seeds another rumor that it is bringing in Blackberries for its customers instead.

China Mobile should talk to Verizon and Vodaphone to see how well their hardball negotiations for the iPhone worked out for them. By this time, Steve Jobs has competitor China Unicom on his iPhone "Favorites" dialing list too.

Full disclosure: by this time, everyone in the known universe -- or at least those who read my blog -- should know I have Apple stock.

Technorati Tags: Apple, Blackberry, China Mobile, China Unicom, Dixintong, iPhone, Research In Motion

Poor marketing strategy costs Motorola CEO Ed Zander his job

2007-11-30T10:20:00.001-05:00

Forbes reports today that Motorola CEO Ed Zander is stepping down from the CEO position. Why? Well, the article posits that the primary reason is just bad marketing:

A two-year run of success Motorola enjoyed following the launch of its Razr phone began crumbling last year after sales slowed and the company admitted it had been trading profit margins for global market share by aggressively undercutting pricing.

Anyone can buy market share by giving up profits. Good marketing increases profits; great marketing increases profits and market share. And while Zander stepping down will provide the illusion that the company is changing, its fortunes won't change until its marketing improves.

Full disclosure: the author has no position in Motorola, but does own shares in Apple, Inc, which competes in mobile phones with Motorola.

Technorati Tags: Marketing, Motorola, Ed Zander

Google's second shot across the bow of mobile phone operators

2007-11-30T10:14:00.000-05:00

The first shot in the open mobile phone wars was the announcement of Google's open source Android platform for mobile phone handsets. Now, the Wall Street Journal reports that Google intends to commit to bidding in the January US wireless spectrum auction. Hmmm. Sounds to me like Verizon's pledge to open its network wasn't exactly heard as a declaration of independence in the Googleplex. Good for Google; having two companies competing to deliver an open platform promise to consumers will only keep operators honest.

Full disclosure: the author owns Google stock.

Technorati Tags: Android, Google, Mobile phone, Verizon

Can video game perception evolve from gory to great?

2007-11-29T16:44:00.000-05:00

I often think that video gaming doesn't get enough respect. But perhaps that's changing. Today's Wall Street Journal podcast had an excellent 15 minute segment on hot video games for the holidays (link via iTunes). And my avid video gamer son David and I have been watching and enjoying the Discovery Channel's excellent documentary series titled, Rise of the Video Game.

Personally, I'm not a big gamer, although in my youth, I used to stay up all night playing SpaceWar on MIT's PDP-1 (yes, there really was a PDP-1 although you have to go to a computer museum nowadays to see one). Since that time, I've enjoyed a variety of computer-based games ranging from Lara Croft to Neverwinter Nights. Today, I have to admit spending most of my gaming time with specialist products like the excellent X-Plane flight simulator and LittleWing's solid state pinball games [side comment: I highly recommend Littlewing's Golden Logres pinball game, which is a Japanese reinterpretation of the Arthurian legend. It is a great pinball game and also provides a fascinating look into how legends translate in strange and interesting ways between cultures. But that is beside the point.]. But given that annual US video gaming revenues now eclipse the annual US movie box office revenues, I think it is time the business world thought more about video gaming as a growing and important communications medium. With video games now on the verge of making us laugh and cry with their emotional impact, we should expect them to occupy a similarly prominent place in our social fabric.

I think one of the reasons that many people dismiss video games today is that they only really hear about one type of video game: first person shooters like Doom and Unreal Tournament. Imagine where the movie industry be today if the most commercially successful movie ever were slasher-flick Halloween instead of Gone With the Wind. Yet in the video game world, both the press and many adults accept the commercial success of Microsoft's first-person shooters Halo, Halo 2, and Halo 3 as evidence that video games will never amount to anything good. The Halo series are excellent games, but they appeal to a narrow taste -- specifically, those who like shooting.

And that's why it's refreshing to see Nintendo's Wii video game console doing so well in the market. Nintendo's consoles and strict game certification standards emphasize games that cover a wider emotional gamut than "target and kill." And its motion-sensing technology has forced Wii players to develop muscles in more places than their thumbs. The Wii has done so well at expanding the gaming genre and interest, in fact, that it is now in demand at retirement communities as well as in more traditional gaming homes. And it is this broad success of the Wii coupled with Nintendo's DS hand held consoles that have pushed Nintendo to become the second most valuable company in Japan today.

The Rise of the Video Game series asks the question, when will video games make us cry instead of just appealing to our demand for action? That time will soon be here. But the developers who reach this milestone won't likely be those that are working on Doom 9, any more than the producers of Die Hard 5 are likely to break into the top 100 films of all time. They'll be developers in the mold of Shigeru Miyamoto, who spent his entire career studying art and storytelling before he developed the Mario games for Nintendo. And they'll probably be doing it for the Wii.

One final note: for more from an avid vintage gamer's perspective (he owns most consoles prior to the Nintendo Gamecube, including a Sega Dreamcast), check out David's blog at VideoGameNinja.blogspot.com. Feel free to leave him a comment suggesting a topic you'd like to hear from him about; he'd love ideas for future postings.

Technorati Tags: Gaming, Halo, Little Wing, Nintendo, Rise Of The Video Game, Video games, Wall Street Journal, Wii

Vanu could put the open in Verizon's open network.

2007-11-29T08:35:00.000-05:00

In today's Boston Globe, Carolyn Johnson makes a compelling case that Verizon's decision to adopt an open network strategy may be just what Boston-based software radio company Vanu needs to gain acceptance by a major US carrier.

Over the past decade, Vanu has developed what seems like a fairly esoteric technology - software that can control how a radio transmits and receives signals. That means a single base station at the bottom of a cell tower could be tuned for everything from an AT&T iPhone to a Verizon Wireless cellphone, instead of requiring separate racks of hardware.

With the traditional cellphone model in the United States beginning to crumble, the moment may be emerging for Vanu's technology.

I was pleased to see such a thoughtful technology piece in the Globe, whose technology coverage tends to play second fiddle to many authors at its parent company, The New York Times. And it's a nice tribute to Vanu and Vanu Bose, whom I have mentioned before as being as visionary and a person to watch. Plus, Vanu would fit nicely in with Verizon's V-initialed branding.

Meanwhile, there's commentary on Techcrunch that suggests that Verizon may not give all handsets and software access to its traditional subscribers who buy only Verizon-approved devices. Somehow that rings true to me -- the Verizon announcement and subsequent commentary sounded way too good to believe.

Technorati Tags: Vanu Bose, Vanu.com, Verizon

Ten reasons for Apple's booming holiday sales season

2007-11-28T10:28:00.000-05:00

Leander Kahney of Wired has a compelling list of reasons he believes Apple is going to have record-breaking holiday sales. I would add just one more bullet to round out Wired's list of reasons for Apple holiday joy to 10: the iPhone's first Christmas. My projection is that Apple will sell about three million iPhones during the holiday season. And while the iPhone revenue spread over 24 months may pale next to the revenue blowout driven by 30 million iPods, those iPhone sales will be raking in a millions in deferred revenue in subsequent quarters. Think of the iPhone as the gift that keeps on giving all year long -- at least to Apple shareholders.

Full disclosure: the author owns Apple stock.

Technorati Tags: Apple, iPhone, Leander Kahney, Wired

Unlocked iPhones to sold in France for €749

2007-11-28T09:05:00.000-05:00

According to MarketWatch.com, customers will be able to buy iPhones from France's Orange beginning at 1830 Paris time. Most interesting, though, is the fact that carrier-agnostic buyers will be able to buy an iPhone without an Orange plan for €649, and then can pay €100 to unlock it, resulting in a completely fetter-free iPhone for €749. Now, those of you armed with currency converters will note that this is still a hefty US$1,149, but it's a significant discount from the €999 or US$1,480 being charged in Germany for an unlocked iPhone.

Technorati Tags: Apple, France, iPhone, Orange

How Apple achieves that Zen Apple Store look

2007-11-28T08:28:00.000-05:00

Apple Stores look so spare and clean that we mortals struggle to visualize the conceptual work needed to build and run them. Well, struggle no longer, because ifoAppleStore.com has found a collection of Apple Store Planograms, which visually show the incredible amount of logistical detail Apple needs to make those 200 Apple Stores the most efficient retail engines in the world, pulling in more than $4,000 in annual revenue per square foot.

Lest you are not already bowled over by those planograms, consider this: Apple just underwent a complete redesign of its stores to eliminate the cash registers, preferring instead to empower employees with wireless Point Of Sale (POS) systems. Said another way, instead of having Apple store sales bottleneck on a few checkout employees, every Apple employee now is a checkout person.

Apple has already announced that it expects to have its best holiday selling season ever in 2007. After looking at the planograms and planning associated with the Apple Stores, we suspect that that announcement is less of a projection than a sure thing.

Full disclosure: The author owns Apple stock.

Technorati Tags: Apple, Apple Store, Point of Sale, ifoAppleStore.com, Retail

iPhone competition gets crazy in France

2007-11-27T15:07:00.000-05:00

According to Dow Jones, French site phoneandphone.com has been selling iPhones since Monday in France, stealing French telecom provider Orange's exclusive launch scheduled for Thursday. To add insult to injury, they're selling their black market iPhones for €299 instead of the standard €399. There's no indication of the source of phoneandphone.com's iPhones in the article, but you can bet they aren't a certified Apple supplier.

Of more interest to Apple watchers world-wide, though, is the fact that Orange expects to sell 100,000 iPhones before the end of 2007. Given reports of slow sales in the UK, that sounds optimistic, but then again, the French are perhaps the ideal customers for the iPhone's elegant design. My bet: they'll sell those easily in Paris.

Technorati Tags: Apple, France, iPhone, Orange, phoneandphone.com

The mark of the beast = Google?

2007-11-27T14:31:00.000-05:00

I don't know how I missed this sign of the apocalypse yesterday, but fortunately, Fake Steve Jobs was on the case. And I always thought it would be Steve Ballmer. And given that .00 stock price implies a bit of manipulation, who says that stock traders don't have a sense of humor?

Clever marketing: Debitel launches €600 rebate for unlocked iPhone purchasers

2007-11-27T10:55:00.000-05:00

T-Mobile competitor Debitel came up with a clever way to offer iPhones on its network. Simply offer a 600 euro sign-up bonus to customers and have them buy an unlocked iPhone from T-Mobile. Customers end up paying the same net €399 price for the iPhone and get to use it on Debitel's network.

It's too bad unlocked iPhones aren't available in the US; otherwise, T-Mobile could use the same tactic to steal iPhone customers away from AT&T.

Technorati Tags: Apple, iPhone, Debitel, T-Mobile

Verizon cracks open the locked gates of the US mobile phone business

2007-11-27T10:26:00.000-05:00

I've claimed previously that Apple's iPhone and Google's Android phone software were going to transform the mobile phone industry here in the US. Well, today, we got some clear evidence of that effect: Verizon Wireless, the number two wireless vendor in the US, has announced that it will open its network to phones and software not sold by Verizon by the end of 2008.

Now, in any European country, this announcement would be greeted by a yawn. But here, this is big news. Carriers here have traditionally been the gatekeepers for both handsets and software on the US networks, claiming that they required such control to guarantee the quality of service on those networks. Those claims have just been, to borrow a phrase, "rendered inoperative." Verizon saw that with Google bidding on the 700 MHz spectrum next year and offering open source software to power a wide variety of handsets, it was fighting the tide to open networks. And you know what they say: if you can't beat 'em, join 'em. Kudos to Verizon for going with the flow; unfortunately, we'll have to wait until 2009 to see if its actions match its press releases.

Oh, one more thing: Don't expect Apple's iPhone to end up on Verizon's network in 2009. Apple's exclusive carrier deal with AT&T for the iPhone doesn't expire until summer of 2012. But at the same time, that deal doesn't prevent Apple from introducing a Verizon EVDO-powered tablet, either.

Full disclosure: The author owns both Apple and Google stock.

Technorati Tags: Android, Apple, Google, iPhone, Mobile phones, Verizon

The November Stock Market: Correction or Prediction?

2007-11-27T09:55:00.000-05:00

Today, the Wall Street Journal is officially calling the recent stock market downturn a correction. If the market loses another 10%, it will officially be a bear market. The story blames the credit crunch, Abu Dhabi's bailout of Citibank, and SIV writedowns as the major causes, but I'd guess they'd add pestilence, famine, and a plague of locusts if they could garner enough fear, uncertainty, and doubt to convince the Fed to cut interest rates again.

Personally, I think this hand-wringing is overdone. Why? Because many years have a sell-off of stocks about this time. Mutual funds are readjusting their portfolios for end of the year reporting and distributions, investors are selling losing positions to offset profits before the end of the year, and consumers are trying to make sure they have enough money to cover their Christmas shopping lists. November is a great time for portfolio adjustments.

But there's another factor at work here: politics. Markets hate uncertainty of any type, and next year is a Presidential election year. If we look at the history of the Standard and Poor's 500 stock index, commonly known as the S&P 500, for Novembers before election years, an interesting pattern pops out:

Date	S&P 500 month open	S&P 500 month close	Percent change	Party elected president
11/1983	163.55	166.40	1.74%	Same President Republican
11/1987	251.75	230.30	-8.51%	Same party, different Republican President
11/1991	392.46	375.22	-4.39%	Change in president and party to Democrat
11/1995	581.50	605.37	4.10%	Same President Democrat
11/1999	1362.93	1388.91	1.91%	Split decision
11/2003	1050.71	1058.20	0.71%	Same President Republican
11/2007	1545.79	1407.22	-8.96%	Change in president and party?

When the political winds forecast a change in political party and president, the stock market tends to sell off in the prior November. When a president is likely to be re-elected, the stock market tends to rise in the November preceding the election.

Now astute readers will notice a couple exceptions here, which involve both Bush administrations. Prior to the election of George Herbert Walker Bush in 1988, the stock market sold off in November 1987 by 8.5%. I would argue that this was a symptom of the stock market not liking the uncertainty involved in the replacement of two-term incumbent President, Ronald Reagan. While George H. W. Bush was of the same party, the market still considered him to be a risky choice, and therefore, the market sold off.

So what about 1999? In that case, I would argue that the market was forecasting the election of a same party Democratic president, and therefore did not sell off. And in fact, Democrat Al Gore won the popular vote -- only the Electoral College system and decisions by the US Supreme Court put George W. Bush in the White House. Clearly the November stock market effect couldn't predict that outcome, so I've marked that prediction a split decision.

That leaves us with November 2007. The market has sold off 9% this month, and the Wall Street Journal may be accurate in claiming that the market is undergoing a correction. But given the last 25 years of stock market history, I would argue that this isn't a correction; it's a prediction. And it's one that indicates we're going to see a Democrat in the White House next year -- we just don't know which Democrat it will be.

Technorati Tags: Correction, Politics, Predictions, S&P 500, Stock market

More Kindle critiques from a product designer

2007-11-26T08:57:00.000-05:00

My critique of the Amazon Kindle book reader was largely from the first principles of the clear communication and singular purpose required to market consumer products. Now, Canadian product designer Thibaut Sailly -- yes a real one, not one who imagines he might be able to play one on TV -- has taken a hard look at the Kindle design from a detailed product and usability perspective. She arrives at similar conclusions, but does so with more rigor and detail. Her hot/cold spots on the physical design feel right to me. Most intriguing to me is her insight that the book reader should have a cover to properly communicate its bookishness.

Thanks to Daring Fireball for the find.

For those wishing a broader insights with one the gurus of usability, check out this interview with human-computer interaction expert and former Apple maven Don Norman. My big takeaway from this interview is that technology products need more natural interaction cues instead of artificial ones. All his critiques seem like common sense until you look at today's technology products and realize that his sense is anything but common. I highly recommend his books, such as The Design of Everyday Things and Emotional Design: Why We Love (or Hate) Everyday Things as well.

Technorati Tags: Amazon, Bookishness, Kindle, Donald Norman

How iTunes unlocks German (and presumably French) phones

2007-11-26T08:38:00.000-05:00

MacRumors has a nice note translated from the MacNotes.de (German) site detailing how Apple has complied with the court order to sell unlocked iPhones in Germany. The process is so simple, one suspects it has been designed in all along.

The unlocking process is as follows: You simply buy a regular iPhone ("locked") and pay the additional premium (999 euro total). Your iPhone's IMEI number is recorded and sent to Apple. After 24 hours or so, Apple's database is updated. At this stage, once you connect your iPhone to iTunes, the iPhone is automatically unlocked in a process that is described as taking only "seconds". You can then proceed to sync your now-unlocked iPhone with iTunes. The firmware remains at version 1.1.2 after the unlock. The process raises a number of questions and also opens the possibility of unauthorized unlocking solutions to become readily available.

The clearly awkward and probably not finished part is the need for T-Mobile to record and transmit the phone IMEI (that's the phone's unique electronic serial number used on the phone network) to Apple. Given Apple's obsession in making the whole iPhone activation a seamless and near-instantaneous experience here in the US, the concept that a customer has to wait 24 hours for a database update in Germany to use their unlocked iPhone must grate on the user experience designers in Cupertino. I expect to see some further back-end integration for T-Mobile and Orange to speed this process up in the future should the court order stand.

Technorati Tags: Apple, iPhone, Orange, T-Mobile, Unlocked mobile phones, Unlocked phones, User experience

More Amazon Kindle: is it worth two OLPCs?

2007-11-24T18:34:00.000-05:00

RC Howe, aka my older son, has done a very nice table comparison of the $399 Amazon Kindle book reader and the less than $200, One Laptop Per Child (OLPC) computer. And the simple act of comparing the two raises an interesting question: Is a smaller form factor and more restricted functionality worth twice the price?

Oh, and if you really want to pay $399, why not take advantage of OLPC's Give One, Get One program? No matter what you may think of the technology behind the product, it's a nice piece of philanthropic marketing.

Technorati Tags: Amazon, OLPC, Kindle

iPhones still dominating the Wall Street Journal gift list

2007-11-22T10:20:00.000-05:00

When I last checked in on the Wall Street Journal gift poll, there were about 250 votes in, and iPhones were the #1 gift vote, with 52% of respondents. Well, now there are more than 123,000 votes in and guess what? The iPhone still is garnering 63,445 or 51% of the votes. [Ed note: clicking on the above link will take you to the current poll results. I captured an image of the current results because the results could yet change.]

The surprises are farther down the list though. Whereas yesterday, the #2 gift as a Blackberry, Blackberries are now next to last at 2%. The second most popular item now is a DS Lite gaming system, followed by a tie between GPS navigators (there's that category again) and digital point and shoot cameras. And the Zunes? They are now dead last in the poll.

Technorati Tags: Apple, Blackberry, GPS, iPhone, Wall Street Journal, Zune

2007 Boston Globe Black Friday ad circulars fall from 2006

2007-11-22T10:11:00.000-05:00

According to my count this year, we received 512 page-sized Black Friday ad circulars in today's Boston Globe (West edition), promoting the numerous sales being held on the day after Thanksgiving. That's down 19% from last year's 636 pages, but up 24% from 2005's 412.

Just for clarity, my count is of one-sided pages of approximately 8.5 x 11 size. So if someone prints a double-sided portrait layout that's 17 inches tall by 11 inches wide, that counts as four pages -- that is, two 8.5 x 11 pages on each side times two sides.

Department stores made up the bulk of these ads, with 250 pages, down from 322 last year. Electronics, on the other hand, went up to 132 from last year's 116. Hardware stores were again third with 42 pages, but sporting goods came in a surprising fourth with 36.

The big product that appeared in nearly every ad departmental ad circular? GPS navigation systems. They were everywhere. As in prior years, flat screen TVs, cell phones, and music players were also prominently featured. Video game systems were also noticeable.

My conclusion: advertising spending is down this year, as our January forecast indicated. Will holiday sales be down as well? We'll know in about six weeks or so, but I predict they will be flat to down as well.

Technorati Tags: Advertising, Black Friday

Where do unlocked iPhones end up? China

2007-11-21T09:55:00.000-05:00

I've done a lot of interviews about gray market entrepreneurs who would walk into the 5th Avenue with piles of cash and buy 5 iPhones each. I have always assumed these phones would be unlocked and then exported for resale in other countries where no legitimate iPhone channels exist. After all, there are 193 countries with representatives in the UN, and only three of those have legitimate ways to buy iPhones today; I presumed that these iPhone buyers simply saw an opportunity to supply the other 190 countries.

But Wired News today has what I think is a pretty good clue about we can assume many of the gray market phones have actually ended up. The article is titled China's New 'Love Craze' — Black Market iPhones, and it has this telling paragraph:

The iPhone is readily available in computer superstores in most large Chinese cities. In Beijing's Zhong Guancun, a 15-story mall filled with technology vendors, almost all the stalls are stocked. Two weeks ago, the blogger of Too Many Resources for the iPhone asked several of these vendors whether they could sell him 100 iPhones. They all answered "No problem."

With more than a billion consumers, China has the potential to consume Apple's entire iPhone production output for several years, especially if Apple provided a built-in SMS program that supported Chinese. I have to assume that such a product and plan is on Apple's radar for 2008. But with no Chinese carrier signed to date, no official supply of iPhones, and no Chinese texting software, Chinese entrepreneurs have come up with their own answer for Chinese consumers looking for iPhones: No problem. And I have to believe that's because they have a pretty reliable source of iPhones through Mom and Pop US exporters.

Technorati Tags: Apple, China, iPhone, Gray market, Wired

Apple makes clever -- perhaps too clever -- use of Web media for its PC-Mac ads

2007-11-21T09:05:00.000-05:00

I am chastened to admit that I didn't get this Mac-PC ad the first time I saw it because I didn't visually link the animation in the Web leaderboard ad with the Mac-PC commercial running in the sidebar. Now that MacRumors has explained it, I do. But because I wasn't expecting the two animations were linked, I was blind to the ad's effect the first time through. I wonder how many other people didn't get it as well.

I wonder, though, if Apple had to get some special arrangement with the ad syndication folks though, since those two page positions -- leaderboard banner and sidebar -- are usually sold as separate ad units. I'm not sure how you would build such an ad, either; while I've done animated ads in JavaScript, I've never had to have two ads in different positions pass information to one another. Anyone know how it was done?

Regardless, I'd love to see some ad retention studies done on this ad versus the more traditional sidebar videos without the leaderboard link. My guess is that short-term awareness might be lower with this ad, but long-term retention and awareness might be higher because of its unique methodology. I suspect that Apple already knows the answer, since they usually gather testing data for their ads. Does anyone else know?

Technorati Tags: Advertising, Apple, Mac-PC, MacRumors

T-Mobile debuts legal unlocked iPhones without contracts for €999

2007-11-21T08:42:00.000-05:00

Well, that German court injunction we noted yesterday appears to have had its effect. T-Mobile is now selling iPhones without a contract for €999 or about $1,478. But wait, there's even better news:

It will also allow those customers who bought an iPhone since Nov. 19 to unlock the device free of charge so it can be used with other SIM cards. However, that will not enable customers to make use of all the functions that the music-playing and Web-browsing device offers.

I get the last part; T-Mobile can't guarantee that the carrier for every SIM card has EDGE service, so it can't guarantee Web browsing. But music-playing? That seems a bizarre restriction, so bizarre, in fact, that I suspect it is a misprint or misquote. Music playing on the iPhone doesn't require any type of phone network access, so why would a different SIM card disable it? Hmmm. I wonder if iTunes will only recognize iPhones with approved carrier SIM cards in them..... That might explain the problem.

But the big news here is that for the first time since the iPhone launched, you'll be able to purchase an iPhone in Germany and legally unlock it from its carrier. We'll likely see a similar deal arrive next week in France because of French laws requiring carriers to sell unlocked versions of phones that are locked to carriers. Note that this doesn't mean you can modify the software on it -- that's a whole different thing. But it does mean you can move it from carrier to carrier and avoid roaming charges if you sign up with a local carrier.

All I can say is that I think it ironic that consumers can only buy locked phones in the "free market" US, while consumers can buy carrier-free phones in regulation-laden Europe.

Technorati Tags: Apple, iPhone, Unlocked phones

iPhones leading Wall Street Journal's gift list

2007-11-20T17:45:00.000-05:00

After noting that flat panel TV sellers are trying to convince consumers to upgrade their TVs this holiday season, The Wall Street Journal started a poll of what's on consumer gift lists. The poll allows readers to choose one of the following:

Flat panel TV

iPhone

Compact camera

SLR camera

Blackberry

Zune

DS Lite

GPS navigator

Surprisingly, especially given that this was all started by an article on flat panel TVs, iPhones are currently taking the #1 spot with 52% of votes, with Blackberries ranking a distant second spot with 19% of votes. And even more surprising, Zunes are tied for third with GPS navigators, each with 8% of the vote so far.

It will be interesting to see if that proportion changes overnight, but at present, iPhone interest for the holidays seems to be much higher than I would have expected.

Technorati Tags: Apple, Flat Panels, iPhone

The Kindle book reader: What were Amazon's marketers thinking?

2007-11-20T11:41:00.000-05:00

Technology marketers, repeat after me: Ugly products, awkward user experiences, and restricted content don't sell consumer electronics gadgets.

One more time; I'm not sure it got through the first time.

Now that we're all on the same page, can someone explain to me how Amazon’s Kindle Reader ever got released to the market when it has all three of the characteristics above that kill consumer gadgets?

That was the mantra that was running through my head as I sat through Amazon's Kindle video. Strangely, the video spent maybe 20 seconds on the concept of reading a book electronically, and then proceeded to dive into all the wonderful features built into the device, like shopping at the Kindle store, pulling data over the cellular network, and looking up words in the dictionary. When a video advertising a e-book reader skips over the device's primary benefit, it's not a mark of marketing prowess.

But the Kindle is even worse than its marketing video because its:

Hardware design screams "Blackberry" instead of book. Books are about visually presenting long-form text and pictures. But the Kindle can only display about a paragraph of text at a time on its relatively small screen compared to other products in this category such as the Sony Reader. If this is a machine designed for reading, why is so much device real-estate dedicated to a keyboard, which is not used for ordinary reading? And the person who added a thumbwheel as a pointing device for Web pages needs to get off their Blackberry and into the real world -- even RIM figured out that they needed horizontal scrolling with the Blackberry Pearl. The strange choices made in the hardware design suggest that it was designed to be a wireless Amazon shopping device that happens to read books rather than the other way around.

Unclear purpose hobbles its software. Since book reading software doesn't put a heavy strain on most software engineers (let's see -- we need forward page, previous page, table of contents....), you'd think Amazon would focus Kindle's software on providing access to the widest possible array of book content. But instead, Kindle software focuses on providing access only to a limited number of Amazon-blessed formats. Ironically, the Kindle won't even read many eBooks that Amazon already sells online because they are in PDF format, which the Kindle doesn't recognize. And PDF eBooks that other Web sites sell will clearly be non-starters for this device. And worse, Amazon burdened the software with a lot of irrelevant functions such as Web browsing and email fetching that add cost and complexity while diluting the device's market position.

Content restrictions pose future problems. Amazon has wrapped its content in digital rights management software that prohibits normal "first-sale" book usage like loaning, resale, and viewing on other devices. And what will happen when Sprint decides to upgrade the Whispernet (really garden-variety cellular EVDO) to a higher-performing network, just as AT&T did with its old TDMA network? Because there's no computer involved, Kindle owners will then be reduced to moving around Amazon-proprietary files via SD memory cards -- assuming they can still get these Amazon-proprietary books from from anyone -- or relegating their $400 device to paper-weight status.

Price doesn't add up. The Kindle reader costs about the same as 20 hard-cover books from Amazon -- more than a year's worth of reading for most US adults -- but comes without any bundled content. And Amazon has snuck in some clever little fees into its service. Examples include a $0.99 to $1.99 monthly subscription fee for blogs, a $0.10 per attachment format conversion fee for emailed documents, and $9.99 to $14.99 monthly subscription fees for newspapers. The result: suddenly a low-cost hobby of reading books and magazines costs as much as an iPhone with an unlimited data subscription -- yet without the ability to make calls, get email, or play movies.

Amazon's Kindle is a great example of technology being pushed at consumers without a clear idea of its market or value. In some other market -- perhaps in enterprise software -- an ugly product with an awkward user interface and restricted content might succeed. But with the broad and unforgiving consumer market, it doesn't have a chance. The only surprise here is that Amazon thinks that it does.

Full disclosure: the author has no position in Amazon, but does have a long position in Apple Inc. at the time of writing. This blog also is an Amazon Associate, so we do receive a small commission on any purchases you might make through following Amazon links on this page.

Technorati Tags: Amazon, Apple, eBooks, eReader, Kindle, Marketing, problem solving

Vodaphone wants courts to block T-Mobile iPhone sales in Germany

2007-11-19T15:24:00.000-05:00

From the "If you can't beat 'em, sue 'em" department, Vodafone has obtained a restraining order in Germany against T-Mobile's exclusive deal to sell iPhones. Vodaphone claims in their filing that they don't want to prohibit all iPhone sales, but simply wants the new sales practices including exclusive T-Mobile network use examined.

This seems a bit odd given Vodaphone's assertions that the iPhone will be good for mobile carriers in general and Vodaphone's UMTS network in particular (an interesting claim given that the iPhone doesn't use UMTS). But hey, it beats shutting down customer service to avoid defections to Vodaphone rivals who have iPhones. But we in America shouldn't assume that T-Mobile has a slam dunk defense either. Europe has fair-competition laws that are designed to allow consumers choice, and Vodaphone might be able to make that work for them. And in any case, we'll be seeing unlocked iPhones in France in two weeks because of a French law requiring carriers to offer unlocked as well as locked phones.

You have to admit, it's an interesting development.

Technorati Tags: Apple, iPhone, Vodaphone, T-Mobile

Piper Jaffray sees Apple's historical holiday boom repeating itself

2007-11-19T10:48:00.000-05:00

AppleInsider has a nice summary of Piper Jaffray's addition of Apple Inc. to its Alpha list, indicating that it expects above-average appreciation over the next 90 days. The nice bit: they published a historical chart that shows that Apple stock normally rallies about 43% in the fourth calendar quarter through MacWorld.

I really like Gene Munster's work, and our price targets are quite similar. I think that now we are past November options expiration and hedge fund redemption limits for the year, a lot of the downward pressure on Apple stock is, in my opinion, behind us. Witness the fact that despite the Dow Jones being down more than 100 points at the moment, Apple stock is actually still in positive territory (Afternoon update: not any more; oh well). Once investors see the crowds in Apple stores over the Black Friday weekend and start anticipating the usual year-end Santa Claus rally in stocks in general, I expect the stock to return to a more positive year-end trend.

One more thing: I don't think today's stock price accurately yet reflects Apple's own optimism about the holiday quarter that it projected in its earnings call. My models tend to be pretty aggressive and usually are significantly higher than what Apple projects. In Apple's earnings call, Apple CFO Peter Oppenheimer projected that the company would have revenue of $9.2 billion and earnings of $1.42 per share. Given that those numbers were within 5% of what my model said (as opposed to where they normally are, which is about 20% lower), I think it very likely they are going to do substantially better than what I thought were optimistic projections.

All that said, no one can accurately predict the short-term movement of stock prices, myself included. But when I occasionally do that anyway, it's nice to have Piper Jaffray's Gene Munster for company.

Full disclosure: The author is long Apple at the time of writing.

Technorati Tags: Apple, Financial analysis

Most Leopard wireless problems resolved

2007-11-19T09:52:00.000-05:00

I've previously noted several problems associated with my upgrade to Apple's Mac OS X 10.5 (Leopard) system. The machine that has given me the most trouble has actually been my officially-supported Titanium Powerbook; my unsupported dual 800 MHz Quicksilver PowerMac works perfectly. Why? The problem has been that my wireless networking card 1) at first wasn't even recognized as being there, and 2) once it was recognized, would show only two bars and would occasionally drop connections.

However, at this point, the only symptom remaining is that my airport display only shows two bars; all my other problems have workarounds or solutions at this point. In case others are experiencing wireless problems on Leopard, here are the solutions I've used to get to this point:

Safe boot recognized may airport card. As recommended in the Apple KBase document, I rebooted my Powerbook in safe mode by holding down the shift key after the startup bong. Then I rebooted normally, and Leopard recognized the airport card as it should.

Building a new networking location from scratch fixed my dropout problem. Rather than using my upgraded networking settings, I built an entirely new networking location from scratch, specifying all the airport networks, passwords, and TCP/IP settings from scratch. Of particular importance was setting up my Domain Name Server (DNS) addresses correctly; once I fixed those, my wireless networking seemed to work fine except for one thing: I couldn't find the Snow Airport base station at my office using Leopard's Airport Utility. But surprisingly, I found a workaround for that today, specifically....

10.4's Airport Admin Utility allows me to configure my Snow Airport. Despite the fact that the new Leopard Utility named "Airport Utility" doesn't recognize or configure my Snow dual-Ethernet Airport base station, the old Tiger version of that utility named "Airport Admin Utility" recognizes and configures it just fine. And this is despite the fact that Leopard claims that that binary won't run under Leopard. Go figure. So I just copied that utility from my backup disk to my Utilities folder, and I'm back running completely wireless again.

It's clear that Apple changed its Airport drivers with Leopard, and that those drivers aren't completely bug-free. But all that said, I've now found a way to use them reliably. And given that Leopard gives me some other nice features like Time Machine and crash-free operation on my ancient and unsupported Quicksilver PowerMac, I have to say it's been worth the hassle. Like many other Apple users, just the Quicklook feature and new Mail.app capabilities have made me a Leopard convert.

Now if I can just find a way to get Photoshop 7 to run again, I'll be golden. But first I have to find my install CDs again, which isn't as easy a job as you might think, given they are now five years old.

Technorati Tags: Airport, Airport Admin Utility, Apple, Leopard, Mac OS X, WiFi, Wireless

Exploring video game glitches

2007-11-19T09:18:00.000-05:00

I mentioned last week that my older son, Robert, had started blogging about his iPhone, programming, and Linux. Well, not to be outdone, my 11-year-old son David started blogging this week as well, except he's focusing on the vintage video games that he collects. And over the weekend, he wrote an interesting post on an aspect of video games I hadn't known about: glitches.

Many of us would call video game glitches by a more pejorative name: bugs. That's because unlike game easter eggs, they usually were never intended to be in the games, but instead snuck in because of logic or graphics flaws in the code. But with the increasing sophistication of physics engines and elaborate layout designs in games, glitches have become prevelent, subtle, and entertaining. Some gamers now focus on seeing how far they can permute gameplay through the use of glitches, and the phenomenon isn't limited to console games; glitches are often found and exploited in arcade games as well. There's a great presentation of glitching examples over at Wikipedia.

Personally, I enjoy observing and analyzing the video game industry, but I love the fact that up and coming gamers like David are interested in blogging about it even more. Any technology that gets an 11-year-old boy writing for recreation is a net plus in my book. And who knows? It might even boost his middle school English grades if he keeps it up.

Technorati Tags: Blogging, Blogs, Games, Gaming, Glitches

SiCortex's new 5832 processor computer at SC07

2007-11-19T08:37:00.000-05:00

Wired News published a photo of the SiCortext 5832-processor SC5832 that the company showed at Supercomputing 07.. We've written about SiCortex before (originally back in 2006), having worked on developing massively parallel supercomputer operating systems in the late 1980s, and having some appreciation for the beauty of big iron. And you've got to admit, the bright blue displays on this beastie will impress your lab funders much more than your average Linux supercluster. Just make sure they stand back when that powered front cover swings up to expose the interconnect.

Technorati Tags: SC07, SiCortex, Wired

Amazon taps Associates to join the Black Friday frenzy

2007-11-17T12:12:00.001-05:00

Today, I just received an email from Amazon Associates, asking us to link to their Black Friday sales page. They've also created a widget to advertise hourly deals on Black Friday, which I've added to the blog just to be able to track how effective it is. While not strictly social networking, I have to give Amazon credit for using the Associates network to market its Black Friday promotions -- I suspect it will pay off for them big-time, especially for those shoppers uninterested in braving Black Friday crowds.

Full disclosure: Blackfriars is a member of Amazon Associates and therefore receives a commission on products bought through the clicking on Amazon ads.

Technorati Tags: Amazon, Black Friday, Marketing

XBox's 360s Halo 3 surge peters out

2007-11-16T17:04:00.000-05:00

In its earnings call, Microsoft crowed about how Halo 3 had finally brought its Entertainment and devices division into profitability, driving up its outlook and stock price. Further, videos like the one shown above on YouTube suggest that Halo's popularity will influence American culture for years to come. So life in the XBox gaming world is good, right?

Unfortunately, that surge in sales is so last quarter. The Wall Street Journal reports today that while Microsoft sold 3.3 million copies of Halo 3 in the few days it was available in September, October sales were only 433,800 units, suggesting that the pent up demand for Halo may be pretty-well satisfied. The result: The Nintendo Wii went back to outselling the XBox 360 console by 519,000 to 366,000 for the month of October. My takeaway: don't expect Microsoft's Entertainment division to continue those profits going forward, since XBox 360 consoles are sold at a loss. And with at least two years until there's another Halo to boost XBox sales, Microsoft had better be looking for another franchise game if it wants to beat Nintendo.

Technorati Tags: Halo 3, Microsoft, Nintendo, Playstation 3, XBox 360

PowerPoint doesn't kill; presenters do

2007-11-16T16:48:00.000-05:00

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Communicating better doesn't have to be hard. Click through the 61 slides in Alexei Kapterev's slide presentation above, and you'll be a long way along that path. The sad part: I think I actually seen some of the bad slides he cites in real presentations.

Hat tip to Lifehacker.com for finding this gem.

Technorati Tags: Alexei Kapterev, Presentations, Lifehacker.com

Good news: Garmin realizes that bidding higher for TeleAtlas doesn't make the deal better

2007-11-16T09:59:00.000-05:00

Global positioning system maker Garmin dropped its bid for map-maker TeleAtlas today, and the stock has rocketed up to over $100 a share again. Why? Because instead of paying $3.3 billion for TeleAtlas, Garmin simply signed a six-year extension with its current mapping provider, Navteq. That deal also has a four-year extension option.

Garmin's calculus was simple: it can build a lot of market and shareholder value with $3.3 billion over 10 years that doesn't involve owning a mapping company. And by 2017, there may be other mapping alternatives -- Google comes to mind -- that make a lot more business sense. Smart.

So what's the message here? Bidding more for a takeover doesn't make it a better deal, only a more expensive one. And when the bidding gets too rich, there's always another roadmap to success.

Full disclosure: the author has a long position in Garmin at the time of writing.

Technorati Tags: Garmin, Navteq, TeleAtlas

Black Friday minus seven and counting

2007-11-16T09:42:00.000-05:00

It's just one week until the Friday after Thanksgiving (aka Black Friday, so-named because it is the day when retailers "go into the black", that is, make a profit) when US retailers go all out to capture holiday shoppers. I never really thought much about Black Friday until I started working in marketing, but like almost every other marketing activity, these sales involve a huge amount of preparation, creative work, and production in advance of the big day. And guess what -- some of the information leaks out in advance of the day.

Despite the threats of lawsuits for copyright violation, the Web site Black Friday Ads (bfads.net), manages to post many of the sales in advance of the day. One major innovation in this year's Black Friday sales is that while in the past retailers have opened at 5 am on Black Friday, some retailers like CompUSA and BJ's Wholesale Club are going to open at midnight to capture early birds and night owls alike. All I can say is that you've got to feel sorry for the people who work those stores and will have to prop open their eyelids with toothpicks as they prepare for the busiest and longest shopping day of their year. Let's hope this phenomenon is a one-time event.

All this said, rumor has it that there are going to be some pretty amazing deals on Black Friday. In past years, we've marveled at sub-$1,000 42-inch plasma displays; this year, Sears is offering a sub-$1,000 46-inch flat-panel TV, and Micro Center is offering a 42-inch Akai Plasma for $699.99. On computer gear, CompUSA is offering an Envision 22-inch LCD monitor for $149.99 after $130 in rebates, and Dell is selling a dual-core Dimension 531 with 24-inch LCD monitor for $659 with a $100 gift card to boot. And the list goes on.

As in previous years, we'll be counting the advertising pages in our local Boston Globe on Thanksgiving Day to gauge how robust the Black Friday ad budgets are. But there's an added benefit for Apple buyers: Not only will Apple be having its own Black Friday specials in Apple Stores, but rumor has it that Best Buy will be authorized to carry iPhones for sale for its Black Friday sales. That may be a long shot, but given Apple's penchant for marketing, you can bet it isn't going to be left out of the holiday rush.

Technorati Tags: Apple, bfads.net, Black Friday, iPhone, Marketing, Micro Center, Sears

The danger in undervaluing EMC

2007-11-16T08:17:00.000-05:00

Here's a puzzle: Take a long-established company that sells its products to nearly every Fortune 500 company and reaps $12 billion in revenue and more than $1 billion a year in profit. Add to that another company whose market capitalization is $33 billion. Now add about 30 other companies of varying values between $100 million and $2 billion. How much should this long-established parent company be worth?

If you said only $41 billion, you must own EMC stock, because it's one of the few cases where the market claims that the whole is worth substantially less than the sum of its parts.

This past Wednesday, I spent the day listening to a stream of EMC executives talk about how the company is innovating in its business models, processes, software, consumer products, and security. And despite the very-real risk of death by PowerPoint slides and opaque vocabulary (just what is "solutioneering", anyway? It certainly isn't in the dictionary.), the day was full of unpolished gems that make me think the company is seriously undervalued. After all, this isn't your father's EMC; EMC now:

Sells information systems, not storage. Rich Napolitano, Senior Vice President for Storage Platform Operations, said that EMC's systems-wide approach to solving customer problems was what lured him to the company from Sun Microsystems. He said, "EMC sells complete information systems just like Sun, IBM, and others; we just don't sell the servers." And in today's multi-vendor data centers, being a server vendor-neutral provider is actually an advantage.

Has focused its acquisitions on software, not storage. EMC CEO and Chairman Joe Tucci quizzed the audience on how much of the $8 billion EMC has spent on acquisitions it had spent on hardware companies. The answer: zero. Five years ago, the concept of EMC becoming a software company seemed ridiculous. Today, it looks downright prescient. After all, Tucci noted, even the hardware guys put most of their value into software nowadays. Oh, and did we mention that the margins on software are higher -- a lot higher?

Sees VMware as competitive weapon as well as a product. As the Wall Street Journal noted Thursday, EMC has no interest in selling the 86% of VMware it owns, despite the fact that VMware's market cap had eclipsed EMC's in recent months. But while VMware has assembled a tidy business selling its virtualization products, the bigger impact of EMC owning VMware will likely be several years from now, when EMC's other products will be able to migrate databases, application images, and content stores around network environments seemingly without regard for the underlying hardware. And when competitors try to replicate that flexibility with their products, they'll discover that without VMware's intellectual property, they'll be years behind.

Licenses consumer software and services. EMC demonstrated Intel's SS4200-E, an Intel-OEMed home server product, based on a skunk-works EMC effort [Note to Intel: get someone to work on your consumer product naming]. But even more impressive, EMC will license its Lifeline software stack that powers that device to other hardware OEMs who wish to offer similar products for consumers and small and medium-sized businesses. And every buyer of those home server products will see "Software by EMC" logos on them too, boosting the company's name recognition and new software emphasis. Don't want to own a home server to back up your digital life? No problem -- EMC now offers in-the-cloud backup services through its recent acquisition of the online backup service, Mozy.com.

Boasts the best security story of any enterprise vendor. In the excitement of the VMware initial public offering, the world seems to have forgotten that EMC also owns probably the leading security company in the US: RSA Data Security. While the company is best known for its SecurID authentication systems, RSA also has a huge asset base of security personnel and research intellectual property -- for example, much of the encryption technology that secures eCommerce sites -- that EMC now is building into its products. And with EMC presenters like Dennis Hoffman telling the EMC-RSA security story in self-deprecating, funny, and easily understandable ways, security will likely become as big a selling proposition for EMC as virtualization is.

So with all these plusses, why is EMC still undervalued and unappreciated by investors? Blackfriars believes that EMC's story is just too hard to understand. EMC's brand and language are stuck in its storage past, and executives like Joe Tucci are still telling EMC's story as if the only people listening are CIOs and data center managers. That's why we hear such investor-hostile slang as "information lifecycle management", "virtual provisioning", "RAID-6", and "remote RDF" in meetings like yesterday's. EMC aficionados and storage analysts know what EMC is talking about; everyone else just tunes out. It's also why the Wall Street Journal writes about VMware's ownership rather than more substantial topics; acquisitions and IPOs are a whole lot easier to present to an investor audience cogently than virtual provisioning and storage snapshots.

Another challenge EMC faces is that it has a strong brand that no longer really fits its business. EMC has spent 28 years and millions of dollars building up an IT brand that stood for high-end, gold-plated storage. But in the last five years, EMC has changed from a storage vendor to a diversified technology company appealing to everyone from enterprises to consumers, and it hasn't substantively changed its brand or what it stands for. Is it any wonder than EMC's stock price is similarly unchanged?

Other companies have faced similar challenges and overcome them. IBM rebranded itself under "eBusiness" to leave its mainframe legacy in the past. BP used "Beyond Petroleum" to convince consumers to look past its oil heritage to a greener future. Apple challenged its few but loyal customers to "Think Different". And in all those cases, companies that were considered moribund and undervalued suddenly were revitalized -- and so were their stock prices. They simply needed a clear story to rally investors behind.

One more thing: Wall Street undervaluing EMC's stock endangers the company. Unless EMC can convince Wall Street its future is greater than the sum of its parts, IBM, Cisco, or even a private equity firm like The Blackstone Group could buy out EMC to sell off its storage business and acquisitions (including VMware) and pocket billions in the process. And that would be a sad price to pay for just not telling a better story.

Full disclosure: the author has no position in EMC at the time of writing.

Technorati Tags: Berkeley Data Systems, EMC, Joe Tucci, Mozy.com, RSA Data Security, Storage, VMware

Leopard's wireless networking fix and better restart dialog

2007-11-15T16:41:00.000-05:00

I just downloaded the new 10.5.1 Leopard update, and in the process, noticed that the restart dialog now actually gives you the opportunity to select "Not Now." That's just another one of those refreshing little upgrade tweaks that make me pleased to be running Leopard.

Oh, the wireless networking bug I had now appears to be gone on my laptop. Creating a new location and populating all the DNS info from scratch appears to have fixed my prior connectivity issues. The only two problems I have left are:

1. The Airport Utility still can't see our Airport Snow Base Station, and
2. My airport signal strength is down two bars from where it was on Tiger.

Both of those issues go away if I boot into Tiger. Now, I'm going to see if 10.5.1 fixes those too.

UPDATE: Grrrr. Rebooting with the 10.5.1 update brought my networking problems back. Bummer.

Technorati Tags: Apple, Leopard, Mac OS X, Networking, WiFi

EMC Analyst Day

2007-11-14T11:11:00.001-05:00

Today, I am in Boston attending the EMC Innovation Day analyst conference. Don't expect any postings today unless EMC provides breaking news. But I will provide a teaser: what are we going to do about the explosion of information growing at 60% a year? I hope to find out.

Another blogger in the family

2007-11-13T14:04:00.001-05:00

Regular readers may remember my son Robert (aka RC Howe), who saved his money all summer to buy his own iPhone (and for which he is also paying the monthly subscription fees). Well, given that he owns both a MacBook Pro and an iPhone, it was only a matter of time before he started his own blog too. You can read Robert's observations on iPhones, Linux, Leopard, and Apple and Google stock (much to my surprise) at rcetc.blogspot.com.

Highly recommended. I've already some new bits about Leopard that I didn't know (and my son didn't tell me).

Technorati Tags: Blogging, Leopard, RC Howe

China Mobile: Love the iPhone, hate paying for it

2007-11-13T10:55:00.000-05:00

ComputerWorld has probably the most extensive article I've seen describing China Mobile's CEO's interest in offering Apple's iPhone, based upon a speech he is giving in Macao:

"Our customers like this kind of fashionable product," Wang Jianzhou, China Mobile's CEO, on the sidelines of the GSM Association's Mobile Asia Congress in Macau.

But in a speech at the conference, Wang said he doesn't like some of the new business models emerging in the mobile phone industry, including handset makers wanting to share revenue with mobile operators.

"We still think we can maintain the operator-centric model because we have the customers, the end users," Wang said.

And with 350 million subscribers, one has to expect that China Mobile's views will carry some weight. All that said, I don't expect Steve Jobs and Apple to cave either, since they didn't give in to similar objections from Verizon in the US. And after all, there's always China Unicom to talk to.

Technorati Tags: Apple, China Mobile, China Unicom, iPhone, Mobile phones, Wang Jianzhou

The battle for the right price for Apple stock

2007-11-13T10:27:00.001-05:00

I don't think anyone has managed to miss the fact that Apple stock is down about 20% in a week (if you have, Barrons has a nice summary of the overall carnage in technology stocks). I've gotten several emails asking me 1) how and why this is happening, and 2) whether I think it will go back up. I am not a financial advisor, but I'm happy to give my opinion. But let's tackle those questions in reverse order.

Will Apple go back up again? My view is almost certainly yes. Why? Because at the end of the day, I know that the stock price will eventually follow Apple earnings. And as I've noted before, Apple is using the iPhone and Apple TV to make its future earnings nicely predictable, since it is taking cash from customers now and recognizing them as earnings over 24 months. Said another way, future Apple earnings are like money in the bank -- literally.

So that's the rosy picture: at some day in the future, Apple stock will be valued at some nice hefty multiple of its earnings. I use 35 as my Price to earnings ration for Apple stock, since that equals its annual earnings growth. But assuming you accept my projection that Apple will earn something north of $5 a share in fiscal 2008 ending in September and more than $7 a share in fiscal 2009, Apple's going to be at least a stock valued at somewhere between $175 and $245 at at P/E of 35. It's easy math.

So what's going on now that's pulling Apple stock back to $155 or maybe lower?

Well, first, the whole market is down, for one thing. The Dow Jones Industrial Average is now below 13,000 for the first time since August. So's the NASDAQ. And as you can see from the graphic above, Apple isn't even the biggest loser among tech stocks on a percentage basis -- companies like Google, Cisco, Research In Motion, and VMWare have had similar or bigger drops.

Secondly, Apple stock has had huge gains year to date, and a lot of mutual funds clean up their holdings prior to paying dividends and capital distributions to their shareholders in December. Many fund managers may simply be selling Apple stock just as a normal rotation in and out of technology around the end of the year.

Third, with the credit crunch bear crushing the stock market as a whole, Apple is likely attracting momentum short sellers, who take advantage of short-term declines in stock price to make some extra dollars, particularly if a stock is considered over-valued and the market is selling off overall. Like rainy days, there's not much to be done about short sellers other than to wait them out.

Fourth, a lot of quantitative hedge fund strategies are pulling down unrelated securities as the result of subprime mortgage losses. I wrote about this phenomenon about a week ago, inspired by the Technology Review article (registration required), The Blow-Up.". So despite the fact that Apple has almost no sub-prime mortgage exposure, automated quantitative hedge fund trading systems may make it behave as if it did anyway.

And fifth and finally, as one insightful reader pointed out, both stock options and hedge fund expirations are taking place this week. Investors usually know about options expiration dates, but what are hedge fund expirations? Turns out that investors in hedge funds have to give 45 days notice before they can withdraw their money. So if any investors want to withdraw their money before the end of this year -- say, to write off losses on their taxes or just to pay bills -- they have to give notice by the end of this week. And assuming that many hedge fund investors may already have given notice because of the down market, hedge funds may be liquidating substantial positions in high-quality stocks just to pay off their investors.

The bottom line: Think of all the red ink in the market this past week as simply a before-Thanksgiving sale on stocks. Once we are past options and hedge fund expirations this week and end-of-year selling for tax purposes, stock prices at large will eventually reflect the earnings of the companies behind them. Companies with innovative products, strong earnings and earnings growth, and no exposure to the credit industry will appreciate in value. And that's true of no company I know more than Apple.

Full disclosure: Of the companies mentioned in this article, the author is long Apple, Garmin, and Google at the time of writing, but has no positions in hedge funds.

Technorati Tags: Apple, Barrons, Financial analysis, Hedge funds, Options, Markets, Technology Review, Technology stocks

Now trendy: don't read email to avoid the tyranny of too much

2007-11-13T07:57:00.000-05:00

The New York Times and a bizarre article this weekend describing the work of Timothy Ferris, who preaches the gospel of the 4-hour workweek. In his book, he encourages executives to outsource their email-reading to the Philippines and India and to do business by picking up the phone.

Now, I'm all for fighting the tyranny of too much, but the description in this article smacks of the Silicon Valley version of another Timothy Leary in the 1960s who encouraged people to, "Tune in, turn on, and drop out." And while I can understand the temptation to make your email someone else's problem that doesn't get paid as much and turn to real-time communication, all that really means is that the executive's voice mailbox is going to get full instead of her/his email box. Yeah, like that's going to help productivity. And an answering service, while good at screening calls, isn't the perfect solution either, since they still need a way to get "important" messages to you.

Yes, prioritization is a really good idea, but prioritizing by media type is just silly. And unless you're the NSA, the methods for prioritizing electronic communication media are vastly better than those for prioritizing voice. Dropping off the grid and becoming inaccessible sounds like a great idea until you are on the other side of that inaccessibility and can't get your business done. And you can bet those same people who embrace the 4-hour workweek will be the ones that scream the loudest when you refuse to take their calls.

I always say, if something sounds too good to be true, it probably isn't true. The four-hour workweek falls nicely into that category. I do have to give the Times credit for correct placement of their article, though; it was in the Fashion section, along with all the other fads.

Technorati Tags: email, Fashion, Productivity, Timothy Ferris, Tyranny of too much

The first shots in the mobile phone war between consumers and carriers

2007-11-12T10:09:00.000-05:00

I've written before that Apple's iPhone and the threat of Google's Android (or gPhone) are rewriting the rules for the mobile carrier market. Well, the New York Times now thinks so too. And perhaps the most insightful point the article makes is that this is not a technology issue, but a marketing one:

At the heart of the tension between the different camps is whether the wireless network should be open, much like the Internet is today, or remain under the watchful control of companies like AT&T and Verizon Wireless, a joint venture of Verizon Communications and Vodafone. Carriers, who paid billions of dollars to build their networks, are unwilling to open them.

For others, change can’t happen soon enough. As such the alliances and partnerships struck now are likely to shape the industry over the next five years.

“It is the battle of the overdogs,” said Tom Wheeler, a venture capitalist and former chief of the CTIA, a trade group for the wireless industry. “They are all jostling back and forth to be leaders of the next generation. The question is, how do I position myself? It is a territorial battle.”

Asking this question of carriers today is a bit like asking AOL about the Internet in 1994. Because of their multi-million subscriber lists, the carriers think they are winning the battle for their hearts and minds. But if that's the case, why do so many mobile phone customers hate their carriers?

Bottom line: the carriers have made their livings to date from owning the customer (through contracts), the handset (through vendor subsidies), the network (through licenses), and the content (through content restrictions). What customers are saying is that they own the network -- period. And that's what the wireless war will be about for the next decade.

Full disclosure: the author owns Google and Apple stock, but has no positions in mobile carriers.

Technorati Tags: Apple, Google, iPhone, Mobile phone, New York Times, Android, Telcos, Telecom

Compete's data says iPhones comprise a category all their own

2007-11-09T10:52:00.000-05:00

Elaine Warner at Compete.com has mined some intriguing data from mobile phone shoppers at AT&T. Her penultimate paragraph draws a very interesting conclusion:

The fact that consumers are not increasingly considering other AT&T handsets while considering the iPhone suggests that, whether due to marketing or other factors, the iPhone has created its own category of handset. It doesn’t fit neatly into the category of smartphone, music/media phone or camera phone, which is typically how shoppers research handsets. That hasn’t been a hindrance on demand though, as consumers continue to seek out the iPhone despite its lack of conventional categorization.

From a marketer's point of view, any product that a consumer considers unique is money in the bank, because competitors don't even get considered before purchase. Given that only 12% of iPhone shoppers even viewed another phone on AT&T's Web site (compared with 30% for ordinary AT&T shoppers), Apple has data to prove that it is driving traffic and shoppers to mobile phone operators. And if that doesn't keep them in a class of their own with consumers next year, it certainly will with those operators.

Technorati Tags: Apple, at&t, iPhone, Mobile phones

Another goose for Apple holiday sales: video rentals

2007-11-09T08:40:00.000-05:00

According to EvanSeries.org, iTunes 7.5 sports text strings that indicate it will support video rentals. Now of course, these strings may just be the result of someone including the wrong sources in the compile, but more likely, Apple has video rentals queued up for release before the holidays, but after the European iPhone launch, which T-Mobile started at midnight CET, but won't officially begin in the UK until 1802 GMT or 1:02 pm EST/10:02 am PST for we American types.

We've been predicting that Apple was going to provide digital video rentals for about five months now. It will be nice when we can move that prediction to the "Product released" column. But it will also give a nice bump to Apple TV sales over the holidays, which we had also predicted would remain low until this release.

Technorati Tags: Apple, Apple TV, iPhone, Movies, Predictions, Movie rentals, Video

Analysts starting to realize Apple has a brand new source of revenue

2007-11-08T13:47:00.000-05:00

Bloomberg posted an article yesterday noting that iPhone service fees are prompting analysts to revalue Apple's earnings. Those who have been reading my Analyzing Apple reports will already be up on this trend, but apparently some financial analysts are just now realizing that yes, wireless carriers really are selling their souls to Steve Jobs to carry the iPhone, and that those tributes are going to bolster Apple earnings over the next few years.

Now I've got to apologize to readers for my lateness in posting the July Analyzing Apple report and getting the October/November one published (they're both coming -- really!), but even if you go back and read the June Analyzing Apple report, you'll see this little bit of info at the end:

Hidden revenue justifies a higher P/E ratio. Apple announced in April that it would recognize revenue from the iPhone and Apple TV hardware sales over 24 months. This means that iPhone and Apple TV sales will largely appear on Apple’s balance sheet for the next couple years instead of in its income statement. Blackfriars believes that this hidden and guaranteed future revenue justifies raising the P/E ratio that we use to calculate target stock prices to 35 from 30. We fully expect Apple stock to reach those new targets of $131 in FY07 and $161 in FY08.

And as you can see by those low price targets, that was before Apple's highly-successful US iPhone launch, blew out its Q4 FY07 quarter, and forecast a rosier-than-expected Q1 FY08.

So are those $250 price goals ridiculous? Well, here's a pretty good clue from a Dow Jones report today titled "Consumer electronics seen taking share in holiday spending":

"We believe this Christmas season could be dominated by three major categories within the consumer electronics space: flat-panel televisions, videogames/accessories, and Apple-branded products," said Credit Suisse analysts in a recent note to clients.

They see a similar pattern unfolding as in 1998, when the popularity and affordability of the personal computer likely stripped away demand for more traditional holiday items such as apparel and accessories.
This year, it is the desirability, variety, and pricing of such items as flat-screen TVs, Apple Inc.'s latest iPod models and its iPhone, and videogaming systems that could create a consumer electronics-skewed holiday season, according to Credit Suisse.

The fact that Apple-branded products show up -- the only consumer electronics products specified by name -- in the top three most in demand consumer products suggests that Apple's holiday sales will be above what many expect. And with November iPhone launches occurring in the UK, Germany, and France, and the Euro-to-dollar exchange rate rising, Apple is developing a recurring revenue stream that no one really has historical data for, yet we believe that this revenue stream will add billions of dollar to its balance sheet each quarter.

So here's a rule of thumb I've come up with to provide a handle on Apple earnings, based upon my own models.

In very rough numbers, each million iPhones sold adds about $0.02 per share to annual earnings, $2 to Apple's target stock price, and $350 million to its balance sheet.

Looked at this way, if Apple sells ten million iPhones next year, just those iPhones will have added $0.20 to its earnings, $20 to its stock price, and almost $3.5 billion to its cash horde to pay for future earnings. And of course, the iPhone is only one -- and currently the smallest -- of Apple's four lines of business. So unless Apple stumbles somewhere along the way, those $250 price goals that analysts are quoting aren't ridiculous; they're just based on revenue streams and deferred revenue that aren't immediately obvious.

Full disclosure: Despite the nearly 10% drop so far today, the author still owns Apple stock. And for those investors agonizing over that drop, here's some encouraging news: the queue to buy iPhones in the UK tomorrow has started forming at the Regent Street store in London, 24 hours in advance of sales.

UPDATE: For a point of view that makes me look like a sour Apple pessimist, check out this commentary on the same article citing Stephen Coleman (referred to incorrectly as Stephen Capital), an analyst who is predicting Apple stock will hit $600 in 18 months.

UPDATE 2: Under the topic of more good news from Europe, I missed this earlier, but Deutsche Telekom CEO Rene Obermann was quoted today as saying that he fears that iPhone demand in Germany may actually outstrip supply there.

Technorati Tags: Analyzing Apple, Apple, Finance, Financial analysis, iPhone, Projections

Blackfriars on Your Mac Life

2007-11-08T09:17:00.001-05:00

Shawn King over at Your Mac Life invited me to chat with him last night about my article, the Mac OS X Malware Myth. Unfortunately, I had a prior commitment last night, but Shawn was nice enough to pre-record the interview earlier in the day and play it back during the show.

If you read my article, there's not a lot new, other than my ability to confuse Carthage and Troy in my description of the history of Trojan Horses. But Shawn and Lesa are engaging and fun to listen to, and for Blackfriars Marketing readers, it's your opportunity to match my voice to my words.

Technorati Tags: Your Mac Life, Mac OS X, Malware, Shawn King, Apple

First look at the European version of the iPhone

2007-11-07T13:24:00.000-05:00

Sharp-eyed reader Victor Minton notes that British gadget site T3 (one of my perennial favorites) has photos of the version 1.1.2 iPhone being released in the UK and Germany on Friday (more words and pictures from last Sunday here). The T3 photos demonstrate a few notable differences from the US iPhone:

A larger box and bronze instead of chrome metal accents (maybe). This probably is just bad white balance on the photos, but the metal trim surrounding the LCD screen appears to have a gold or bronze tint to them. T3 claims no Photoshop was involved. The bad white balance theory is supported by a photo at the end of the series where T3 shows a UK and US phone side-by-side and they look the same.

Four languages. Like the iPod touch, but unable to live up to its polyglot versatility, iPhone 1.1.2 functions and menus can appear in English, French, German, and Italian.

New keyboard layouts. German and French keyboards put characters like Y, Z, and Q in different places than they appear on American keyboards, resulting in AZERTY and QWERTZ layouts. iPhone virtual keyboards mimic their physical counterparts. Oh, and Euro symbols (and I presume Pound symbols) take the place of dollar signs too.

O2 specific menus. Not only does O2 replace AT&T Services in the settings menu, but the UK iphone appears to gain a SIM Applications menu item too.

Technorati Tags: Apple, Internationalization, iPhone, O2

The coolest Christmas toy for 2007: A full-motion flight simulator platform

2007-11-07T12:04:00.000-05:00

Every now and again, a press release arrives that makes me glad I don't block PR distribution lists. I think this one about the DreamFlyer Flight Motion Simulators that is being introduced at the Consumer Electronics Show preview next week in New York City falls into that category. For the person who has everything, you can buy them the ultimate USB peripheral: a two-axis motion platform for Microsoft Flight Simulator, X-Plane, or other flight simulator. You can even buy it with brackets for up to three LCD displays that move with the platform.

The $2,800 price tag plus $450 shipping puts knocks it off my Christmas list, but you have to admit, it's a pretty cool gadget.

Technorati Tags: CES, Consumer Electronics, Dreamflyer.com, Flight simulator, Motion platform, Dreamflyer

Computerworld judges Leopard more productive than Vista

2007-11-07T11:55:00.000-05:00

Despite Leopard's teething pains (which I'll talk about in a minute), Computerworld's in-depth analysis says that Leopard spanks Vista when it comes to getting things done. The money quote:

There's really no contest. Tiger is a better OS than Vista, and there are no long-term downsides to Leopard. Vista doesn't measure up.

....

It can be described in a lot of different ways, but it boils down to this: Even in a Windows-centric IT setting, I'm far more productive on the Mac than I was with Windows. During this year, my only tech support call to our IT department came when a routine change was made to my network log-in password, and for some reason neither the old nor the new password would work on the Mac or Windows. It took about five minutes to fix.

Despite any teething pains that accompany almost any OS upgrade, I expect those advantages to continue with Leopard -- and the gap between it and Vista to widen.

As someone who introduced a Mac into a Windows-based business in my last job (and got away with it) and now runs a business on Macs, I couldn't agree more. It's nice to see the productivity difference noted in the mainstream press.

All that said, I do want to note that Leopard appears to have introduced a rather serious wireless networking problem into the Mac world, and its getting in the way for a lot of Leopard users, myself included. Judging from the comments on the above thread, this appears to be a very tough bug to track down. My symptom is that I've lost several bars of wireless strength, and wireless networking has become unreliable. Also, I'm now unable to manage my Airport base station using Leopard, either through the wired or wireless network interfaces.

Since I have both a wired connection available and a Tiger image to boot from when I want to modify the base station, this isn't a show-stopper for me, but many other users don't have those luxuries. I'll bet there are some engineers seriously burning the midnight oil in Cupertino these days until this bug gets fixed. And rightfully so; until this gets fixed, it's a black spot on an otherwise great release.

Technorati Tags: Apple, Bugs, Computerworld, Leopard, Mac OS X, Microsoft, WiFi, Windows Vista

The incredible shrinking Microsoft

2007-11-06T09:13:00.000-05:00

The financial and investing world seems to be going gaga over Microsoft lately, having been blown away by its recent quarterly earnings report which seems to indicate the company is having record quarter after record quarter. Some analysts are predicting Microsoft's stock price could hit $50 in the not too distant future because of these amazing results. So forgive me if I ask an impolite question:

Then why does Microsoft's balance sheet keep shrinking when it is making so much money?

Now this isn't normally the case. If we look at Apple's latest 10-Q (the official SEC filing where the company reports earnings and balance sheet information), we find that its assets grew from $17 billion to $25 billion between 2006 and 2007. That should be no surprise, since the company is making lots of money from Macs, iPods, and iPhones. As the company makes money, it invests that money unless it give it back to stockholders. Those investments show up on the balance sheet. Cool.

Except when it's Microsoft. As I noted back in May, Microsoft's asset base has been shrinking over the past year, going from nearly $70 billion in June 2006 down to $66 billion at the beginning of the year and down to $64 billion as of March 31. It hit $63 billion as of the end of July. Yeah, Now that's a change of $7 billion that's gone poof from Microsoft's balance sheet. And it's not shareholder dividends -- those only account for less than $1 billion over the period.

Now in Microsoft's latest filing (the balance sheet is on page 2), it managed to push those assets back up to $65 billion, so life should be good, right? Well, not so much. The problem is a little balance sheet item called "Goodwill". That ballooned from about $5 billion to over $10 billion in the last three months. Why? Oh yeah. Because Microsoft paid nearly $6 billion for aQuantive, an advertising company with about $450 million in annual revenue. And since Microsoft paid cash for that company, the value it received over and above the tangible assets go on the balance sheet as goodwill. For aQuantive, that's about $5 billion.

But just because that value is on the balance sheet doesn't mean the asset is actually worth anything like that value. Goodwill values are typically carried for years and eventually written off because companies often overpay during acquisitions. Microsoft, despite its billions in the bank, is no exception to that rule. And if we subtract off Microsoft's overpayment from its balance sheet, the company's assets are down to about $60 billion. That means that excluding the aQuantive goodwill, Microsoft's hard assets have shunk $10 billion or 15% over 15 months. Wow. A billion here, a billion there, pretty soon you're talking about real money.

So where have those assets gone? Well, about $7 billion has gone to funding Microsoft's XBox 360 initiative, which has bought it the number two spot in next-generation video games. However, the company still loses money on each console sold and while it made money on the Halo 3 launch, there are no future Halo launches scheduled, so we expect that business unit to go back to its money-losing ways. We've already noted that the company has spent nearly $6 billion to get into the advertising business, with few signs of success there. And Microsoft's Online Services Business is continuing to lose money as well.

Some other interesting points in the Microsoft 10-Q statement: the company is under an IRS tax audit for the years 2000-2006. Some of Microsoft's declining shareholder equity is due to a $7 billion increase in reserves Microsoft has booked to account for some of its tax provisions under the new FIN 48 rules, which it must record on the balance sheet if it has less than a 50% chance of its position being upheld. The result: net shareholder equity declined from $36 billion to $32 billion between 2006 and 2007.

Now to be fair, I concede that Microsoft's Windows and Office businesses are generating billions in profit every quarter. But companies like GE, Apple, Intel, and others seem to use their billions to grow the net worth of their companies. Only Microsoft appears to use those billions to make its company smaller and worth less. And with 9.5 billion Microsoft shares outstanding, it doesn't take much dilution of value before one has to ask whether those shares are worth their current valuation, to say nothing of twice their value. After all, why pay a premium for a depreciating asset?

So the next time someone tries to sell you on Microsoft coming back as the next big growth stock, ask them this simple question: "Why should I invest in a company whose that has lost 12% in shareholder equity in a year and whose assets are declining?" I'm not sure there's a good answer.

Full disclosure: The author is not an accountant and has no positions in Microsoft, GE, or Intel. He does, however, own Apple and Google stocks, both of which some may view as Microsoft competitors.

Technorati Tags: Apple, Balance Sheet, Financial analysis, Microsoft

Google's phone targets Windows Mobile and RIMM, not Apple

2007-11-05T12:39:00.001-05:00

The initial reports about the Google announcement of its mobile phone strategy are coming in now. You can look at Google's blog for its official viewpoint. My summary is that Google announced:

An open-source mobile phone software stack. Google's not making any devices; it's just creating a standard set of open source software to run mobile phones and use Google services.

An alliance of 30 technology and carrier companies. Google got handset makers HTC, Motorola, and Samsung on board, as well as notable carriers T-Mobile and Sprint to sign up for its Open Handset Alliance

A software developer kit. Google will make the SDK available in about a week on November 12.

No hardware. Despite the many mockups and prototype pictures running around, no hardware was announced and none is expected until the second half of 2008.

So far, this announcement lines up pretty well with what I had predicted last week, although we still don't know if these OHA partners will help Google in its bid for 700 MHz spectrum. But in the meantime, we can ask the question, what does this mean for competing software companies and handset providers? Here are a couple of my top of mind thoughts:

The OHA targets Research in Motion, Symbian, Palm, and Microsoft. Google has just set the going price of a next generation mobile phone software stack to zero, which compared to the $3 to $8 handset makers normally pay per unit. If you're a handset maker like Motorola or Samsung, that promises to have you anywhere from $15 to $100 million a year if you can make it work. On the other hand, if you're RIM, Palm, or Microsoft, you now have a tough marketing job ahead to convince your licensees that you're that much better than free.

There's no iPhone killer here. Despite some who hoped that the gPhone was an iPhone-killer last week, there's no competition for Apple in this announcement before late next year. You can expect Apple to be selling two or three versions of its iPhone by then and to have about 10 million iPhones in the market around the world. And while the OHA handsets may take the world by storm, more likely they'll simply produce a lot more application software that runs on top of Linux -- which Apple can easily adapt to run on Mac OS X on the iPhone should they become popular.

I will note one thing though: Google is going to have its SDK in the market about three months before Apple will. And that's got to have a lot of mobile application developers drooling. The big question remains though: once you've written your application, what are you going to test it on?

Full disclosure: the author is long Apple at the time of writing.

Technorati Tags: Apple, Google, gPhone, HTC, iPhone, Motorola, Open Handset Alliance, Samsung

A peace offering for the journalist/PR war

2007-11-05T10:56:00.000-05:00

When Wired Managing Editor Chris Anderson threw down this digital gauntlet and added PR executives who sent him irrelevant press releases to his spam blocking list, I knew it was going to cause a ruckus. I didn't, however, expect it to end up in the New York Times Business section, which it did today.

Now I have some sympathy for Chris's position, since my mailbox is similarly full of my share of consumer electronics press releases for products I have no interest in. But I'm reluctant to join Chris's email blocking vendetta against PR people who may get carried away with their email marketing. Why? Because researching any idea or story is never a linear process. And while 90% of those press releases may be distractions, 10% of them actually have a germ of a good idea in them. And in one percent of the cases, the PR person can both provide some insight and put you in contact with people you'd never have spoken to yourself. I've worked with incredibly helpful PR people at Apple, HP, IBM, Intel and others who 1) know their business, and 2) know that their job is to help journalists and analysts write about their companies.

And what about the PR agencies? That's a tougher call, as Chris has noted, largely because they don't have the same depth of knowledge and internal company access. But just blocking specific email addresses isn't going to do the job in the long run. Perhaps a better idea is to provide those offenders with specific email addresses -- perhaps ca-press-release@wired.com -- to send their press releases to. For while a press release may not be what you're looking for 90% of the time, they are more valuable than the Viagra pharmacy ads and Nigerian email scams that make up most spam in the typical spambox. And cutting off professionals trying to do their jobs -- even if they are doing them badly -- just feels wrong.

I think that former Financial Times reporter Tom Foremski has captured some of the puzzlement I feel about this PR fracas. And even better, he proposed a solution to it back in 2006: Let today's archaic press release die a natural death. Instead, deconstruct today's press release package, add tags and other metadata to let journalists find and search for it, and publish links to that information. The investing site SeekingAlpha.com, a Web site that syndicates this blog, already does this today with financial earnings call transcripts and has done so very successfully; there's no reason another site couldn't do this for press releases. It's a very Web-centric view, but that's ideal for reaching the long tail of journalists who don't have a cadre of research assistants, but do have access to the Internet. And best of all, it might get the PR community back in Chris Anderson's graces.

What do you say, PR guys? You have nothing to lose but your Wired blacklist. Just don't send around a press release announcing it, OK?

Technorati Tags: Chris Anderson, Journalism, PR, Public Relations, The Long Tail, Wired

Music subscriptions: still dead after all these years

2007-11-03T10:54:00.001-04:00

I've been writing for years that music subscriptions are a terrible idea because they turn the process of listening to music into a tyranny of too much choice in deciding what to listen to. Well, Napster seems to be demonstrating that PC-based music subscriptions are a dying business, with subscriptions declining month after month. I suspect they will find the same is true in the mobile phone business, but they'll undoubtedly take a few more years to find that out too.

Lesson: just because you have a technology that makes a business model possible doesn't mean consumers will buy your product.

Full disclosure: the author owns stock in Apple, which competes with Napster by selling, not renting, music.

Technorati Tags: Apple, Music rental, Napster, Subscriptions