Posts filed under “Technology”

Google vs Microsoft: Now We’re Getting Serious

I’ve heard all sorts of chatter about the Google foray into spreadsheets, and none of it resonates with me. Here are 3 key aspects of this worth thinking about:

1. Strategically, Google is shooting at half of the Microsoft franchise

Microsoft, despite alot of hoopla you have heard about all its other product offerings, makes the vast lion’s share of its money via its Operating System and via Office. Nothing else it does is generates nearly the profitable cash flow as those two money printing presses do.

Think long term strategy: From a military perspective, Google is opening a second front in the war Microsoft launched against them. You want to come after our core busines? Allow us to return the favor.

Google doesn’t have to kill Office — they only have to siphon off a small percentage of purchases to hurt Mister Softee’s bottom line. Remember, once software development costs are paid for, the marginal cost of each subsequent sale is almost zero; its 99% profit. If Google captures 1% of potential office sales, that’s a lot of cash — pure profit — off of the bottom line to Redmond.

That’s right, Google is aiming at Microsoft’s P/E.

2. Time is on Google’s — Not Microsoft’s — side

After IBM’s anti-Trust action, they were hamstrung. That’s in large part why the PC revolution was fomented elsehwere — Apple, Microsoft, and Intel, and not at IBM, who no longer even makes PCs.

Because of their overly aggresive anti-competitive behavior in the 1990s, Mister Softee is in a similar position. Their core business is the PC Operating system, followed by its Office suite. With more and more of computing moving to the web, Redmond loses its leverage, its monopoly advantage.

Cheap PC horsepower, lots of connectivity and increasing broadband has unleashed tons of entrepreneurial energy and creativity. The future is decentralizing. It will come from millions of new start ups, not stodgy old Microsoft. Look at all the fresh apps for GoogleMaps. Google was smart to create the online version, and then let everyone else develop for it. They tapped into the entreprenuerial zeitgeist. Compare that with the strategy of Microsoft with its Xbox.

3. A free version of a web based Office will only benefit Dell and HP

A few weeks ago, I got a snail mail offer from Dell for a pretty fast 2.4Ghz machine — 17" CRT included — for the "low low price" of $300. I was about to buy (yet another) machine for the office — when it dawned on me that Office Professional-Small Business cost $320 — more than the PC itself. I decided to pass. (I could have gotten Office Basic — Word, Excel and Outlook — for $70). I suspect this process occurs lots of times in small businesses in America.

In Google’s short history, they have continuously rolled out more and more offerings. I suspect that 5 years from now, we will look back to discover that a full featured Office equivalent has developed.

In the alternative, is there anyway this ends up helping Microsoft?  I can’t think of any.

Last, consider this, from John at GMSV:

"It’s high time, isn’t it, that Google cops to having designs on Microsoft’s software business. The company now offers an e-mail program with built in IM and upwards of 2.5 gigabytes of storage space, an HTML editor and a calendar program. It’s developing a universally accessible network drive and likely a Web-based word processor as well.  And now it’s got a spreadsheet program to boot. And it insists it has no plans whatsoever to compete with Microsoft’s core PC software business? Please.


And people wonder why Microsoft’s stock price has done nothing for 5 years . . .


UPDATE: June 7, 2006 1:34pm

Blog Roll — Google vs. Microsoft

This got picked up by the WSJ, which also referenced Henry Blodget and GMSV‘s takes on the subject . . .


UPDATE: June 14, 2006 6:54am

The NYTimes reports on the new Googleplex in Oregon:

Local residents are at once enthusiastic and puzzled about their affluent but secretive new neighbor, a successor to the aluminum manufacturers that once came seeking the cheap power that flows from the dams holding back the powerful Columbia. The project has created hundreds of construction jobs, caused local real estate prices to jump 40 percent and is expected to create 60 to 200 permanent jobs in a town of 12,000 people when the center opens later this year…

The rate at which the Google computing system has grown is as remarkable as its size. In March 2001, when the company was serving about 70 million Web pages daily, it had 8,000 computers, according to a Microsoft researcher granted anonymity to talk about a detailed tour he was given at one of Google’s Silicon Valley computing centers. By 2003 the number had grown to 100,000.

Today even the closest Google watchers have lost precise count of how big the system is. The best guess is that Google now has more than 450,000 servers spread over at least 25 locations around the world. The company has major operations in Ireland, and a big computing center has recently been completed in Atlanta. Connecting these centers is a high-capacity fiber optic network that the company has assembled over the last few years.

Google has found that for search engines, every millisecond longer it takes to give users their results leads to lower satisfaction. So the speed of light ends up being a constraint, and the company wants to put significant processing power close to all of its users.

Microsoft’s Internet computing effort is currently based on 200,000 servers, and the company expects that number to grow to 800,000 by 2011 under its most aggressive forecast, according to a company document."

Hiding in Plain Sight, Google Seeks an Expansion of Power
NYTimes, June 14, 2006

Category: Investing, Technology, Web/Tech

Yahoo Video Goes Live

Category: Technology, Web/Tech, Weblogs

Google Maps/ mashup: Weathermole

Category: Science, Technology, Web/Tech, Weblogs

Warner Bros Goes P2P via Bit Torrent

Category: Film, Intellectual Property, Music, Technology

Big Cap Tech Continues to Disappoint

Category: Investing, Psychology, Technology, Trading

George Gilder: So THAT explains it

Category: Data Analysis, Investing, Psychology, Science, Technology, Trading

Dell soils itself

Category: Psychology, Technology, Trading

A few words about Microsoft

Category: Corporate Management, Data Analysis, Technology, Weblogs

Rise of the Pure Patent Business Model

Back in December 2004, I wrote a column titled "Five Under-the-Radar Trends for 2005". One of the below radar trends I predicted was the acceleration of intellectual property lawsuits. That turned out to be rather prescient.

There are actually two different issues here: The first is, should the USPO
be issuing so many patents, especially those for business methods? Amazon’s One-click buying, and MercExchange’s Buy it now auction are certainly questionable "inventions." That’s an issue for Congress, who needs to adequately fund the Patent Office so they can hire many more patent examiners, rather than merely have an under staffed patent office rubber stamp applications.

The second issue is that once a patent becomes issued, who gets to use it and how? Very often, we see the first issue inappropriately raised as a PR defense in the second. I don’t get the sense that all of the financial media really has a firm grasp on this. There is an entire world of patents, innovation, USPO issues, and large corporate litigants that have not been adequately discussed. Some get it, some don’t. Compare  this story: "eBay Takes on the Patent Trolls" with this one "In Patent Case, EBay Tries To Fight Its Way Out of Paper Bag." (For some intercorporate litigation, see Apple against Apple Corps. Ltd., and TiVo’s against EchoStar’s Dish Network).

Incidentally, the term "Patent Troll" was invented by Peter Detkin when he was defending a patent case against Intel. Ironically, Detkin is now managing director with Intellectual Ventures, an intellectual property firm suing patent infringers.

If you recognize the property right inherent in patents, then the term "Patent Troll" is quite meaningless, meant to stir up political opposition to patents. How you use your property is irrelevant to the property right attached to it. What does it matter if you choose to manufacture widgets — or merely license the patent to thos ethat do? 

What is actually going on now is a massive land grab underway by large corporations, looking to keep the fruits of entrepreneurs and innovators labor for themselves. These are not meek and vulnerable entities at the mercy of lawyers; rather, these are very astute players seeking to use the patent to further their own goals — often at the expense of innovation.

Take Intel, where Detkin was vice president and assistant general counsel, for example. They are certainly no stranger to patent litigation. As the book Inside Intel makes clear, INTC used its patents as a club to thwart competition in the CPU market for decades. That’s why its taken AMD so long to become a legitimate competitor to the chip giant.

The stealing of entrepreneurial innovation by large firms is fairly common place. My own experience with patent enforcement is that it is an enormously expensive, difficult, time consuming venture, fraught with peril. Consider the case of Robert Kearns, the inventor of the intermittant windshield wiper. In 1967, he received several patents on his design, which he tried to license to the Big 3 in Detroit. They sent him
packing, but later the intermittant windshield wiper somehow found its
way into autos. Long story short, he ended up in litigation for decades before finally winning. Thats decades later.

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Category: Financial Press, Intellectual Property, Technology, Web/Tech

Obnoxious Dell Pre-Installs

Category: Corporate Management, Retail, Technology