May 2007: Microsoft Yahoo is a done deal even if they don’t know it yet

This is a great move for Microsoft, but if RIMM stock drops to a reasonable earnings multiple, it would be an almost necessary buy for MSFT too.

The reason:

Smartphones have become an essential business tool, like the desktop computer in the 80s.

In a downturn, in particular, if you buy 500 employees an iPhone you look spendthrift, buy them a Blackberry and you look plain thrifty. Buy them anything else and you might look stupid.

The Apple Mac OS may have been more like the OS that powers business computers today, but the less innovative DOS is what made Microsoft dominate. An overlooked reason is purely psychological, and predated the raft of software that made it a rational one: DOS looked more business like.

DOS succeeded at a time when command line computing seemed like the real deal compared to cartoon-like mouse and icon interfaces.

Similarly, a device like the iPhone looks like a luxury consumer device, while a Blackberry is less innovative and more boring. Like conservative office furniture, it looks right for business and is the best of breed. Smartphone alternatives like Palm increasingly look like also rans. A Blackberry will be the de facto business standard smart phone and therefore it competes on Microsoft’s home turf.

Microsoft need Blackberry, because its the right kind of crappy.

If the reviewers of the Macbook Air are right, then people don’t really care about Apple design.

Above is a commercial for an original Pentium, it promises movie quality films, amazing computer graphics and instant number crunching.

A Pentium had around 3 million transistors, 2 year old Intel processors today have 1.7 billion.

You would need six hundred Pentium based computers, in an office the size of a hangar, to equal the processing power of a single Macbook Air that fits in an envelope.

Yet if you would believe what you read, the Macbook Air, is under spec’ed, when the vast majority of professional computer users use exactly the same software as we did when we had Pentiums.

And this opinion, that the Air is under powered, is according to the leading technology journalists in the country, not mad people with tin foil hats.

Pentium’s were first made when the applications that people most used were spreadsheets, word processors and presentation software. A tiny minority pf people did things like 3d graphics and high resolution photo retouching.

In fact the most notable new entrant in software, the browser, would potentially reduce client computer requirements.

Today not much has changed, more people do photo retouching but often at lower resolution. More processing is done on servers, and most people still use things like word processors and spreadsheets in similar ways.

In fact the extra demands on computing power are largely for consumer applications, so you could argue that ‘professional’ computers need something else than computing horse power.

The initial reception of the Macbook Air proves that the current process of designing, marketing and selling computers has nothing to do with ’specification’ requirements, but everything to do with specification lust.

If the critics are right, they show that above all that despite Apple’s great designs, people don’t really care about design, unless its lathered on top of tech prowess.

But what if the problem was with the critics themselves. Perhaps they are out of touch and way too geeky for a world where computers are not sold like self assembly amateur electronics projects.

Meg Whitman is to step down at Ebay after 10 years.

Anyone who has worked in Silicon Valley will have heard rumors of what an inefficient shambles Ebay is internally and how it is devoid of any creative inspiration.

But before dismissing Whitman, consider that she grew a company from 30 people and $4m revenue, to the behemoth it is now.

Like all things in life, the Ebay story is complicated, but here is a stab at a simplified version.

Ebay’s model was very clear when Whitman took over, they needed an executor not tempted by innovation or distraction, a John Sculley type not a Steve Jobs type.

As Ebay grew, it remained focused and held on to its monopoly by building a reputation system that created a switching cost for its users. Ebay performed financially.

Like all monopolistic companies there is a time when the growth starts to slow as it saturates its market and creative input is required to develop new products and explore new markets.

For Ebay, its weaknesses started showing with the PayPal acquisition and the tipping point was the Skype purchase.

Ebay had no option but to buy Paypal, because a fleet footed startup was potentially hijacking their business by inserting its payment system into their own transaction flow, as Ebay users were having to sign up with Paypal, in flagrante.

Paypal could have been a threat to the entire retail banking industry, rather than Ebay. With Ebay’s purchase Paypal’s ambitions were scorched and its efficacy demolished. It was a good deal, however, coming in the middle of the dotcom crash where the premium for Paypal’s potential banking play didn’t show too much.

Paypal’s founders had no place in a company run by management consultant types, they left and the product calcified while the team swelled, several people doing the job that one person had previously.

If Paypal was a way of acquiring innovation, where the company had been unable to innovate internally, the Skype purchase was a somewhat creative acquisition itself.

Sure there was a potentially hijacking threat with Skype, but it hadn’t yet manifested itself, and the asking price was more than the value of buying it just to kill it. Paypal was about banking and Skype about telecoms, big ideas that command big prices when you have lost of users.

Ebay doesn’t do creative, so this was a mistake. Skype wasn’t yet part of the Ebay transaction flow, and its price wasn’t cheap. To justify its price it needed to continue to innovate, something that Ebay is not setup to do.

This is where Ebay is now, a very successful business woman is leaving a company at the time where it needs a visionary.

The amazing thing, is that Ebay has some obvious and profound visionary potential:

1. Ebay is all about Green, the biggest angle any company can have, currently, and yet it has ignored this. As the largest marketplace for second hand goods, it is the worlds largest recycler.

2. Ebay contains a collective memory of the worlds stuff. How we interact with the world is largely through this stuff, yet Ebay throws away this memory by deleting its archives from the web. If you don’t think this is of profound importannce, William Gibson says it much better, here.

What is needed is a visionary to take what Whitman has built and let it flourish again, by building products and services based upon fundamental concepts, like those above. Ebay needs a Steve Jobs.

Ironically, and against all consensus, I suspect that Steve Jobs’s are actually less rare than Whitman’s, they just don’t often get a chance to run a company.

eBay’s Whitman To Retire; Donahoe As Leading Candidate | paidContent.org

A great article on why Japan still leads the US in terms of Gadgets.

There are a variety of reasons posited, but the main one is that gadgets are not dominated by males in Japan.

I couldn’t help but be reminded of the fact that Myspace’s growth came from its male/female balance, caused by teenage girls attraction to alpha males in bands.

Perhaps this gender symmetry helps achieve viral growth since hubs and key influencers are more likely to connect male -> female -> male etc.

Thanks to Keith for the article.
ASIAN POP The Gadget Gap / Why does all the cool stuff come out in Asia first?

Julien ‘Spike’ Galbraith born 21:12 on Jan 11.
I am so, so happy.

My gut tells me that Kindle will go the way of poopy brown Zunes and Segways.

1. Expensive hardware.
2. Cheap looking hardware.
3. Expensive content.
4. Un-innovative software.
5. A name that sounds like firewood.

I like Amazon - a lot. I think its really hard for a startup to come along and beat a company that has so much infrastructure and logistics nailed, and I like the innovation in S3 and EC2.

But the Kindle has dog written all over it. Amazon needed to do something really disruptive here and this is not a disruptive product.

Ebook readers have not taken off, and the difference between laptops and readers is narrowing. I suspect a market slice is needed to gain traction and that education could provide that in a way that would be world changing.

What I’d like to see is a Kindle like product for schools and universities, worldwide - a reader meets the $100 laptop. Education is an area where lowered royalties could be made for developing countries allowing for a device that could give every child on earth access to the same textbooks.

My wife is now nearly 4 months PREGNANT! So we’re launching a kids and baby site for Wists, called Yokiddo.

Hopefully by saturating ourselves with fun kids stuff to look at, such as a $3M model of Moscow or Craftsman’s ‘my first chainsaw’, we will exorcise the need to actually buy any.

Is Rim the new Microsoft?

The graph says it all. Far from denting the Blackberry maker’s stock, RIM has actually outpaced Apple’s massive surge since the iPhone announcement at the beginning of the year.

Windows 3.1 was shabby compared to the original Mac OS, but businesses liked Microsoft because its very absence of polish made it seem less like an indulgence.

Bottom line: Rim is the Microsoft of the business cellphone market, and there is a lot of money to be made there. The iPhone is years ahead of the Blackberry, but its presence creates context making Rimm’s the business device and Apple’s the consumer one.

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