Apple takes a bite off the Palm

July 23, 2009 by · Leave a Comment
Filed under: Technology 

Apple

One of the most impressive (or at least intriguing) features of the Palm Pre was its ability to “sync” directly to iTunes. It made it the only pretend-iPod phone available to the non iPhone world (if that makes any sense). As you probably know, the Palm Pre was designed by ex Apple employees hired by Palm to revolutionize their product line. That they did but they also brought in the keys to the iTunes kingdom giving the Pre a hand over other smarthph
Fig6_palm_of_hand-150x150one.

Apple, of course, did not like it.

This is the deal: Apple recently announced that the new version of iTunes will most likely not allow non-Apple devices that sync to it to continue

to do so. They did not specifically name Palm, but who are they kidding we all know who they’re taking about. It is not a reaction that is surprising. As we all know, Apple likes control over the entire experience and does not like intruders in their system. That is what has made them so successful in the port

able music business and now smartphones. It is not surprising that Palm tried it either, what is surprising is that there are no lawyers back and forth arguing each others case.

Continue …

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In Search for Search Leadership

July 2, 2009 by · Leave a Comment
Filed under: Business, Technology 

Microsoft launched Bing in June as a re-branded, fresher looking version of Live Search. This is one more of the so far fruitless efforts to make money in the fast growing search industry. Last year, right before the economic meltdown, a bid to acquire Yahoo for $40B failed (Balmer, Microsoft’s CEO is probably thankful for that now.) Bing launched as expected with a huge marketing campaign (maybe actually clever) that goes after Google, so far #1 seated and far, far from the other 2. Is the investment worth it and how long will it take to pay back?

According to Internet data firm StatCounter, Microsoft gained a point of market share of US searches right after its launch in June 3rd to around 8.23%. At the same time Google’s declined slightly (0.24% to 78.48%) while Yahoo remained almost flat at 11.04% . Interestingly, during the first week, Bing accounted for 92% of searches to quickly stabilize at around 8.23%. Interesting payback for an estimated $3B investment (so far) in search by the software giant. Although it might trend as a positive market share growth it is not clear how long will it take to move the needle on Microsoft’s earnings. According to Yahoo finance (interesting choice of source) was a staggering $17B in fiscal 2008. Compared this to a mere (yeah, right) $4.5B of Google in its fiscal 2008 it seems like a battle not only tough to win, but the prize may not be as expected, especially for share holders.

Think about it. Google’s 78% of the market represents less than $4B in earnings. If Microsoft reaches, lets say 10% (1/8 of Google’s), and assuming the same cost structure it will earn $500M (or a 3% earnings increase). Yeah, yeah, I know what you’re thinking. These numbers are bogus and the bet is on growth. Sure, but to make a decent move on MSFT’s earnings, let’s say 10-12% (or $2B) they will need 4 times more earnings, which will mean a significant market share gain over Google and a never seen before growth (the market doubling and their share doubling doesn’t seem plausible). If everything else remains constant, that will mean $2 -$2.5 share price increase. Whereas a market doubling and a 10% share loss for Google will mean, well a 50% share price increase (yes $200/share). Sure more bogus numbers since MSFT is trading at <14 times earnings and Google at almost 30 so the market has already factored in a faster growth for the latter. It still illustrates the point that Google is better positioned to profit from search than Microsoft even if Balmer succeeds with Bing. Keep in mind that updates on both Yahoo and Google are expected in 2009.

This brings me to the real point I wanted to make. We all tried Bing. A gorgeous site, looks great and it works great. But the results are the same if not worse as with the other two. So as creatures of habit, like all geeks and online shoppers are, we all went back to our comfort zone. We will probably keep trying Bing a couple of times and it will probably succeed in taking on Yahoo’s #2 spot. But it will take a whole bunch of billions for people to conjugate Bing. I don’t know about you , but being “googled” is a lot better than being “binged”.

Enjoy.

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