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Saturday, April 23, 2005

Economist - "The Future of Journalism" - Key Insight

From Economist.com:

"Many bloggers are windbags, but some are world experts in their field. Matthew Hindman, a political scientist at Arizona State University, found that the top bloggers are more likely than top newspaper columnists to have gone to a top university, and far more likely to have an advanced degree, such as a doctorate."

This is exactly why I don't put much if any value in the Mainstream Media anymore. I got tired of people with journalism degrees telling me things that are out of context, useless or just plain untrue. This is why I am short Newspapers as a group.

Thursday, April 21, 2005

Adobe + Macromedia = A Good Idea (but not for Microsoft)

Adobe’s acquisition of Macromedia is a bold merger that makes a ton of sense in the long-term. While a lot of users and technologists are getting lost in the forrest for the trees, this merger creates a new Anti-Microsoft productivity platform.

Microsoft’s lock on the office productivity market is because it is THE ONLY office productivity platform that is ubiquitous/universal. So much so, jobs are defined around an employee’s ability to use the applications. Want to be a presentation expert? Better know PowerPoint. Want to get a Paralegal job? Being a Word expert sure helps. Investment banking analyst? You should know how to make love to Excel. Businesses can hire around capability to use the apps and get fairly known quantities.

Because of there dominance of the platform, it is exceedingly difficult to get a toehold in introducing alternative solutions. Unless you marry two (or more) application platforms that already enjoy near universal adoption and sew them together. Which is exactly what I believe Adobe+Macromedia are doing. Think about it, the PDF/Acrobat platforms enjoy near universal adoption in the computing landscape today. It may not be 99%+ like Word, but it has to be 80%+. Name another application that resides on almost all computers today: that’s right, Macromedia Flash. Sure it’s just used as a presentation engine currently, but Macromedia has big plans going forward that I believe mesh well with future technology trends.

Macromedia has been touting their ability to create lightweight and easy to use interfaces with internet and corporate applications for sometime now. Adobe realizes that if paper is slowly going away due to the rise of pervasive data systems within the corporation, then rather have people fill out paper forms, have them enter data directly into the applications instead. Critical to making this work is having a widely adopted, tested and utilized interface engine. Macromedia is positioning itself to be much more than the JibJab television.

What I am saying is that if one looks at how the world of work is evolving, you can make a great case that Adobe + Macromedia could be a very potent competitor to Microsoft. A Product Manager at Macromedia, Mike Chambers outlines this vision quite nicely in his post:

"I strongly believe in the potential of Flash as a cross-platform solution for deploying rich content and applications (I can't stress the cross-platform part of that enough). Together, the combined company will have the resources on our own to make the platform successful on a larger scale. So, personally, I am excited about this because, after the combination closes, Flash as a platform will be driven by a much, much larger company (combined we would be over $2 billion a year in revenue), with a lot more resources at its disposal. I think it makes it much more likely that Flash will play a significant role as the next generation application / content platform (one that is ubiquitous and cross platform)."

But wait, there’s more. Technology trends indicate that Microsoft is losing/has lost the race to become the heart of the network – Linux and Unix are dominant in that part of the system for a number of reasons (stability, the techies who support networks hate MSFT, security, etc…). If a trend such as thin clients comes to dominate, Microsoft applications will absolutely lose the productivity/data form application battle. The clog that MSFT apps create on thick clients alone illustrates their competitive disadvantage in this type of world.

The solution that would win in this world is one that is composed of thin and light applications such as PDF and Flash. One could make a case for the plethora of Open Source desktop app/Office mimic programs out there, they dont have the cross-platform adoption that PDF+Flash has. They'll be used in Linux boxes, but they're not likely to be adopted on the MSFT platform in meaningful numbers anytime soon.

Kotke.org has a great round-up of the blogiverse's reaction, but it's funny how technlogists ignore the business aspects of deals.

In my next installment, I’ll tell you what could go wrong with this merger and why I think Apple should be the next player to completely round out this anti-Microsoft competitive triad.

**FYI - A Short Ebay, Long Macromedia play since my Jan. 20th post would've netted 40+% in approximately 3 months**

Wednesday, April 20, 2005

GOOG, YHOO and EBAY are NOT Tech Companies

One of my pet peeves with the stock market today is uthat people are ignorant when it comes to understanding the companies that they invest in. Take the “Tech” category. This category is used to classify any and all companies that have anything to do with technology – software makers, network equipment, mobile phones, internet advertisers, etc… This ignorance by the larger markets actually creates investable opportunities by the savvy investor. This is because certain companies trade in sympathy with other companies that are the bellweathers of the sector, when in fact they have very little to do with each other.

This earnings season was a prime example. It started off with a few technology companies reporting horrible earnings relative to expectations. IBM came in very low and caused a market-wide decline for a few days. Other software related companies also reported below expectation performance. Interestingly, this decline took down a lot of companies that have absolutely nothing to do with IBM’s business of creating and maintaining software and hardware systems for other businesses.

For instance, why Google, Yahoo and eBay are classified as “Tech” companies is unknown to me. In my world, I use a simple rule to determine whether or not a company should be classified as Tech: Does this company sell to the IT department of other companies? I like to use end-user definitions to segregate my sector categories because it helps to evaluate which companies to invest in. Understanding the end-user/purchaser makes analyzing a company’s products and services much easier. I can look at a networking equipment company and understand whether their router has a big addressable market and whether or not their offering is competitive amongst other offerings.

Using this classification scheme, Google, Yahoo and Ebay have nothing to do with IBM, Compuware or other software companies. More importantly, they shouldn’t trade in sympathy with them.

Think about it, Google and Yahoo!s end-customer is the advertising department of pretty much all businesses on one side and the minds of consumers on another. That market definition is COMPLETELY different than IT department heads and has different dynamics. IBM’s business is dependent on technology buying cycles which have a high beta to business cycles. IBM is the penultimate Tech company.

Google and Yahoo!’s businesses are being driven by a secular change in advertising, namely that some of it is moving online. This trend is not affected by technology buying cycles. Maybe there is a s malleffect based upon how many healthy Tech companies are around and willing to buy advertising on their sites, but that’s it.

The point of this laborious essay on the fine points of sector categorization? It can help the Tech investor make money. When IBM brings the whole “Tech” sector down because of weak IT spending, buy the companies that actually are not “Tech” and are driven by different market dynamics.

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