Friday, July 31, 2009

Fight of the Grizzly Bears: Microsoft vs Google

The knock down drag out, fight of the Grizzly Bears, Microsoft and Google, is just getting started. The owners of Yahoo shares are not amused.

Microsoft has entered a deal that will send a pile of money to Yahoo over the next 10 years but it will give Microsoft's Bing the tools to stand a fighting chance against Google Search. The concern of Yahoo owners is that it appears that Yahoo has conceded the arena to Google. Google has 65 to 73% of the search market and Microhoo has about 30%. If you have a product to advertise, your ad is twice as likely to be seen on Google Search as it is on the combined Microsoft Yahoo platform. Indeed, if your product is sold in international markets, the odds are even much more in Google's favor. Google is a verb. Bing is a cherry. Yahoo continues to do well with display adds but search provides sellers with the first opportunity to sell.

As the fierce battle between Google and Microsoft continues, in operating systems, browsers and search, the consumer will win and win BIG! The price of communication--computing is coming down rapidly. All sorts of devices are being built with free Google software attached and Microsoft is rapidly lowering its cost of software in order to be more competitive. The cost of wireless connection to the Internet is falling rapidly.

The Amazon and Apple Bears are also engaged in the fight for the sweetest honey. Neither Google or Microsoft can afford to devote all their resources to battling the other. Apple just wounded Google and itself by killing the killer Google Voice app on it's iPhones. Most likely, Apple killed the app under pressure from a big Black Bear named AT&T. Google Voice is a great product and it is being accepted by major carriers such as Sprint and T-Mobile. It remains to be seen if Verizon and AT&T will be forced by it's customers to offer this money saving feature. My attitude is that there is no way that I will buy an AT&T iPhone if it does not allow full and direct access to the web.

Amazon, Google and Barnes & Noble are the Big Bears of books. Hardly a day goes by without a loud growl from one of these Bears or by one of their sloth. Sony, which is certainly not a cub bear, is aligned with both Google and Borders. Sony and Google just announced that 1,000,000 Google Books are now available for free on the Sony Reader. Last week, the Sony Readers offered in Borders stores came with 100 books preloaded. I suppose that deal is the same but that one can now select any of the 1,000,000 Google Books to increase the size of ones free library.

Google continues to force down the price to consumers in one area after another. Amazon pays publishers-authors 35% of book revenues. The Google settlement gives 63% of revenues to publishers-authors! Most Amazon Books are available for $9.99 or less. Most Google Books will be available for $5.99 or less! To some extent, this is a comparison of apples to oranges because Google's 10 million book library is a long tail library, whereas Amazons library, while large and growing at more than 335,000 books, is cut out of the middle of the total book bell curve. We must expect for books within the first standard deviation to be priced higher than the outliers.

The big question about books is how much of an advantage Google will have. It seems that Barnes and Noble, Amazon and others might be able to lock in new books for a year or two but that Google will become the source of choice for the great majority of less popular books. Other niches may hold, for example Barnes and Noble has such a lock on the romance novel business that authors may agree to opt out of the Google program.

About a year ago, Microsoft made the strategic decision to devote its resources elsewhere. I don't think a knowledge search is complete unless it includes books. Google should maintain it's lead in search partly because the body of knowledge held in books is large relative to the knowledge posted on the web. Looking out 5 or 10 years, I would not be surprised if the search market is dominated by Google and Baidu. Baidu has about 60% of the Chinese market, Google has about 30% and Yahoo has about 6%.

Again, the consumer will continue to be the big winner. Knowledge will become more available than ever before and the cost to acquire knowledge will be driven lower and lower in real terms.


HUGE! The paradigm shift we are going through is as significant as the invention and spread of the printing press.

Skeptics do not believe that the Microsoft Monopoly can be broken by Google. They are right! The Microsoft Monopoly is being broken by the sloth (the entire group of BEARS). One bear does not have the power to chase Microsoft off the mountain. Indeed, the point is not to ban Microsoft from the mountain but to force it to share the honey pot. The reason this is important is that innovation has been stifled by the monopoly.

Back in 1984, I was a strong supporter of the break-up of the AT&T monopoly. My Dad retired from AT&T and my Mom is no longer covered by the super wonderful health care insurance of the old days, but it was the right thing to do. When Dad retired, in 1986, a significant retirement benefit he received included free or deeply discounted long distance calls. We often forget how much money the consumer has saved and how much innovation has been possible because the AT&T monopoly was broken. Before MCI was allowed to chew away at the AT&T monopoly, a three minute phone call cost substantially more than one hour of work at minimum wage. Today, minimum wage is up to$7.25 per hour and the marginal cost of a three minute long distance call is quickly approaching ZERO!

Google has done a good job of cooperating with the sloth to achieve common goals; the citizens of the world have much to gain from a more competitive market. Microsoft's 90%+ lock on the browser market has finally been broken because various parties are cooperating while competing at the same time. The drop from 95% to 90% was most difficult, but the recent plunge from 90% to 65% is telling.

As Google and others bring browser based operating systems to market, these systems will be able to compete with Microsoft's expensive Windows products because Microsoft has lost it browser monopoly.

During the past 50 years, most people have been unwilling to admit, even to themselves, how many hours they routinely devote to watching TV. It is not uncommon for the guy who does not watch much TV to spend most of his free time watching sporting events on TV. Political and stock market junkies do not watch TV (except for hours of Fox, CNN or CNBC). Today, there is a steady move away from TV viewing to two way interaction. The sports fanatic is growing more likely to play a baseball video game against a live opponent and less likely to watch a baseball game on TV. The political junkie is more and more likely to discuss politics and less likely to watch politics being discussed.

The way we will communicate in the near future will change the way we live. The change is going to be omnipresent. Each of us will be more in control of interruption by unwanted communication while we will much more actively engaged throughout the typical day.
To bring these changes about, trillions of dollars will be invested. This investment cycle will prove to be the largest ever. In addition to the investment needed to implement the communications changes, there will be huge investments in nono-technology and products derived from genetics research. The future of the world has never been brighter!

Friday, July 24, 2009

Petro Dollars Flowing: US Boom is Here!

Only one year ago, petro dollars were flooding out of the USA. The chant in the summer before the election was "drill, drill, drill". Successful drilling that was done over the past several years has produced an abundance of domestically produced natural gas, 80 years worth of discoveries at current usage rates. The discoveries have been so large that gas drilling rigs are being moth balled.

A year ago, Russia was one of the nations that was accumulating huge caches of dollars. Today, Russian held dollars are flowing the other direction. In the next year, "The Next Big Future" web site estimates that Russia will spend 43.5 Billion of its 95.4 Billion Petro Dollars!

Thomas L. Friedman has posted a neat and seemingly accurate theory in his book, "Hot, Flat, and Crowded". History shows that when the oil rich nations are enjoying high prices, the powerful elite that control their governments do what ever they want. Friedman calls the situation one of "no taxation therefore no representation". History also shows that the people rise up in rebellion against oil rich oppressive governments and that freedom blooms during times when oil prices are low. The current situation in Iran supports Friedman's theory. Iranians are showing how tired they are of living under oppressive Islamic law. Democracy is going to continue to bloom around the world. We can only hope that the USA does not pass these other nations like a ship in the night.

I keep running into folk who believe that the price of gasoline is going to go "right back up". The continued rapid growth of China and India supports their argument but that is about all the support they can find. Most everything else points to lower gasoline consumption.

There will be lower fuel consumption because of requirements imposed by the US Congress and the Obama administration. As a strong advocate of FREEDOM, it galls me to see our government dictate what we can buy or if we can have a liver transplant or not, but I do not deny that government programs do reduce consumption.

Democrats have formed a firm blockade that is preventing the drilling for oil in US costal waters (certain deep water areas are being explored), but the billions of barrels of oil coming online in Angola, Brazil and Iraq will keep supplies plentiful while the switch to smaller cars will keep the demand down. Petro dollars are a function of both price and volume. In the past year, we have seen a significant decline in volume of oil imported and a huge decline in the total price of the oil imported. The recession has been largely responsible for the lower demand in the short run but the switch over to smaller cars and the flow of abundant new supplies is just beginning.

Where are those petro dollars going? Into technology! Which further lessons the demand for oil!
I cannot say it enough times that a major communications paradigm shift is underway. One that will cause an enormous amount of substitution of cheap resources for expensive resources. Take something as simple as a Monopoly Game as an example. You might be surprised to learn that the components to a Monopoly Board require the mining of ores, the drilling of oil, the cutting of trees and thousands of other expensive activities. It is a wonder of modern society that a Monopoly Board can be manufactured, shipped and sold for at a very affordable price. Still, think about the cost to distribute a software version of the game relative to the "hardware" version. The "hardware version" probably costs 1,000 times as much to manufacture and distribute as does the software version.

More incredibly, a growing number of Monopoly Games are going to be played online. Friends, family and strangers will increasingly get together online to play such a game rather than traveling. Indeed, in a number of online game parlors, there are players who have logged 10's of thousands of games played over the past 10 years or more. Most of these games have been played against strangers but new software is making it very easy to invite a friends or family "over" for a media rich game. A game where live audio and video makes the "get together" similar to "the real thing". Some folk, who cannot imagine "getting together" with friends to play a board game, already play games on a Sony Playstation or through Facebook or other means frequently.

In case you have not heard, there are now about 250 million people communicating via Facebook. About 50 million of these folk have joined in the last 3 months! Google, Apple and Facebook are three of the leaders who are tearing the old Microsoft Monopoly to bits. Innovation is hitting fifth gear. Within a couple of years, super high speed Internet communications will cause us to change the way we think. Instead of sending messages, we will "meet" with folk to discuss what we want to discuss. In one second we will be meeting with one group and in another we will speak to some other person without disrupting the ongoing meeting.

Many folk are resisting the change. Many have been "turned off" by "first generation vehicles" such as email. These folks will soon be forced to "climb back on" the "Internet wagon". When bookstores and video stores, as we know them today, disappear and when newspapers and magazines are no longer published on paper, other communications vehicles will become necessities.

The Bull Market in US stocks began on March 9, 2009. Many a stock is up 70% or more off the bottom. The games played by the powerful drove real estate prices down, and allowed the powerful to accumulated trillions of dollars worth. Now it is time for these "big boys" to sit back and enjoy the rise of the markets. Because the available supply of super cheap real estate is gone, dollars are now flowing into stocks. There will be bumps and grinds along the way but this is going to be one whopper of a BULL MARKET!

Thursday, July 23, 2009

Yes. The Recession is Over.

The current bull market began on March 9; it has a long way to run. Even after average gains of about 40%, stocks are still very cheap. The wet blanket of fear that covered the market and the economy is drying quickly.

Throughout the recession, the Internet sector has surged. The Internet has been climbing the second phase sigmoid curve at an accelerating rate. Facebook has added 50 million users in only a few months! Amazon just purchased a $900 million Internet shoe company. Apple sold 7 times as many iPhones this past quarter as it did the year before!

Several previously dead economic sectors are rapidly returning to health and the market is beginning to have hope that the most burdensome of the Obama program will never be enacted. Housing sales are up 3 months in a row; bidding wars have broken out for low priced houses. The mad rush of young couples leaving apartments are bying houses to pick up the $8,000 government housing giveaway. Before this program expires in November, it will cause a spike in low home price buying that will in turn cause a subsequent wave in medium home price buying, etc. As they say, a healthy housing market is like a ladder, you can't get to step two unless the first step is available.

Looking ahead, one can see a huge investment wave developing. What is so neat about this wave is that the incentives to invest begin with the word FREE. For example, the Pandora music service, basic account is FREE. After years of legal dispute, Pandora and other music streaming services have the legal right to offer large amounts of music FREE of charge. As you may recall, Napster was at the forefront of the first surge in Internet use. Android and Pandora just made a deal. This means that "FREE" music streaming will be available on cell phones and other portable devices. Of course, the big difference this go round is that the "FREE" service will be provided by providers that "meter" usage.

There has not been a recession in Internet traffic, but there is an explosion of usage on the way. While individuals switch to "smart phones", providers will switch to 4G speed. Today, users of "smart phones" are kind of like the man who bought a Corvette to drive to work even though the speed limit on his road to work is 20 miles per hour; he enjoys the nice ride and the neat amenities in the car but he can't wait to get on the Interstate. Over the next couple of years, "Interstate Speed" is coming to the mobile Internet.

Huge investments will be made on the consumer side and the business side. The consumer who signs-up to pay $60 per month for 24 months for a data plan signs-up to "invest" $1,440 into the mobile Internet business. Companies will have to spend far more than $1,440 to install all the structure needed to handle this traffic. A huge investment boom is just getting underway. In most businesses, the recession is already over. It will take many businesses time to recover back to prior business levels but climbing back out of a whole is not nearly as terrifying as falling in and not feeling the bottom.

Sunday, July 19, 2009

Google or Microsoft Apps?

PC World just posted an article saying that their money is on Microsoft in the Microsoft--Google Office App War. I put my money on Google.

PC World notes that Microsoft Office is used by 80% of businesses and that Microsoft is responding to Google by offering an online version of Microsoft Office for free. PC World is focused on the wrong question. PC World is looking at trees and has not stepped back to see the forest. Microsoft is begrudgingly offering one of its greatest profit drivers for FREE but Google's list of FREE is long. Google is prepared to offer consumers access to millions of books, FREE. It is prepared to offer consumers a FREE Google Voice phone number. It is prepared to offer all sorts of FREE software that will be used inside of FREE Google Waves.

It makes all the sense in the world for consumers to buy Android based phones because the FREE software and unfettered access to FREE texting, FREE Internet phone calls and other FREE services, makes the total price of service a bargain over competing brands. The story in regard to the coming battle between Windows and Chrome is similar. Big businesses will continue to buy Windows for a long while but consumers will buy lower priced computers that come equipped with the FREE operating system.

My guess is that the computer consumer/business split is in the neighborhood of 70/30. In other words, given the choice between FREE Chrome and EXPENSIVE Windows, I suspect that the majority of computers will ultimately be Chrome based. Apple will get it's share and there might be various Linus Kernels underneath the Chrome based machines but Windows finally has serious competition.

Last week, a conversion tool became available to move Lotus Notes files to Google. One can already move ones Outlook files to Google. Even more interesting, one can now keep ones Outlook files but send the output to ones Google accounts. In other words, Google does not have to "steal" Microsoft and IBM customers to keep growing its market share. If the consumer can save money on his home computer but still send work files to it, then the rational consumer will save money. The rational consumer will "reside" in the Google "world" while going for occasional visits to the Microsoft "world".

Let me make it clear. I am not projecting the downfall of Microsoft. I am projecting that Google will take a considerable market share in a number of areas where Microsoft is dominant. Chances are that a lot of other Internet companies will be hit by the blast sent by Google toward Microsoft and by Microsoft toward Google. The most recent example is that Microsoft has fired it's Bling "cannon" at Google but it appears to have hit Yahoo more than Google. Consumers should be careful about tying themselves too closely to one of the many Internet companies that may be the Internet equivalent of the Stanly Steamer Automobile. There are many good products "out there", but some have great advantages over the others. Many a small company is in direct competiton with Microsoft and Google. My money is on Google.

Thursday, July 16, 2009

The Nokia Un-surge

Nokia is the number one seller of cell phone hand sets. I suggest that Nokia gained this lofty status as the un-cola of computer software. In the decades when I and others had no real choice but to buy Microsoft upgrade after Microsoft upgrade for PCs, there was determination by consumers to not let Microsoft gain a monopoly on phones and or on TV set top boxes. While Nokia's symbian software was an easy alternative to chose, it has never become much more than "telephone" software.

Google's Android is starting to appear in all the kinds of applications futurist have talked about for decades. Android, mobile phone software is good for things like web connected thermostats, web connected music players, web connected door locks and web connected lights. Of Google software advantages, NO LICENCE FEE, is certainly near the top of the list. Add FREE software just when the price of computer chips suitable for running "web connected appliances" drops and suddenly the demand for these goods is set to soar.

A few years ago, security systems that included whole house lighting, whole house music, and electronic door locks and monitoring might cost $20,000 or more to install. It does not take a masters in econ. degree to appreciate that when price falls, demand soars.

My running analogy to the paradigm shift from horse and buggy to auto offers all the insight we need. In 1908 when Henry Ford adopted Old's idea of standardized parts, he was able to offer Model T Fords for $850. In 1908, $850 was a very large amount of money but suddenly cars were no longer the play toy of the supper rich. We should not forget that the rich build scores of "makes" of cars from 1865 to 1908, before the first Model T was sold. 100's of these models were steam or battery driven. Both Mr. Daimler and Mr. Benz were making excellent internal combustion engine machines by 1886. The first gasoline car production was accomplished by Mr. Duryea. As an interesting aside, it should be noted that hybrid, electric-gasoline models, were a temporary rage in the 1920's.

The use of standardized parts drove the price of a Model T down from $850 in 1908 to $440 by the time the assembly line was up and running in 1915. By 1925, a Model T could be had for $290. By 1925, the market share of other producers was growing faster than Ford's because the price had gotten so low that consumers were opting for the more expensive offerings of competitors in order to get things like better brakes, better heat and better starters.

In the past quarter, Nokia's market share declined from 40% to 38%. Two percent of a huge market is a huge amount of money, an enormous amount if one calculates the net present value of a long term shift of such magnitude.

The Apple iPhone is perhaps the Cadillac of the phone business. It has taken market share but it is pricey. I submit that Apple will continue to take gain market share but the Google Android is closer to the General Motors in this comparison. Some of the features of the Android are being made available on both Apple and Nokia devices, however, as consumers adopt "pure Androids", the price of service plans will fall. Microsoft is not the only firm seeking to corral a niche.

I have to run, but I'll come back to edit and complete this draft.

Wednesday, July 15, 2009

Surge, Surge, Surge -- Stock Prices Rise

The animal (stock share) spirits are out and about. They are being summoned forth by surges in earnings at companies such as Goldman Sachs and Intel, by a refinancing surge in the housing market, by the clunker car program, by the continuing surge in Internet usage and by a new China surge. Even the stimulus spending of the government is going to have a temporary effect over the next several months.

Markets are surging in response to projected future profits. Share prices, along with Doctor Copper and Professor Yield curve are the most accurate forecasters of economic growth. Despite wonderful low cost substitutes for copper, all three are predicting a strong economy. My guesstimate is that our economy will grow by better than a 3.5% average annual rate over then next 24 months! While more than half the people are busy worrying over the damage that Obama will do if he is successful in installing very expensive and wasteful health care and cap and trade legislation, the market is busy healing itself. The market, like water that always finds a way to flow down hill, always finds a way around impediments. Raise the cost of health care in the USA and prices of goods to the consumer will restore profits to businesses. Government programs that shift the cost of individual goods to others can be called income distribution programs or socialism.

For more than thirty years, "environmentalist" have fought to restrict energy development in the USA. Drilling for oil, building oil refineries and building power plants have all been made expensive or difficult. The irony is that many of these same folk have tried to restrict importation of low cost goods from around the globe. Meanwhile, the market continues to find its way around the environmental bottle-neck.

The most recent announcement about a new oil refinery comes from South Korea, which will spend 10 Billion Dollars to construct a modern and clean oil "cooker". China, which has been approaching completion of two coal fired power plants per week, is at work increasing production of nuclear power generation at an even faster pace. In America the most significant energy development has been hydro cracking of natural gas fields. In Canada, the "in ground cooking of tar pit oil" holds great promise for producing huge supplies of relatively clean burning oil.

One current surge is the holdings of foreign currency by China. This is a good thing, not a bad thing. It represents the purchase of low cost goods from China and pent up demand in China for foreign goods and services. The more goods that China exports, the more money China has to purchase goods, services or assets from the USA. The refinancing surge that is currently taking place in America is directly linked to the investment of huge amounts of Chinese owned US currency into the US financial markets. Again, like water that must eventually find its way down hill, all but a few lost or destroyed US dollars must eventually find their way back to the USA. Low cost money invested by China is making low cost mortgages available to home owners.

In many areas, the USA has a comparative advantage over China. One example is in the area of computing. IBM is a major builder of what has become known as cloud computing centers. This week, Microsoft finally announced pricing for the cloud computing service that it announced more than a year ago. Obviously, the construction of a network of cloud computers takes time and Microsoft surely started construction long before it announce the coming service.

The cost of providing computing service continues to fall rapidly, however, the amount of computing being done continues to rise at exponential growth rates. The cost per calculation is approaching zero at an ever increasing rate but the sum total of resources being used is rising rapidly. Data centers use large amounts of electricity. Digital computing (including digital communications) is being substituted for the physical movement of goods. The market is reducing total energy consumption by using ever larger amounts of low cost electricity.

Microsoft will charge about 12 cents per hour for doing calculations, about 15 cents per gigabyte for storage and about 10 cents per 10,000 retrievals of data. It is hard to get ones mind around how big a business this is because 12 cents per hour sounds so cheap. We pay a Chinese worker 33 cents per hour to assemble desk top computers for us while we buy only the processors in bulk and charge the Chinese 12 cents per hour for calculating. The thing is that one data center can do calculations for who knows how many customers all at the same time. Another way to look at this is the continuing drive toward lower costs goods through automation.

The cost of computing is so cheap that computing can be offered to consumers "free", in exchange for an occasional look at advertising. Facebook provides computing service for more than 200 million users but does not charge fees. Based on the Microsoft numbers posted above (I believe I got these from a posting by Om Malik), Facebook needs around 15 cents in advertising revenues per hour of consumer use.

The biggest expense of operating computers is the electrical expense. The great news is that the latest computer chips compared to the chips of 2007 do double the work while using half the electricity. The value of holding "virtual meetings" continues to soar, but, uh oh!, did I mention that China has built an assembly line to produce nuclear power plants! Did I mention that there is once again a surge in the construction of massive, high speed, fibre optic data networks? No less than 4 transatlantic massive data cables are in progress!

If the USA does not wake up, even IMB, Microsoft, Amazon, Apple, HP, and Google (to name a few) will move their cloud data centers overseas, to where the power costs are cheap. If IBM places a data center in India and makes profits there, the owners of IBM shares will benefit, however, the jobs required to run that data center will be located in India.

The current BOOM in wireless traffic is un-abating. The latest US numbers I can find are that wireless data transmission generated 23.2 Billion Dollars in revenue in 2007 and 32 Billion Dollars in revenue in 2008. Thirty-eight percent growth during a "recession"! The numbers are small relative to all voice and data transmission but such growth rates will double and redouble revenues in less than 4 years.

Again, most Americans are worried about the recession or about the massive deficit the Obama administration is growing while being totally unaware that there is an economic surge in progress. This past Sunday a local preacher said to his congregation that the economy is bad and likely to get worst before it gets better. I think this was a personal opinion and not an insight offered by God.

Public opinion is "group think opinion". We are all influenced by "news sellers", politicians, big businesses and the wealthiest of investors. Even our preachers sometimes hear enough "bad news" to become believers in it.

How about you? Are you an independent thinker? Can you look at the world and see that there is a communications revolution in progress? One that is leading to a massive investment cycle! The ups and downs of the economy are the result of uneven investment. During the past three years, housing construction (investment) has virtually died, auto production has dropped precipitously and the consumer savings rate has soared. Savings are a necessary thing but too much saving is a very bad thing. Few appreciate the reality that there has been too much savings, particularly early this year. Obama excessive spending has been more than offset by excessive saving around the world.

The good news is that pent up demand is being released. Cars are being bought and housing inventories are declining. Housing related shares, such as Whirlpool, have double in price from the recession lows. The second phase of the surge ready for takeoff.

Believe it or not, the congress is about to fail at making a massive reform to our health care system. There is likely to be a bill but not nearly as onerous one as Obama would like. This failure will be a relief to the market place. The current surge, will not be smooth but it will continue. Retail sales are rising again. A consumer lead buying spree is developing. Hand held communications devices (the ones that cost over $3,000 over a 24 month service contract) are at the top of many a consumers spending list.

Tuesday, July 14, 2009

Google Kills Microsoft; Microsoft Kills Google

"News sellers" have been quick to pick a champion, Google or Microsoft, in the latest battle of the Titans. If you do a Google News Search for "Kill", the top article is from PC world. Before you get to articles about killings in Afghanistan and the killings of parents of 9 adopted kids in Florida, the story is that Microsoft will "Kill" Google because Microsoft will allow corporations to store their own Office Online Documents. What do you think, is this response from Microsoft so powerful that it will "Kill Google"?

I hope you are not easily taken-in by "news sellers". NBC Nightly News just lead off with a long story about an airplane that developed a hole in the fuselage during its flight. No one was hurt but the public apparently drools at even the thought of a horrible accident. We can't get enough bad news! And airlines stocks are set up for what will be an amazing growth and profit run.

When Henry Ford kept making the Model T long past its prime, he gave General Motors an opening. Smart men such as Charles Kettering exploited Henry's mistake. Henry was slow to add electric starters, colors and financing. Still, General Motors did not "Kill Ford". Indeed, the recent news has been the bankruptcy of GM while Ford has made it through this crisis without being bailed out by taxpayer subsidy. Besides, it is Google innovation after innovation that is running rings around Microsoft.
No, Microsoft is not going to Kill Google or vise versa, however the battle is joined. Until recently, Microsoft has had a virtual PC Operating System and Browser monopoly. The monopoly is unraveling. Microsoft's browser market share has fallen from 90% to 65% in recent months. Apple and Foxfire were taking share before Google Chrome entered the picture.

Microsoft was never able to reach monopoly status in the mobile market, so it may not be amazing that Google's Android OS is making inroads. On the other hand, the announcement that Google Chrome will become an OS for the PC was a dueling slap to Microsoft's face. It required a response. The Microsoft response in regard to its Office suite is nothing more than an acknowledgement that Google's threat is real.


Let the battle rage, the consumer will be the big winner. Over the past twenty-five years, I purchased many copies of Microsoft Office. I never learned how to use most of the advanced features. I never needed half of what I bought but I had no real choice. Once Google came along, I became a great fan because Google works at making useful stuff instead of making complex expensive stuff.

Five years ago, would you have guessed that Microsoft would offer an online version of its Office suite free of charge? No way! But the economic maxim, under appreciated by many is that pure competition leads to zero profits. The corollary to this maxim is that when competition is strong, the consumer wins.

The battle between Google and Microsoft is great news. It is not something to be feared but something to be enjoyed. Owners of shares need not despair. The competition will be fierce because the market is growing so fast, but both companies will ultimately make huge profits once a Mexican standoff is reached. For now, the shift from desktop to mobile computing will be such a major deal that both companies will trade short term earnings increases for long term market share. All the while, both companies will seek ways to take share from fast growth companies such as Facebook.

Google has shown that it's advertising business model is powerful enough to support "free software". Microsoft is gradually being forced to give up some of its $60 Billion in software revenues each year to become a factor in the advertising arena. Google makes only a third as much as Microsoft, but it is growing much faster.

Google Voice, Google Wave and Google Books all represent paradigm shifts. One day you will laugh about the time you once wasted playing phone tag and sorting through spam. Children born today will have a hard time appreciating life before the Wave. Millions of "meetings" will move from conference rooms to Waves. Yes, others have produced products with some of the same features but the Wave will be adopted by the masses and thus it will be available to serve.

If you have not applied for your free Google Voice number, you should do so promptly. You should also sign-up to be notified when Google Wave is public and you should input the ISBN numbers of all your books to your Google Library. On the other hand, the wisdom of jumping on the current crop of hand held devices is an open and individual question.

Kindle just lowered the price of the II by $60 to $299. Borders offers 100 free books when you buy a Sony reader in the USA, however, Borders UK offers 1,000 free books when you buy a reader in the UK (I can't remember the brand). One thousand good books for $300 is a good deal, with a free reader attached.

China has just done Kindle one better. While I like "cell phone delivery" as offered by Kindle, the $200 knockoff in China has a sim card, which means any cell phone service provider can sell the service. Pretty soon, AT&T and Verizon readers will be available. Once the Google Books settlement goes through, millions of free or low cost books will be up for grabs. Hopefully, Google will exert its influence to push the sim card idea. Since Readers might provide good service for 10 years, it would be a shame to have ones book service tied to AT&T or Verizon. The Kindle implementation is not bad. Amazon pays the freight, at who knows what wholsale rate. It is not a problem to have cell service through AT&T and books delivered synced between a Kindle and an iPhone. The primary benefit of the sim card would be to make the best device available across multiple vendors. The exclusivity of iPhone with AT&T is not in the best interest of the customer.

The story in regard to cell phone hand sets is even more complex. The current offerings, iPhone, Pre and G2 represent powerful improvements over previous models. However, many other models will be out before the holiday selling season. Chances are that prices will be lower by Halloween. Still, most of the price of the phone is built into the price of the service. AT&T has milked the iPhone for a high monthly rate; it might be worth waiting for a better deal but the sacrifice is using the old clunker for the next several months. Perhaps the best compromise is to at least wait until Verizon offers more advanced models. The suggestion has nothing to do with which carrier you are on but everything to do with waiting for competition to drive prices down.
Oh! Driving down price is where we started. Time for: The End.

Monday, July 13, 2009

Lower Cost + Better Service = BOOM!

Sprint has announced that it will demand that its suppliers include WIFI in handsets. This is one of those inevitable, forced moves that lower the price of technology to consumers. The public often thinks that businesses set the price for goods and services. In reality, if consumers will not pay the price, the good or service is discontinued or the price comes down to what the consumer will pay. More frequently, some consumers pay the high price but others balk until a competitor offers a better deal and then the whole industry must adopt the lower price. Yes, the price for mobile Internet service is coming down. T-Mobil is offering their high usage plans for $30 per month less than AT&T iPhone plans. It has to be that some of the extra charge by At&T is extra profit for having a lock on iPhones. As other phones approch or pass the quality of the iPhone the price spread will narrow by the lowering of the AT&T price.

Verizon's initial response to the announcement was that they already offer numerous handsets with built-in WIFI. This is kind of like a car dealer saying I can sell you a Cadillac or a Buick but I'll charge you a big premium for the Cadillac because it has power windows. There was a time when power windows only came on luxury cars. It was amazing how much higher the price of the luxury cars; a price that had little to do with the actual cost of adding features such as power windows. Sooner or later, the dam broke, power windows were added as a feature on lower priced cars and they consistently outsold those without, until such windows were added to other low priced autos as well. Dealers contniue to offer high priced luxury cars but power windows is no longer the excuse for any part of the price difference. Today most cars have power windows as standard equipment and the cost, including installation of power windows is less than the cost of the old hand cranked windows. (Most consumers do not realize how much the price of a new car has tumbled over the past 20 years. The hours of work needed to buy the average new car continues to fall.)

Within a sort time, perhaps only 2 or 3 years, most cell phone traffic will be going through WiFi Routers and high speed land lines. This will allow cell phone companies to handle the huge surge in volume that is coming while selling all the more cell phones.

Many services that most of us currently access through our personal computers are rapidly being moved to cell phones. Things like an Internet search is not a new service but it will be new to billions of cell phone users over the next few years. Dramatic advances in computer translation of text to speech and vice versa will also dramatically increase traffic. The settlement reached between the music industry and providers of Internet music streams will dramatically increase the amount of time consumers listen to "their private Internet radio stations". The resolution of the settlement between Google and book publishers will mean that many hours will be spent reading books, magazines and newsletters that have been transmitted to "cell phones". It seems unreal but under the developing pricing plans, consumers will listen to a wide variety of music free of charge but will pay a few cents extra per minute after they max out their data plan.

After the Internet 1.0 bubble popped, there were hundreds of thousands of miles of "dark cable" stretched around the globe. By selling cell phones that look for the nearest WiFi connection in lieu of the nearest cell phone tower, fewer launches of very expensive satellites will be made and thousands of miles of dark cable will be lit. Cell phone companies will initially get the same price from the customer for sending the call, even though the expensive tower and satellite is not used. Don't take the point of the tower wrong, the demand for towers does not go away. Indeed, in many instances, the addition of a WiFi compatible antennae on a tower will make that tower all the more important. Still, much of the tremendous growth in traffic is going to hit a home based, work based or Starbucks based WiFi reciever and zoom out to a transmitter in another home, restaurant or work place. In other words, cell phones are being made with two modes, similar to having a car equipped with both an FM radio and an AM radio. AM radios were once the only game in town, but over the years, FM took the greater market share. In like manner, cell radios are going to be partially replaced by WiFi radios. WiFi radios (and the coming enhanced versions) are cheaper, faster and can carry much more traffic!

If you have not gotten your Google Voice free phone number, you should apply now. Google Voice is offering a significant productivity enhancement to billions of people. Companies, such as Cisco, have worked on unified message services for many years, as has Google and Grand Central before the Google purchase, but this work is just now ready for a huge global payoff. The serice is much more than a sophisticated call screening, call routing and call answering machine. It is also a text to voice translator and more. Never before has it been routine for words spoken in English to be heard in another language and for the hearer to respond in his language while being heard in English. Biblical radicals will see this as another sign that Armageddon is upon us but the savings to consumers will be enormous because the lowest cost producer of goods will be more easily found.

How about GOOGLE WAVE for disruptive technology! If you have not watched the developers video about Google Wave you should do so ( It will be months before Google Wave is available to the public but adoption rates will be rapid once it is available. Why not? Instead of sending your family and friends something similar to a telegram, you will invite them to come sit down in your living room to have a chat or to play a card game with other invited friends. Email is old, 40-year old technology; in a few years, those who use email will be the equivalent of those who still drove horses in the 1930's or model T in the 1940's.

Lower cost for better service means dramatic growth in use. Lower costs + Better service = BOOM!

Sunday, July 12, 2009

Strong Economy

As you can see from the posting found on the Philidelphia Fed web page, the economy is making a come back, after a "double dip".

Had our government officials not throw us into a ditch, we would not have needed housing and auto subidies to pull us out, but the car clunker and first home subsidies and others are kicking-in. The third quarter will be strong and the forth very strong.

Dramatic growth in the communications sector will continue.

Friday, July 10, 2009

Double Dip Recession

One of the many fears currently held by more than a few is the proverbial fear of the "Double Dip Recession"; we just had it! Did you notice? This Bull Market, the one that began around March 9, 2009, just had its "correction".

No, the market will not go straight up from here and the economic recovery still has a lot of bumping and grinding to do, but the market will not give you much of a buying opportunity and the economic recovery is already underway. Indeed, we are very near the next market "jumping off point". Yes, based on the seasonal calendar, there is serious risk ahead. October bottoms are historic and the US Congress has much compromising to do in order to produce a budget. There is much talk suggesting the March 9 lows will be tested. There are still many old neighborhoods with lots of homes for sale.

However, the stimulus funds that were passed a long time ago are finally making their way into the economy, the "cash for clunker" car program is bringing traffic to auto dealers and the housing credit will expire in November. Many a buyer will be anxious to buy before this program expires. Many a housing deal will be made by September.

The market is already discounting the great potential harm that would be done by a federal take over of health care and the passage of an onerous cap and trade tax. Even with 60 democratic votes in the Senate, the Obama Health Care plan as proposed during the campaign has no chance. The irony is that the big unions don't want to lose one of their major member benefits. And the cap and trade garbage is pure foolishness. This week, the international community said yes, yes, yes, we need to STOP THE DREADED GLOBAL WARMING, and no, no, no, we not shut-up or put-up.

Folks, Global Warming is the biggest con ever. Power hungry politicians and even power hungry industry leaders are willing to play this magicians trick. The worst part of all is that it allows industry to continue to pollute. Right now, many lives could be saved by tightening the allowed sulfur compound emissions but instead we are focused on reducing carbon dioxide which is other wise know as plant food. The more plant food we produce the bigger the volume of ocean plankton.

Over the next 12 years, China will build 72 giga-watts of nuclear power and not millions or hundreds of millions but billions of consumers will substitute electricity for gasoline in quadrillions of instances. So far, about 6% of the words population has a broadband IP address. Forty-four % of Norwegians and 24% of Americans have IP addresses. Nuclear power plants can not be built fast enough to accommodate the current compounded growth in communications traffic.

The Internet is not in a recession. Advertising revenue growth has slowed but Internet usage is growing at 27% per year. No less than 4 trans-Atlantic communications cables to Africa are works in progress.

The 18.3 year real estate cycle is at its beginning point. For the next 15 years, real estate prices will with a dip about mid-way, soar! If you are ever going to own a deluxe ocean front beach property, you have already missed the deepest discounts but there are still many opportunities. Stocks are a lot like the wagging tail of a dog. Stocks tend to jump around more than real estate but the tail tends to go in the same general direction as the dog.

Wednesday, July 08, 2009

Google Developments Are Huge!

Over the past couple of weeks, Google has made major announcements which have greeted with a bell curve of excitement, yawns and "pooh pooh". Many financial and IT "experts" have been among the "pooh pooh" crowd. Experts are often so deep in the forest that they can only see trees and not the big picture.

Google is not the only player in the new Internet 2.0, but Google is helping Internet 2.0 to climb up a new sigmoid growth curve. The acceleration stage has been reached, but few seem to recognize the significance of the break out. Significant change to the way you live your life is in the works. Your cost of living is headed down and the ease of getting stuff done is "going up". Here is a recap of some evolving events:

1) The cost of fully functional computers will fall rapidly over the next several years. By this fall, it is likely that the $200 price point will be broken for netbooks. In about 18 months the $100 price point will be broken. Today's $200 machines typically come loaded with a minimum of $250 of application software. Gradually consumers are learning that they really don't need the extra software. The $100 machines will do more than today's machines without the expense of the software.

2) Sales of Internet 2.0 phones and mini-computers, including Apple, Android and Palm machines will have changed the market place by this fall. Millions of people are going to save money by not buying "Microsoft smart phones". Consumers will initially spend more on service but their cost per minute will fall significantly. Apple just celebrated the one year anniversary of its application software store; software development will never be the same. Very personal and specific software is being purchased, leaving the howitzers for others.

3) Millions of people will sign-up to get their Google Voice phone number this year. They will acquire their phone number for life. Incoming and outgoing calls will be managed and personal time will be controlled like never before. The convergence of voice and text is a major development. "Speak and it shall be written" has been a long held dream. This technology is ready for prime time! Sure it is still in the "Model T work horse stage", but significant work will be accomplished long before the technology is perfected.

4) Late this year, consumers will sign-up for Google Wave. Even early adopters will enjoy a rich platform that will enhance their Internet experience. A friend might invite others to a Friday night Internet only party. He might post a few bridge tables, a few hearts tables, a movie and a game board or two. Attendees might find a seat at a card table while others might hang out or Kibitz. Attendees might leave and return or they might chit chat with players or non players in the Wave publicly or in separate private Wave's. Card players might play a card in mid sentence of a conversation with another attendee. Some attendees might speak their words and others might type their words. In like manner, business meetings will be held and work will get done. Those who have almost abandoned the use of their personal computer because they disliked the hassles of email will return to the Internet.

5) In 18 months, many consumers will flock to Google Chrome OS machines. These machines will boot in only seconds and will be ready to browse the Internet in something like 20% of the time it takes to boot a Windows based machine. The buyers of these machines will tend not to load them up like the "tanks" encouraged by Microsoft. Microsoft makes its money by selling consumers "tanks" loaded with very expensive "howitzers" that are almost never fully utilized by consumers. Google's goal of making the Internet easy, safe and comfortable is consistent with its goal of making money by advertising to users.

This ongoing process is similar to the conversion from the horse and buggy to the automobile. Only about 40% were willing to buy the old Model T. It took the addition of features to make the car easy, safe and comfortable before the second sigmoid curve of growth kicked-in. Features such as electric starters, safety glass, automatic transmissions and air conditioning were necessary. Think of Google Chrome OS as the automatic transmission of the Internet industry. Many people are not going to use a computer if they feel they must know how to down load software, run virus checkers and such. People can do the simple things, such as buy a tank of gas or click, drag and drop a photo, but they want to leave the heavy maintenance to the managers of the "cloud". While the Google Chrome OS will work off-line, most of the stuff that will make it easy to communicate with others will be hosted and maintained on Google "cloud servers".


After the hatchet job done by our powerful leaders, which has resulted in a major recession and the transfer of trillions of dollars of real property and other assets to the super wealthy, it is natural for the public to be in a state of discontinuity. The powerful have been playing the magicians trick of distracting the public with one hand while grabbing trillions of dollars of cheap assets with the other. The public has been sold on the idea that Global Warming and Health Care Reform are the big issues that if not "fixed" will lead to the end of civilization.

While Cap and Trade and Health Care battles make the news, the rapid progress being made to dramatically cut the cost of living is greeted with pooh poohs. Yet the "handwriting is on the wall".

Over the next 11 years, China expects to add 72 gig watts of nuclear electricity capacity. Russia just completed its first floating nuclear reactor. Weird seemingly impossible partnerships are being formed to produce nuclear power. China is mining for uranium in Jordan. South Korea is in partnership with several Middle Eastern countries. France has made deals with several countries that have huge amounts of hydro-carbons and with other that have little. Westinghouse and South Africa are in the midst of negotiations. There is even a race in progress in the USA to be build the first of new generations of nuclear power plants.

Why is the demand for nuclear power so great? For one and only one primary reason, the world wide growth of digital communications traffic is growing at the compounded annual rate of 27%! Why is this major industry growing so rapidly? Because each time a digital communication is substituted, an incredible and immediate rate of return is often the result. Each downloaded newspaper saves a relatively huge amount of resources.

Six or seven of the books on the New York Times best sellers list are available FREE of charge through Kindle! What an incredible situation?! Back in May, Amazon was selling 35% of its dual option books via the Kindle. That was before 6 or 7 of the top selling books were available for FREE. At the beach last week, I saw lots of people reading books; I saw no one reading via an electronic reader. This lack of use to date is not an indication that the technology is not catching on but an indication of how big this market is; the "handwriting is on the wall". The total price of a paper book is a good 200% more than the price of a digital book. Businesses around the world work hard to reduce costs by fractions of 1% but disruptive technologies such as this one saves 200%.

The business cycle surges when there is opportunity for high rates of return. Businesses will spend not millions or billions but trillions of dollars year after year over the next decade because the available returns are extremely high. Individuals have the same opportunity. By buying a web connected pocket computer, consumers will save themselves minutes and even hours per day. They will "waste" much of the time saved "surfing the net" but they will buy the hand held devices .

A Major Investment Cycle is Underway!