Thursday, April 30, 2009

Clever PR

Once in a while, you see a promotion that actually catches your attention. Palm announced today that they were taking applications from bloggers who were interested in getting a free phone, in return for blogging about the experience, with the soon to be released Pre.

Smart, capital efficient way to get the word out. Also, shows real confidence in the product.

In honor of Bono, GP in Elevation Partners (lead Palm shareholder):

Wednesday, April 29, 2009

Q.E.D. quod erat demonstrandum (which was to be proved)

It may be a coincidence, but in the past week, post Oracle/Sun I have found myself brought into a few conversations regarding roll-up opportunities, where a Fund executes on a strategy of bringing a number of related companies together under common ownership. It is a distinct class from traditional venture capital.

Implicit in the execution of such as strategy is a substantial reduction of the combined Companies operating economics. Moreover, sufficient capital is necessary to achieve a critical mass, where the resulting entity is a serious market share player in its market segment and has a multitude of going forward building/liquidity options for shareholders.

Since leaving the M&A advisory world nearly than 10 years ago, I have not spent many cycles thinking about the opportunity, and don't really have an opinion on the segment, but thought a compendium of these conversations would be of interest.

Arbitrarily, if we look at one market, say security, it's now (over)populated with nearly 1,000 vendors. Unfortunately, 950 don't have (and never will) a meaningful EBITDA. This overpopulation will need to adjust (shrink) as customers just don't need choice of this magnitude; that's the opportunity.

For illustrative purposes, let's make some assumptions for a target anchor company:

Revenue $50mm (growing 20%/year)

EBITDA $ 5mm (for simplicity assume this is also pre-tax income)

The company has been sitting in 2-4 venture portfolios for 6-8 years and such Funds are now approaching their LP's with a series of one-year life extensions. The GP's are no longer receiving fees for managing investments from these vintage funds, and the LP's are suffering illiquidity angst. While the Funds were not previously excited about a 'sub-par' exit that nearly returns $25mm in assumed invested capital (management will also participate (happily) in the exit pool), I suspect the dynamics have changed. Returning capital, when the classes you are measured against are down 40%, is not such a relatively bad thing anymore.

The target company is too small for an IPO (even if there was a window), too large to receive more venture funding, too insignificant to move the needle by a large acquirer, and after a long IPO drought, the 'best' buyers, those in the middle-market, are all but extinct. These are dynamics not limited to security but are endemic across the entire software/internet world today.

I suspect the M&A market will value such a company somewhere in a 4-5x EBITDA range. This loosely equates with 50% of total revenues (note, Sun is being acquired at 1.5x MAINTENANCE revenues).

With a near-term objective of maximizing cash-flow, I would expect the $45mm of operating expenses can be slashed to $25mm, while revenue declines to $40mm. Leaving $15mm of free cash-flow.

While speaking with my operational friend, Dennis, and expressing concern about what the cost reductions would mean for future growth, he highlighted that you should put all your focus on one objective. If it's cash flow, when you achieve the sought metric, it will give you great balance sheet flexibility to either execute subsequent add-on's (with greater cost reductions and enhanced deal structuring alternatives) to fuel incremental growth, upstreaming cash to shareholders, or replacing debt with equity.

Of course, these thoughts are not unique. CA built a multi-billion company with precisely this modus operandi. A concern though, in looking at the market today, vs ten years ago, is that customers are much better built to 'plug n play' vendors. The effect of open source, common API's and a move to a cloud based infrastructure, is that lagging vendors, or one's whose relevancy has declined, are subject to more rapid replacement than previously contemplated.

I am sure many 'buy low and sell high' professionals are looking at similar dynamics. No doubt we will see a number of busy players soon. Hopefully, rebuilding the 'middle market'.

Bill Gates, Jr and Bill Gates III

Enthralling interview last night on Charlie Rose.

What I learned from my son Bill "An insatiable and demanding curiosity"

Tuesday, April 28, 2009

Beg, steal or borrow

The NY Times published a disturbing article that highlighted the growth and quasi-legal status of the handset black market. Adding to the pricing pressures of chip commoditization, intense global competition and innovative R&D, legitimate companies are increasingly facing IP rip-off's.

These pirates have captured a 20% market-share in the worlds largest cell-phone market and are now exporting to other major markets. Safe to say that state sponsored IP piracy won't be limited to phones, movies and music. In practice, this is a form of globally exported deflation. Unfortunately, it also probably represents a growth market.

A few thoughts jump to mind:

1. I have focused previously on the trend towards permacheap. By this I mean that we are not in a short-term economic cycle that's reflected in downward pricing pressure. We've hit the reset button for a long term trend to lower prices. Perhaps, permacheap isn't enough and there's room for a permacheap(er) category.

2. IP investment is necessary, but not sufficient, to create value on its own. Iterative value, in the likely form of community, brand or support are critical to mitigate permacheap pressures

3. Current trends probably shifting the risk/reward for investing. Traditional VC looks at either investing to create a new market or investing to alter an existing market. If a company can harness permacheap (e.g. Craigslist or Skype) it's compelling to enter, and destabilize, an existing market.

Monday, April 27, 2009

Rules of engagement

For the past four years I have been a guest in Amir Goldman's class at Wharton. This year, Howard Morgan and I will be commenting on their year-end entrepreneurial projects, and giving a few 'words of the wise'. It's a big responsibility, and I have tried to distill a many thoughts down to a few pithy snippets:

1. Companies are only as healthy as their customers. If you are supplying the auto industry or financial services verticals, no matter how smart you are, it's a difficult place to build equity value within an existing company. These industries are shrinking. On the other hand, growing companies, within growing industries are limited by the number of qualified people they can attract. Focus on growth industries and look to the largest, or fastest growing companies to be a part of.

2. We are at the beginning of a permacheap revolution. The coming of age of the digital generation who will start and run businesses with incredible capital efficiency will lower prices for customers, contribute to a surplus of real estate, think globally from the outset and be EXPORTERS of DEFLATION. You can choose to try to fight this, or jump on the bandwagon. The media companies, by putting up walls to prevent 'analog dollars' from becoming 'digital pennies' will unfortunately, be left with digital air.

3. The 'batch' world is dead. We are addicted to real-time communications and expect if from our peers, vendors and even friends. As Twitter has shown, this is a big opportunity, which I am sure, will have many branches

4. By embracing and empowering a community, you can simultaneously offer greater value, lower expenses and be a good citizen to boot. It's a great time to listen to folk like Craig Newmark.

Friday, April 24, 2009

The Hudson Year

I attended a lecture last night by Russell Shorto, author of An Island at the Center of the World. A history of Dutch Manhattan. He is an engaging speaker and the setting in historic Irvington, NY (sponsored by the historical society) was fitting.

This is the 400th anniversary of the English explorer who, claimed NY on behalf of the Dutch. Hudson was a twice failed explorer who was obsessed with finding the Northwest Passage shortcut to Asia. He had a reputation as an iconoclast and after contractually agreeing to promptly sail west towards the New World, he took off North and East, with a belief that the North Pole was only a rim of ice, backed by a temperate zone. When that failed, after 6 weeks, he headed West and into the history books.

The experience of the Dutch, and later the English, reminds me of Google's Marissa Meyer's statement; "innovation, not instant perfection, you need to iterate". The Dutch approach to its colonies was far different than the British. The Dutch believed in a capital efficient approach to its colonies, where they chartered trading companies to administer the territories with the objective of building profitable enterprises with a minimum of State investment. The British concentrated on building longer term value through deeper upfront investments in settlement and native subjugation. Both, unfortunately, embraced slavery as a facilitating means for their objectives.

Hudson 'discovered' NY in 1609, the West India Trading Company brought settlers in 1625 and in 1653 New Amsterdam was chartered as a Dutch City. Forty four years to build a recognized community; if only they had Craig Newmark to help!

Wednesday, April 22, 2009

Finding a Permacheap voice

On a conference call today between the US, Canada and Israel; set up through They offer free conference calling while making money via a revenue split with the local phone company by driving incremental traffic their way. Like a brick and mortar affiliate program

As was my habit, for price and quality reasons, I signed on via Skype. Unfortunately, it crashed (as it seems to do quite a bit these days since I downloaded Therefore, it was a wonderful opportunity to put the recently updated GoogleVoice to the test.

The quality was amazing and the price is competitive with Skype's free version. Note to folk considering investing in/buying Skype....there's a new sheriff in town to watch for.

Tuesday, April 21, 2009

Brevity is the soul of wit

A quote of Lord Polonius from Hamlet, cited by Craig Newmark last night at Gordon Platt's Media 3.0-What's Next?". Michael Wolff, author of The Man who Owns the News and Burn Rate joined him on stage and the contrast was stunning.

Mr. Wolff looks like he's right out of Bonfire of the Vanities with strong opinions, a hyper cadence and incredible certainty for his vision. Craig Newmark is modest, brief, and he said it best...'I'm a nerd'. You gotta love him.

A few points and observations:

1. Craigslist is an infrastructure that operates a combined business and social network. The success of the social network drives the business.

2. They really take the customer experience and community health seriously. Clearly a core Company value

3. 'We do one simple thing really well. Classifieds'. One of the challenges is to keep things simple, not get distracted and serve the needs of the people who come to the site.

4. The site, similar to Google's, is totally uncool. No graphics, minimal color, real estate dedicated exclusively towards community navigation.

5. Craigslist does not really innovate. Some 'cool things' in the back-end, primarily around fraud stuff, but no real original stuff since 1996.

6. The Company, or Craig, are the antithesis of 'internet speed'. If there is any sense of urgency, it's around keeping the site engaged with the community.

7. Craig "As a nerd, I like precision and measurement', however, I recognize that social media is just beginning and it's really hard to form opinions about good or bad at this point in a market's formation.

8. No advertising, no search engine marketing, only word of mouth to get the message out.

While at the session, I was toggling between Craigslist and Michael Wolff's news aggregation site Newser. Unfortunately, Newser does not offer a thrilling load experience on mobile devices and, IMHO does not stack up well against Daylife (where Jeff Jarvis and Craig Newmark are investors), nor my favorite Meehive.

It was interesting listening to the questions/observations from the audience and the moderator. Less interested in listening to observations gleaned through the windscreen, there was much bemoaning the decline of 'old media' as epitomized by the NY Times. Naturally, Craiglist, the permacheap of classified advertising, was an easy target for Luddite snipers.

Friday, April 17, 2009


about all the swirling rumors around whose buying Twitter and why they ought to be acquired in '09. Recently, as reported in the Gray Lady, Credit Suisse published an estimate that YouTube will lose $470mm in '09 and is still having trouble monetizing the site to come within hundreds of millions of dollars to matching revenues with expenses, 3 years after its acquisition by the mother of all internet monetizing engines.

Skype, another once small company acquired for a huge price tag, is being divested after failing to remotely carry the weight of acquisition expectations. For me, there's enough pattern recognition that the few prospective buyers, with huge war chests and high multiples (er, relatively high multiples) will sit this one out till an economic model is established, one that's complementary to someone.

Meanwhile, Twitter, best of luck on catching all the money PE firms will throw your way on the Long and Winding Road:

Trust me?

Jeff Jarvis has written a wonderful book What Would Google Do? that covers his thoughts on navigating the digital social world; both from a business and a personal perspective.

I thought it would be appropriate to add a Jarvis inspired perspective to the recent timely postings on board communication by Josh Kopelman and Fred Wilson. Jeff cites an inverse relationship between control and trust. He espouses that as an institution (or individual) marshals centralized control, the degree of control has a reverse correlation with the amount of transparency offered. Control turns people off; transparency makes them feel part of your community and more likely interested in your success.

Using company examples, community members of Facebook, Twitter, and Friendfeed are deeply invested in the success of 'their' platforms. They spend time to build applications, provide content and proffer unsolicited feedback for the selfish reward of looking to improve and extend 'their' experience; way more than 'users' participate in the success of traditional hierarchal ecosystems (MSFT/IBM). Just think of the difference between 'users' and community 'members'. It's not sematics, it's company DNA. This cultural shift facilitates a virtuous cycle of rapid adoption of software that has near simultaneous bottom-up and top- down development that is anathema to the control ethos of 'brick and mortar' software vendors; an evolution from the open source model. It's a critical reason for the success of these aforementioned and other similar entities.

This concept is also critical in the ways a CEO builds a relationship with a board. Access to timely, relevant, and unvarnished information (vs data), builds a simultaneous top-down and bottom-up feedback loop on company progress, challenges and threats. It begats trust and, therefore, a diminished desire for control.

Of course, performance is a clear way to engender trust. But, let's face it, we are living in a world where adversity and ecosystem sea changes are the norm that comes with a CEO's job description. Dealing with the inevitable challenges in an open way, with a spirit of partnership is a necessity in a real-time world where you are accustomed to being but a Twitter, a post, or view away from information you want (and don't). Why should communications with a board be different?

The bar for CEO communication with a board has been raised as people are accustomed to running their businesses and personal lives in a real time manner. A community of investors/board members is really no different that a community of customers and employees. They expect, and will soon demand to be treated in a similar manner.

It's true, trust is hard to earn, yet easy to lose.

Thursday, April 16, 2009

Kobe Vs Yossi

Yossi Vardi is one of those larger than life personalities. With successes in industry, the Israeli government and the internet (ICQ), he's now branched into being a video star.

Here is a video of Kobe Bryant strutting his athletic bona fides, followed by Yossi doing the same:

Looking back at Ebay's Skype thinking

The talks regarding eBay's sale of Skype has not yet proffered an acceptable bid and a divestiture, into a stand-alone public entity, is now the expected resolution for this corporate soap opera. When such a strategic and visible transaction does not work out, it's valuable to look back at the reasons for doing it in the first place.

Below, courtesy of Slideshare, is the presentation eBay Management showed to the world two years ago to justify why they paid $1.3B in cash + $1.3B in eBay stock + $1.5B in potential earn-out value ($500mm was earned) for this little revenue, fast growing Company with such wonderful potential to disrupt the communications business.

Post-acquisition, Skype grew by leaps and bounds, built a sound economic model through being at the forefront of permacheap communications and seems poised to become a great standalone communications business. Yet, the promise of the acquisition "to accelerate commerce on eBay", failed miserably. Moreover, it failed as a platform (Skype Extra) whose mandate was to diminish commerce friction or even to encourage growth in numbers or transactions, for the eBay community. Simply put, there was no 'synergy'.

Unlike Youtube, which at the time of Google's acquisition had many similar traits (fast growth, unproven economic model, huge acquisition price) two fundamental differences stand out. First, is that YouTube's founders stayed involved (there is no replacing the passion or vision of founders), second is the business of YouTube is so closely aligned with the business of Google that I have never heard a Google person speak of YouTube as an appendage to body Google.

I hope Skype prospers in its Splendid Isolation

Wednesday, April 15, 2009

Good things come in all sorts of packages

Dennis, my friend from the North, sent me the link below. Dennis is an intrepid entrepreneur, turned investor, who has a knack for seeing people not as they appear on the surface, but for their inner talents. For the past few months, he's had to suffer my soliloquies about now being a special time to listen carefully to entrepreneurs pitching ideas that, they are convinced, will change the world...but are being ignored, or worse.

Check this's really worth a view:

Tuesday, April 14, 2009

Latest gossip from Video-Meetup (Boxee and more)

Tonight the NY Video Meet-up 2.0, hosted by Yaron Samid, had their monthly get together. This session was a bit unique in that provided a live stream/chat facility for 65+ remote users (including yours truly). Unfortunately, the system died midway through the Boxee presentation; and was up and down for the rest of the night.....frustrating as hell!

Frustrations aside, the NY Video forum has rightly grown to be the most dynamic place to see what's happening in the NY internet related video space.

Presenters included:

Boxee- Avner Ronen, CEO. They launched an API for developers that enables them to hook into the Boxee system. Applications will be available through an Application Store. Developers control the UI and Boxee takes the role of platform provider that brings the social aspect to the big screen. Clearly a move away from the Company's initial business of replacing the UI from content providers, thereby violating their ToS (causing the Hulu snit). Not sure there is great value here (unless they can build a huge installed base), but I have to give them credit for moving so rapidly to try to find relevance, that is legal, to build a business. Seems like smart folk who I would not bet against.

Mogulus- Max Haot, CEO. The Company offers a live broadcast platform 'Procaster' where Producers can use the Mogulus browser-based Studio application to create LIVE, scheduled and on-demand internet television to broadcast anywhere on the web through a single player widget. They have a free (ad-supported) and Pro (white-label, no-ads, pay for usage) service that includes the ability to mix multiple live cameras, imported videos clips, and overlay graphics.

When it works, the company says Mogulus producers can broadcast live from a mobile phone; use a customizable flash player with integrated chat (which I think has moderation); and develop a branded channel page that incorporates interactive chat. The system is now only PC based with a Mac version in development.

When the system briefly came up, before crashing again, Max showed some neat features that included zoom and 3D panning and a broadcast virtual world gaming demo.

KickApps- Josh Weinstein, Product Manager. They provide a white label platform for companies to rapidly build customized community sites that feature video. Customization is all widget based drag and drop, including the UI and back-end campaign tracking and ad insertion. They too have a free version (where they serve ads to your site) and a paid version where you control all content. Over the last year, their partners have enjoyed 500mm views.

Diversion Media- Nicholas Buttersworth, CEO. The Company has built a video publishing platform, called HD Cloud, to provide transcoding and delivery solutions for partners. As you would expect from the name, the service is in the cloud and the Company charges on a per MB delivered....effectively converting fixed costs into variable and, hopefully, offering better value than in-house solutions.

Monday, April 13, 2009

Monkey in the Middle? Not.

The recent tribulations of traditional media companies is again shining a spotlight on Google's role as an intermediary. Scott Karp of Publishing 2.0 summarized his perspective here:

"Those who argue that Google is a friend to content owners because it sends them traffic overlook the basic law of supply and demand. The value of “traffic” is entirely relative. The more content there is on the web, the less value that content has — because of the surfeit of ad inventory and abundance of free alternatives to paid content — and thus the less value “traffic” has. The more content there is on the web, the less money every content creator makes, and the more money Google makes by taking a piece of that transaction".

The dilemma around generating sufficient margins to support content development and distribution really goes beyond traditional publishers and into the fabric of most for-profit internet sites too. An exploding distribution channel is affiliate networks. Firms that rely on affiliates to drive traffic and revenue will, for the most part, inevitably experience diminishing returns as affiliates compete to capture a share of the clicks and dollars in their chosen vertical as they insert themselves into the value chain as yet another middleman trying to game the Google system. Those that add real value and are rewarded with sustainable traffic will prosper, but firms that rely on a search engine arbitrage by buying placement more efficiently will be commoditized.

We are witnessing the rise of the middleman's middlemen. SEO firms are paid a slice of the pie to game the Google algorithm, affiliates are paid a slice of revenue for capturing traffic and the list of fractional middlemen has spread throughout the internet value chain. Unfortunately, the weight of all this 'optimization' breaks two fundamental drivers of the internet economy. Permacheap groans under the weight of so many hands in the revenue or margin pocket and trust suffers from SEO wrath.

Nick Carr, recently posted an interesting perspective here where he argues:

"Where the real money ends up is at the one point in the system where traffic is concentrated: the Google search engine. Google’s overriding interest is to (a) maximize the amount and velocity of the traffic flowing through the web and (b) ensure that as large a percentage of that traffic as possible goes through its search engine and is exposed to its ads".

Taken another way, the goal of Google is to encourage permacheap content and to lower the price of conducting commerce. These are noble and reinforcing objectives. Free quality content drives traffic. Traffic brings advertisements and companies that are middlemen in the ad placement business then prosper. Likewise, internet commerce drives internet based advertising. Google's success has been around throwing friction out the door. It's unfortunate that Google's ecosystem looks for an open window enabling friction, under another name to jump right back in.

Sunday, April 12, 2009

Getting Current (as in TV)

PE Hub reported that, to no surprise, Current.TV withdrew its planned IPO. The company recently came to mind while reading Jeff Howe's wonderful book, Crowdsourcing. It has a nice description of Current's travails, while they were looking to establish a business in the prosumer video niche. The book details the Company's attempt to 'democratize media' by attracting and nurturing a community of posters, reviewers and viewers.

The book is a must read for those interested in community based businesses and has a number of 'rules of thumb' that are always quotable, and sometimes even right. My favorite here is the 1-10-89 rule. For each person who posts content, 10 will comment, and 89 will view.

Current had a rocky beginning and, similar to many young companies, zigged and zagged before taking down their site in '07 and relaunching with a firm community embrace around news, entertainment and gaming. The content is a mixture of Professional (e.g. CNN and National Enquirer) and prosumer. Little things, such as welcoming members and empowering the community to vote on videos went a long way to establishing the company. Though, based on the Quantcast numbers below (if accurate), I suspect the company is having a difficult time bringing revenues, or attracting more capital.

Here's a sample of one of the Current videos 'The Rotten Tomatoes Show'

Friday, April 10, 2009

Google's Schmidt on M&A

Silicon Alley Insider ran an interesting piece today that quoted Credit Suisse analysts Kenneth Sena and Spencer Wang estimating that Youtube will lose nearly $470mm in 2009. The article went on to highlight Eric Schmidt saying that, 'going forward, GOOG will be more careful with potential large expense streams, which are of uncertain returns'.

Translated, Google is not a premium bidder for properties such as Facebook, Twitter, or any other popular social site...unless it has demonstrated its economic model. Despite the theoretical low capital cost attraction of a community creating or posting content that populates a site, the scaled economic viability of such sites (unless commerce driven) is yet to be effectively replicated.

I suppose the Google Venture capital arm will be a low cost way to experiment within these paradigms.

Good for Google and bad for entrepreneurs and investors in fast growing yet cash consuming and business uncertain companies hoping for a premier exit.

Wednesday, April 8, 2009

Virtually fine

One of the most visible companies in the 'virtual life' market is Linden Labs, maker of Second Life. Over the last year, for various reasons, the Company has experienced a stream of executive departures, including founders, the re-asigning of it's founding CEO, and other turbulence.

What many casual observers perceive as the game market seems to be undergoing a seismic shift. The granddaddy of the industry, EA is struggling chart here, in a world where the growth seems to now be in casual games and virtual worlds. Both have strong on-line presence, with radically different business models that are anathema to EA's price points, upfront oriented revenue streams, and retail distribution. Another, more subtle thought is an open source comparison you can make with virtual worlds and 'state sponsored' games. It's a bit like the contrast open source vendors make with proprietary software and the Cathedral and the Bazaar where tens of thousands of virtual players create an experience that's superior to a top down design approach. Critically, the value is also delivered in a permacheap format.

Interestingly, and perhaps inevitably, the virtual market also has an open source flavor. One open source site, started in 2007, which at last count has been viewed more than 1mm times, is Opensimulator . For a perspective on the 'business model' of this, and other communities check this out. It's founder, Darren Guard, is leading a for profit venture Tribal Media that's a sponsor of OpenSim and is creating content for virtual worlds

The virtual world marketplace has now reached 300mm users (2008) and is growing 10-15%/quarter. Gartner (who would have thought Gartner would cover this segment, let alone thinking that IBM have a major presence in Second Life) predicts revenue for this segment will exceed $3B by 2012. A true sign of an industry that's hit the relevance bar is its own magazine Virtual Worlds Weekly.

Revolutionaries, doing what they want....and millions follow:

Sunday, April 5, 2009

Sun setting

The NY Times reported tonight that the Sun/IBM deal is off the table, at least for now. Having been through emotional drills similar to this many times, it seems as if IBM has the cards and Sun is playing a dangerous poker game.

A read of the tea leaves suggests that IBM is the only serious bidder here. Turning back the clock two weeks ago, rumors surfaced of an impending IBM bid. I don't know where the rumors came from, but do know they only benefited Sun as it was a very public invitation to parties (contacted and not) that a serious player is deeply engaged. Get into the game, or forever hold your peace. It seems that no one else stepped up to the plate.

IBM entered an exclusive negotiating period to conduct due diligence, and according to the NY Times, lowered its price from $9.55/share to $9.40/share (2%) and resisted 'guarantees' (most probably deal break-up related) suggested by Sun. As a result, Sun, a broken company, is now a spurned broken company with scant partnership alternatives.

It's a shame that such a proud franchise is headed towards such an ignoble end.

Thursday, April 2, 2009

Scrambled Eggs

Josh Kopelman of First Round Capital has, as one of his investment maxims, a belief in investing in companies which have the potential to shrink markets. He's right and I have often looked smart by quoting him.

I was in a board meeting the other day and the CEO was explaining that positive sales momentum was around the simple value proposition of offering enterprise customers a 75% discount to existing vendor prices, while offering a comparable SLA (Service Level Agreement) and a better end-user experience that positively affected our customers revenue. It was a perfect opportunity to quote Josh again.

As background, the company is in a multi-billion dollar revenue market, so there is plenty of market to shrink. But, while we were discussing the implications of shrinking the market (and I was quoting Josh), from the back of the room came a lonely voice of wisdom. The VP of R&D meekly chimed in that we were not really shrinking the market, we were expanding it. True, our customers were drastically cutting their bills. True, their customers were getting better service. But (and there always is a but), the implications of the first two points is that much more content than planned is coming on-line. Therefore, though the ARPU (average revenue per unit) was in deep decline, the number of units looks to greatly increase and the Company should be able to achieve margins 25% higher than the previous generation of vendors.

I don't think the gross market size will settle at 25% of today's level; but it seems logical that a 50-75% level seems likely. Of note, new vendors seem poised to take a 50% share of this redefined market definition. With the enhanced capital efficiency we are seeing each day, it's worth tumbling the dice


With the demise of Silicon Graphics just about now complete, perhaps, looking to discern a simple insight, or to salve the passing of an icon, I hearkened back to what made them great.

What I came away with is the 'Wow' factor. A product, or service that's so unique that it replaces a silent exhalation of breath with a quiet, heartfelt Wow. Sometimes, as with SGI, its special Wow becomes commonplace, emulated and morphed by many. Other times, as with Microsoft and Peter Pan (remember when the folks on the 'edge' loved them?), the Wow slowly dissipates till, before the Company knows it, it's gone. IBM, to its immense credit, recognized they were no longer in the Wow business when Mr. Gerstner shifted its culture and business from Wow to mundane.

Apple, is one of the few companies steeped in Wow, lost it, then found it again. A part of me wishes Palm can do the same.

Thinking back, here are some of my software/internet Wow moments:

Visicalc on an Apple II


Windows 3.1

Lotus 123


Netscape Navigator

Dell- Customize your PC online and buy it cheaper than anywhere else








There really is no substitute for discovering a product/service so compellingly new that it takes your breath away. Something to dream about