Jerry Yang Resigns and Wall Street Piles It On
Nov 18th, 2008 | By Patrick Cox | Category: Featured, Investing Strategies, TechnologyAs you probably have heard, it was announced today that Jerry Yang, founder of Yahoo, had stepped down from his post as CEO. Although the stock is up about 10% today, the future of Yahoo is still very much up in the air. As I told my readers a few months back, the value of Yahoo is not primarily its search engine revenues. It is the company’s dominance of Web mail. Yahoo has twice the hits of Microsoft’s Hotmail and 10 times those of Gmail.
Web mail matters because it is the best portal for Web-based software. Web apps are the future of productivity tools for a number of reasons. First of all, the need to install and update software on your own machines is becoming unnecessary as Web connections improve. Some of us will never cede control to somebody else; most people, however, would prefer not to think about their software at all.
The other reason that Web apps are attractive to software sellers is that they are harder to pirate. Right now, sophisticated users can download and install pirated versions of virtually any Microsoft software. They can even get registration codes that make this appear legal. If software doesn’t reside on your PC, pirating is much easier to combat. The owners of the software will get their revenues either through licensing or targeted advertising.
Microsoft launched its Windows Azure just a few weeks ago. This is an operating system environment that allows developers to build software that runs from the “cloud.” The “cloud” is simply the network of remote hosts on the Internet.
Seven weeks prior to that, Google introduced its own Web browser: Chrome. The fascinating thing about the Chrome launch was that it wasn’t even low-key. It seemed to be timed purposely to avoid public notice. With only 1% of the browser market share, some are calling it a failure. I caution that it’s usually a mistake to assume a Google failure. Chrome is optimized to run Google Web apps. Third-party Google software developers will use it to produce programs that will be accessed through Google.
Eventually, I suspect, some form of Chrome will end up on Google phones. Well, they won’t actually be phones. They will be full-blown computers small enough to fit in your pocket with phone capabilities. We’re nearly there now. Active Innovation Management has announced the OLO Computer. It will be, the company says, a docking station with a full-sized keyboard and screen that uses Apple’s iPhone as trackpad, modem and CPU. I wouldn’t bet on the company, however. Apple is reportedly coming out with its own iPhone dock PC. Apple will have the advantage because it owns the operating system and has more lawyers.
Google, however, is undoubtedly preparing a “netbook” computer that will integrate its Android phone. Samsung, which I consider the most innovative phone manufacturer, will have a version. So will Nokia, Meizu, etc. This is, in fact, the long-vaunted convergence. Increasingly, the cell phone/PDA market will supplant the PC market.
For this reason, I consider manufacturers of traditional PCs at extreme risk. The three largest are Hewlett-Packard, Dell and Acer. HP and Acer are entering the market, and rumors are that Dell will soon. Ultimately, their survival will require it.
For transformational profits,
Patrick Cox
November 18, 2008
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