Ganders and Geese
Whether or not you believe the government should be “bailing out” Wall Street banks, I think it’s fair to say that the financial system itself is critical to the functioning of our economy. If it wasn’t, we wouldn’t see our current problems growing so quickly and pervasively.
The automobile industry is another issue. It’s certainly a smaller part of our economy, even after the shrinkage of investment bank market caps. And there’s no way I’d ever call it essential. Fundamentally, people aren’t buying cars, so what does anyone expect to happen? Why should the auto industry be different than any other industry that’s facing a deep recession? And do you notice none of the foreign-owned manufacturers are crying? All of them operate plants here, why aren’t they in dire straits?
All of which makes talk of a bailout of Detroit significantly more contentious, notwithstanding the recent pilgrimage of auto and union execs to genuflect before the newly vitamin-fortified Democratic leadership in Congress.
But OK, I’ll bite. The failure of any of Detroit’s Big Three would have a large impact on jobs, at least in the short term. And it would propagate to the auto parts industry, and probably a few service industries, as well as financial services (think GMAC). So let’s suppose that a bailout of some sort makes sense, and Congress decides to pump some of that rapidly vanishing $700M into GM, Ford, and Chrysler.
What are they going to do with it? How do we know they’re going to use it to solve their problems? Even more important, what sort of return should America expect from this “investment”? Are we just bailing out a bunch of fat-cat executives who flubbed their corporate strategy? I mean seriously, these incompetents have been lining their pockets with big bonuses, and now they want us to bail them out? WTF?
I have this strange feeling of deja vu.
Seems to me the same politicians in Washington that have been screaming for oversight of the financial services industry, and influence on how any bailout money is used, ought to be making the same kind of noises here. After all, what’s good for the goose is good for the gander. But so far, not a peep. Or a honk.
Here’s what I’d like to see:
- The Chief Executive of any auto company taking government bailout money should be fired.
- Suspend executive bonuses for the rest of the top management ranks
- No dividends of any kind to be paid out to shareholders of the auto makers (sorry, Cerberus Capital Management, no quick exit here.)
- Only two permissible uses for the money: reducing carmakers’ onerous pension obligations to a more manageable level, or retooling plants inside the U.S., to produce more fuel efficient and/or otherwise competitive cars
Think any of this is going to happen? Nah, neither do I. My bet is that the money will go out with only token strings attached to it.
And in 5 years or so, the Big Three–whichever ones are left–will still be limping around getting their butts handed to them by foreign manufacturers who are making better cars in U.S. plants for less money and selling more of them.
I think our goose is cooked.
Disclosure: I hold no position in any of the stocks mentioned here.
Add comment November 7, 2008
‘tennas, Anyone?
Ever wake up in the morning, fire up the PC, and then find your Internet connection doesn’t work? Annoying, isn’t it? Particularly if you have no idea why. Imagine if that happened to your television set.
It could, if the day you wake up is February 17th, 2009.
That’s the day that over-the-air TV stations in the U.S. are required to cease analog transmission and go to all-digital. People who have analog televisions will no longer be able to receive broadcasts.
These unfortunate souls have three options: buy a new digital TV, purchase a special converter box (subsidized by government vouchers), or subscribe to satellite or cable.
All of this has been getting fairly wide publicity. It’s also confused a lot of people. Naturally, cable and satellite providers have joined the party, by trying to con their customers into believing they need to upgrade to digital service to watch (any) TV after the cutover. DISH Network is just one example.
(In reality, no one is “forcing” the telecablecos to upgrade to digital. But since they want to go digital for their own reasons, they’d dearly love for you to opt into higher monthly fees.)
The government ran a DTV “beta test” in Wilmington, NC in September. However, the hoopla surrounding the test, the low percentage of analog households, the presence of special help lines, and FCC commissioners lurking in the area are conditions unlikely to be duplicated when the nationwide conversion occurs.
That will affect an estimated 13 to 23 Million households–most of which are, understandably, not tech savvy. And 35% of which are completely unprepared for the transition.
Wait, it gets worse.
The dirty little secret, not widely publicized (or understood), is that even if you have a new converter box, you may lose your signal anyway.
Analog signals degrade in a familiar way–the poorer the reception, the more snow you see, and the fainter the picture gets. Digital doesn’t work like that. It tends to fall off the cliff entirely. Except for a bit of pixelation, the picture is either there or it isn’t. So people with indoor rabbit ears, or bad rooftop antennas, may lose some or all of their stations, depending on how good their reception was in the first place.
But there’s more.
Some stations are broadcasting at intentionally reduced power levels during the transition, but will ramp up subsequently. People could lose their signal only to have it restored later–perhaps after they fall off their roof trying to install a new antenna. On top of that, so-called “low-power” stations aren’t required to go digital at all. So to receive those, you’ll need to be sure and get a converter box with analog pass-thru.
What a mess.
People who want to learn more about the transition to DTV can do so at the FCC’s official site. Detailed help on antennas can be found here.
One thing’s for sure. Congressmen and FCC commissioners (current or budding) will be getting their ears bent big time after the switchover, once hundreds of thousands of loyal constituents are without their bread and circuses. The response will undoubtedly be swift, accompanied by pompous rhetoric, rolling heads, and ill-advised new laws.
Still, it could be worse. Imagine the response if 2009 were an election year, and politicians faced the prospect of people not seeing their re-election ads.
Disclosure: I hold no position in any of the stocks mentioned here.
Add comment November 4, 2008
C’mon In, The Water’s Fine
The blogosphere has been abuzz since last week about Comcast’s (CMCSA) new policy limiting the amount subscribers can download. Starting October 1st, Comcast will limit users to 250 GB of total downloads per month. Violators will first get a warning if they exceed the cap. A second “offense” within 6 months will risk loss of service for a year.
I continue to be amazed at the ISP business. The telecablecos are the only companies I know that limit the use of what they provide, instead of selling you more of it. As I wrote some months ago, the reason is largely due to the fiction of unlimited usage banging up against the reality of limited network design and oversubscription models.
I could rail at how unfair Comcast is being, or how out of touch they are with Internet users, or how ridiculous it is to punish people for exceeding usage limits they can’t measure. But I’ll leave that to other, better minds.
Instead, I’ll point out how Comcast isn’t even solving the right problem. The trouble with its network isn’t so much capacity in bytes. It’s peak speed.
[Let's ignore for the moment that the Internet is a two-way connection mechanism, and think like a telecableco, where the purpose of ISPs is to shove stuff downstream to you. We know different, but bear with me here.]
Ever take a shower at the same time as someone else in your house? What was the result? Yup, low water pressure, and a singularly annoying experience. Now imagine that on a neighborhood scale. Five people on your street decide to get clean at the same time and all you get is a dribble out of the shower head.
So what’s the solution? Well if you’re Comcast, you limit the size of the swimming pool your subscribers can have. Huh?
How many bytes you download is much less important than when you download them. If a thousand people try to stream a movie (shower) at the same time, they only use up 5 GB or so, but the experience sucks, because the speed (water pressure) is reduced for all. Conversely, download 250 GB (fill your pool) overnight when hardly anyone else is online, and you not only get a fast download but you don’t bother others.
Instead of limiting bytes–a poor proxy for usage–Comcast might be better served by limiting speed. Then they’d be in a position to charge different prices for different speed tiers. This would be relatively easy to do by capping modem speeds, would allow more accurate network capacity planning, and would solve the actual problem, namely congestion at busy times.
In other words, charge for water pressure (or size of water pipe), not the amount of water you use. If you want better pressure, pay extra. An alternative would be time-of-day charging, like traffic on interstates, bridge tolls, and electricity usage. (I suspect that would get too complicated for consumers, but you never know.)
Honestly, Comcast isn’t dumb. So why are they capping total bytes? Two explanations spring to mind, both only small contributors in my view:
- It’s easier to simply monitor total usage and kick people off. (Admittedly, most subs won’t run afoul of the new limits any time soon.)
- They’re clinging desperately to the fixed price, all you can eat model of bandwidth, and are loathe to change it unless their competitors do (that assumes they have competitors, of course).
But the real reason is that Comcast and their ilk want to be in the water business, not the pipe business.
Anybody think that the new usage caps won’t apply if the content you’re downloading comes from Comcast? Like, say with the new Network DVR service some of the telecablecos are itching to charge you for? You bet.
I have no doubt that if Comcast provided most of the video and other content you consume over its connections, their congestion problems would magically disappear. They’d probably even be advising you to build a bigger swimming pool.
And reminding you to fill ‘er up.
Disclosure: I hold no position in any of the stocks mentioned here.
Add comment September 2, 2008
Widgets And Idjits
Intel (INTC) and Yahoo (YHOO) recently announced a venture to develop a platform–dubbed “The Widget Channel”–that in effect turns your TV into an Internet thin client. Seth Gilbert over at Metue.com has a great summary.
Developers can write software widgets that can be uploaded to your TV and run in the background. You could check email, share photos with friends, bid on eBay, anything a widget on your Mac or PC can do. All while watching your favorite TV show or sports event.
Of course, you’ll also have to buy a new TV or Set-Top Box (STB) that is equipped with Intel’s CE3100 Media Processor. Good luck with that.
[I wonder sometimes whether anyone ever sees the obvious disconnect between relatively fast new media business development cycles--i.e. "Internet time"--and the much slower frequency with which people upgrade expensive items like TV sets. Many, many firms are vying to deliver a "convergence" solution. Which, if any, will be sufficiently compelling and have enough staying power to become embedded within a sizable share of TVs or STBs?]
Overall, I’m a bit skeptical of this and other similar initiatives.
What I do like is that it’s expected to be a relatively open standard (from the software point of view, at least–you still need Intel processors). Tapping the creativity of the wider software development community is a proven method for both good product and built-in viral marketing. iPhone apps, Google Maps mashups, and Firefox extensions are just a few examples. However, this alone won’t guarantee consumer adoption of the platform, just ensure functionality is available.
At the end of the day, do consumers even want this? Here’s what I think is true:
- People like to use the Internet for a growing variety of things, including watching video.
- People enjoy watching TV, preferably on a TV set. (I’d hazard a guess that most people watch TV with someone else in the room, but typically watch video on the PC alone.)
- Many do some form of Internet activity (surf, email, etc.) while they watch TV.
- Past attempts at interactive TV–at 15 years and counting–have been underwhelming, and that’s being charitable.
What isn’t at all clear, is whether those surfing are paying any attention to the program while doing so. What also isn’t clear is what the other people in the room are doing. Most likely, they’re actually watching the program.
So what happens when the surfer starts fiddling around with widgets, essentially “doing Internet stuff” while others are watching the show on the same screen. Even if the video portion of the screen is undisturbed, wouldn’t that be a bit distracting? Why does everyone seem to assume the surfer wants or needs to use the TV screen anyway? Aren’t they using a computer already?
Sometimes it seems like much of the Internet/TV/PC convergence is a supplier-driven attempt to create a market where there isn’t one. Perhaps it’s simply another self-reinforcing delusion, where media and equipment companies living in an echo chamber of trade shows, developer conferences, and press events convince themselves a market exists where it doesn’t. The 21st century’s equivalent of the videophone–a technology so compelling that consumers must want it. Except they didn’t.
I’ve seen this kind of thing countless times, especially in large, bureaucratic companies like Intel.
Someone somewhere (fairly high up in the management ranks, to be sure) has a brainchild for a new, compelling offering. A sure-fire way to help the company grow and break into new markets. So it’s funded, momentum builds, staff are assigned, and hilarity ensues.
Soon, lower level employees–who actually do the market research and understand what’s going on–figure out the idea is D.O.A. But nobody wants to tell the top brass they’re wrong, or especially that they’re “idjits” (idiots), in a shoot-the-messenger world. Particularly when their whole department was formed around the initiative. Job security will out, you know.
As the old joke goes, as you go up the management chain, crap becomes manure, then turns into fertilizer, which is recast as a way to grow the company. That’s when the flowery press releases begin. Companies rarely issue a release about how the initiative is abandoned some months later when the market fails to materialize.
Is The Widget Channel crap, or dynamic growth? It’s probably too early to tell. I suspect it’s got a decent chance to beat the competition, whatever that means. However, what’s more important is whether there is even a market to win.
Disclosure: I hold no position in any of the stocks mentioned here.
Add comment August 22, 2008
Pot Pourri
I’ve been remiss in finding the time to post lately, so I’ll make a few comments on miscellaneous non-tech topics as a place holder. Hope to get to something more substantive soon. (And yes, I’m a closet Jeopardy fan.)
Windbags
Are you as sick of hearing the word “headwinds” as I am? I admit to using it more than once as an analyst, where it has a fairly long tradition as shorthand for “difficulty ahead” or “resistance to achieving one’s goals”. But now, not only is it everywhere in the financial press, but the mainstream has picked it up (and stomped all over it). It seems that the word shows up at least once in any article anywhere that talks about the current economic situation. Enough already, find something new!
Anybody Staying Home?
We seem to be off to an awfully early start in the “centering” part of our program. That’s where each candidate–after genuflecting to the extremes of his party in an attempt to win nomination–now tries to make everyone believe they’ve really been in the middle all along. This morning’s Wall St. Journal editorial even accuses Obama of shifting so far to the right he’s the one trying to serve Bush’s 3rd term.
Each time this happens, the press is full of cautions or anecdotes about how this will cause the faithful to not vote for their nominee. But what are they going to do, now that there are really only two choices? Would left-leaning Obamaniacs abstain and risk McCain nominating more conservative Supremes? Are there any conservative evangelicals who dislike McCain so much they’re willing to chance someone in the Oval Office that they believe (erroneously, to be sure) is a Muslim?
Yes, there are probably some self-styled strategists who will let the other guy get elected so he can fail, and then the party can get a “real” president in office in 2012. But I just don’t see the average voter thinking this way. On the other hand, people will do pretty stupid things when they’re angry. We’ll see whether this is the case, or it’s just the usual bleating by the media, ultra-liberals, and far-right conservatives.
The real issue, I think, is who will be more believable as a centrist.
Things I’m Tired Of
How Apple is going to dominate the world. New oil price records. Incorrect predictions–they’re ALL incorrect–about how long our non-recession is going to last. Floods. (Next up: droughts.) Excuses from the studios about why Blu-ray isn’t taking off. Housing woes. Anything with “Hoo” or “Micro” in it.
Must be cranky today. Or just need a vacation.
Tom-AY-to, Tom-AH-to
Boy, the FDA and the press (yes, I think there’s lots of blame there) have really gotten us into a…er…pickle over this tomato thing. After initially alerting everyone to the dangers of salmonella in tomatoes, it seems they can’t find any contaminated tomatoes. NONE of the 1700 samples tested positive for the bug.
Which leaves them in the impossible position of trying to prove a negative. No one will ever be able to show that tomatoes AREN’T contaminated, even if they never find a single one containing the parasite. With all the other…sorry…headwinds facing the economy, the last thing we need is for a bunch of farmers, pickers, packers, shippers, and grocers to be devastated by the implosion of the tomato industry.
I got curious and searched for references to salmonella cases. To my surprise, there are typically tens of thousands of salmonella cases every year in the U.S. alone. With a mortality profile that seems similar to that of the flu–not huge, but nothing to sneeze at either, if you’ll forgive the pun. Compare that to the 800 or so cases and single suspected death reported as a result of this “outbreak”. Puts it in perspective, doesn’t it?
(Note to self: Write that piece about innumeracy, and the complete failure of the educational system in the U.S. to equip people with sufficient understanding of probability and statistics to live an informed and balanced life. Or better yet, direct readers to this book.)
To add insult to injury, the FDA is widening its probe to other types of produce. Isn’t destroying one industry enough? Apparently, the rest of my pico de gallo isn’t safe either.
Crossing the Street
Looks like I’ll have to walk another block or so, next time I’m in Manhattan, to get my morning Joe. Starbucks (SBUX) is closing about 600 stores over the next few months. Watching the local news last night, they literally said “you might go into the city tomorrow morning and find your Starbucks is gone”. Really? How fast do they think this stuff happens anyway?
Actually, those 600 locations are only about 5% of its stores. Not too devastating (except to any employees affected). And most have only been open a year or two. In its high-speed push to open as many stores as possible, Starbucks overshot a bit. Plus the company’s expansion timing (i.e. the economy) could have been better.
My local Starbucks is still doing a healthy business–as evidenced by the long lines. So I’m not worried about that one closing. And the extra steps as I walk across the street in Manhattan will be good for me, as long as I don’t get hit by a taxi.
Or get buffeted by headwinds.
Add comment July 2, 2008
Rim Shot
Here’s an object lesson in how stocks with thin trading volume can get hammered.
Monday, Rimage Corporation (RIMG) reduced 2nd quarter guidance, citing the economic slowdown. Revenue expectations dropped from $24-26M to a new target of $20-22M. Earnings projections plummeted, to 9 to 12 cents per share, from previous guidance of 22-27 cents. Analysts estimates were–predictably–within the previous guidance ranges.
Rimage (pronounced like the French, i.e. “rim-AHZH”) makes high-capacity disc publishing systems that replicate CDs and DVDs as well as customize discs and print/apply labels. It also does a high-margin business selling blank discs and labels.
If you’ve ever ordered a custom-mix CD from Wal Mart, it was printed on one of Rimage’s units.
While Rimage sells its publishing systems into the media industry for music, movie, and software storage, it does a substantial amount of business with large enterprises that create custom discs for product promotion or employee training purposes. It also sells to data-intensive industries needing quick, simple records storage. In particular, the medical industry is one of Rimage’s most important end markets.
I never wrote on Rimage as an analyst, but I do keep it on my radar screen, as its business model not only ties into Digital Media but also fits a theme I’d developed on creating value at the edge of markets (in this case, disc replication). However its trading volume, averaging about 77M shares daily, is less than 1% of the float.
This makes for a very illiquid stock, especially one that until Monday was at a market cap of $170M. Which is the biggest reason it’s covered by only 2 analysts.
As you might expect, Monday the stock dropped a hefty 22%. I’m convinced a good piece of that was due to a lack of buyers for an undercovered, thinly traded name. But many pundits will claim a major reason is that Rimage’s business model is dead. After all, we’re in the iPod generation, discs are passe. With high speed broadband everywhere, and ubiquitous media players, nobody needs plastic anymore.
Bzzzt! Wrong answer.
Sure, any company that reduces guidance so much, particularly one that’s so thinly traded, is going to get a serious haircut on its stock price. And I do believe that eventually, all data storage will be on drives, and delivery will be via broadband. But the key word is eventually.
Recall Amara’s Law (often erroneously attributed to forecaster Paul Saffo): “We tend to overestimate the short-term impact of technological change and underestimate its long-term impact.” As much as we think broadband has already taken over, we forget that not everyone has fiber to the home, nor have they all junked their CDs for a portable mp3 player. The iPod has not reached 100% penetration. Netflix still expects to be renting DVDs for some time. Hell, 20% of Americans have never even sent an email. Not to mention the fact that there are numerous other applications for discs besides personal entertainment media.
These transitions always take longer than we think. Expect discs of some type to be with us for at least another 10 years.
Even at less than half its recent earnings growth rate (8% vs. a 2-year CAGR of 17.4%), Rimage has a PEG ratio hovering around 1.0, based on trailing twelve month earnings. And with a solid cash flow (price-to-FCF ratio is about 7), it’s likely to be able to milk that disc market for some time to come. Perhaps not a value play, but certainly not overvalued either.
Just watch that trading volume and liquidity. Yes, an upside surprise can really rock a thinly traded name like Rimage. But risk management is the name of the game, and you don’t want to be the last one out of the exits if the bottom falls out.
Disclosure: I hold no position in any of the stocks mentioned here.
Add comment June 11, 2008
I Want MyTube, Not YouTube
Maybe I should have called this “A One-Channel TV, Redux”.
There are two recent bits from NewTeeVee about the last 10-foot problem, and especially getting YouTube to the TV. Whether via a special-purpose set-top box, or integrated into your TV, both still fall short.
How difficult can it be to get all the video services (current and future) into my TV? The answer may not be as simple as a browser, which is probably not the right user interface for the living room. But perhaps something close to that. Couple that capability together with a simple way to stream all the content you already have on your PC, and it’ll sell like hotcakes.
But yet another box with only a couple of services? No thanks.
Disclosure: I hold no position in any of the stocks mentioned here.
2 comments June 8, 2008
Ass Backwards, Again
Blockbuster (BBI) has outdone itself now. It just announced a trial of in-store kiosks that will allow consumers to download movies directly into a portable media player (PMP) to take with them. For now, only the Archos player will be supported.
Let me get this straight.
Blockbuster wants you to hop in your car and drive to one of their outlets. Using soon-to-be-five-dollar gasoline. Just so you have the privilege of downloading a movie onto a portable player.
They do seem to have this whole thing ass backwards, don’t they?
Hello! Ever hear of the Internet? Why in the world isn’t this a download to your PC and then a transfer to the PMP? (Yeah, I know, the answer is the studios and their oh-so-customer-friendly Digital Rights Management fixation.) Blockbuster’s insistence on driving consumers to their increasingly useless stores has clearly reached new heights.
Meanwhile, Netflix (NFLX)–while noting its ultimate future is in downloads–predicts that its DVD mailing business won’t PEAK for 5 to 10 years. That tells me the smart money is on DVDs (either standard or Blu-ray) to last some time. I agree.
It’s not that downloads aren’t the preferred solution–personally, I can’t wait–but that universal adoption is a long way off. Why?
- The studios’ love affair with DRM, artificially reducing the availability of video fare and making it difficult to transfer media to other devices
- Still no inexpensive, simple solution in sight for getting video from the PC or Internet to your TV.
Here’s an idea: If you insist on making people drive somewhere, at least let them leave with a disc. Use Qflix technology from Sonic Solutions (SNIC) to print a fully licensed DVD out of the kiosk instead. That’s portability and ease-of-use in a single package. As I’ve noted before, this would allow Blockbuster to reduce/eliminate inventory, and get more Hollywood back catalog titles into customers’ hands.
[Sonic holds the key technology patents on download-to-burn, which has been approved by the DVD Copy Control Association (DVD-CCA). This allows discs to be burned with CSS encryption, pleasing the studios and making such copies legal commercial DVDs.]
Sonic was working with MovieLink, prior to its purchase by Blockbuster, to push this tech into the end user market. While disc burners for consumers probably won’t go mainstream anytime soon, Sonic is in trials with kiosk makers. It’s a nice transitional solution until discs are truly dead. Why Blockbuster has made no use of this technology is a puzzle.
But then so is everything else it does these days.
Disclosure: I hold no position in any of the stocks mentioned here.
1 comment May 29, 2008
Book ‘em, Dano
Goldman Sachs analyst James Mitchell is out with a report that estimates sales of the Kindle electronic book reader from Amazon (AMZN) were between 25,000 and 50,000 in the first quarter. This is hot on the heels of another estimate of 30,000 from Citi analyst Mark Mahaney.
I certainly can’t fault Mitchell’s methodology, which backs out non-Kindle items from Amazon’s unearned revenue line to arrive at an estimate (roughly 10% of that line item) for Kindle revenue and units. Except to note that he’s made some rather broad assumptions about the other items. If so, his subtraction is suspect. Notice also that Mitchell assumes his estimates of unearned revenue for the Kindle could be higher (up to 20%), but not lower, which reveals his bias.
Citi’s Mahaney has even gone so far as to suggest 3% of Amazon’s revenue (about $750M) will come from Kindles within 2 years. Worse yet, he assumes a sales ramp roughly half of the original iPod. Frankly, he’s smoking crack.
If Eliot Spitzer hadn’t brought an end to the practice some years ago (cough, cough), I’d almost think these two were trying to drum up business for their investment banks. Instead it’s probably something much more innocent, like say pumping the stock for the traders.
Why do I think e-books are, at best, a niche item? Because end users don’t need them. Yes, it saves money for publishers and retailers. But it’s unclear whether the savings that trickle down to users overcome the hassle of another $300+ device that needs to stay charged. Plus I like paper. Apparently, so do the multitudes who continue to print things out instead of reading them on a screen. (Remember the paperless society that computers were going to bring?)
Think about it: what problem is the e-book solving for consumers?
- Gee, if only my book was portable, I could take it with me…
- Pushing a button to bookmark my place is SO much easier than bending a page corner.
- Those nasty paper cuts.
- I can take my whole library with me. (Sure, I often read 10 books at a time. And I wish I could read fast enough to finish several books on a long flight.)
- I can download a new book whenever I need one. (Yep. And how long does that take over a pokey wireless link? EVDO isn’t everywhere. And can I read the first page while the rest is downloading?)
- I want my reading material to break if I drop it.
- It’s cheaper. (True, true. Unless you want to read blogs at $2/week or newspaper feeds at $15/month. That’s a lot to pay for portability.)
Kindle isn’t going to take off. Yes, there will always be technophiles and other early adopters that get one because it’s new, or somehow cool. But regardless of whether the Kindle succeeds or fizzles, the buzz-induced sales ramp will tend to look the same at this early of a stage in a product’s life.
Have you seen any gadget geeks flashing a Kindle around the way they did iPods or Razrs in the early part of the adoption cycle? I sure haven’t.
But let’s assume for the moment that the analysts are right, that Kindle will ramp smartly, that reports of large orders from Chinese manufacturers are accurate, and that Amazon won’t take a bath on the units.
Let’s even go so far as to assume e-book sales are completely complementary to paper books, that Kindle entices people to read more books and doesn’t cannibalize the traditional book revenue stream. (Live dangerously, I always say.)
How does that move the needle for Amazon? Whether you think the stock is a buy or not, is 3% of revenue really going to make it a game-changer? I don’t think so. Amazon’s a visionary company, they do a lot of things right, and I wouldn’t bet completely against Jeff Bezos.
But put your money on the whole company, and don’t pay attention to the noise.
Disclosure: I hold no position in any of the stocks mentioned here.
Add comment May 20, 2008
Alias Mr. Moneybags
Who benefits the most from the recently announced Sprint/Clearwire deal? It may not be who you think.
This massive ($3.2B) infusion of money seems like a lot, but it’s just the beginning for this boondoggle. WiMax is a nice technology that works in some circumstances, with the right business model. But then so will WiFi, and it’s much cheaper. Besides, the mobile providers have a huge head start. Why buy new cards and sign a new contract when I already have what I need from my cell phone (or hotspot) provider?
In terms of becoming a successful business, WiMax is vying for the “most hyped” award with social networks. Expect more bags of money to be tossed into the trough before long.
So who gets what?
Sprint (S) - Removes one monkey from the back of CEO Dan Hesse as he is now free to focus on why Sprint has been shedding customers for so long. Also distracts everyone from noticing the delays in its own WiMax buildout.
Intel (INTC) - Intel has been peddling WiMax like a desperate streetwalker to anyone with an open car window. And its been seen hanging around the Clearwire convertible before. Intel wants to be the undisputed standard for WiMax chips, a role it failed to capture in WiFi. Not to mention selling lots of new processors for next generation laptops and smart phones.
Google (GOOG) - Yes, critical mass for Android will help extend its search and advertising dominance into mobile. And this network might turn out to be actually open. Despite Google’s game playing at the FCC auction, the “open” spectrum Verizon won will–in practice–be anything but. Fundamentally, Google has become a VC firm. A billion here, a billion there, something just might stick. All it takes is one 10-bagger to make it work. This ain’t it.
Time Warner Cable (TWC), Comcast (CMCSA) - the Rosencrantz and Guildenstern of mobile will be exactly as successful here as they were with Pilot, the failed MVNO venture with Sprint. And for the same reasons.
Clearwire (CLWR) - Now we’re getting somewhere. Big cash infusion, lots of media attention. The rights to resell Sprint 3G will allow it to grow its top line, giving it time to progress on the buildout. In the end, though, even with a working network it won’t be enough to either satisfy consumers or to make it a viable competitor to the telecableco ISPs. ( And I’m not alone in my thinking, here.)
But you see, by then Craig McCaw will have made his money.
McCaw has a history of promote, build, and sell. Usually at the top. And always with someone else’s money. He’s going to extract himself from this before long, and come out smelling like a rose.
Or a crisp thousand-dollar bill.
Regardless of what happens, whether the network succeeds, whether or not anyone else makes any money, you can be sure of one thing: McCaw has this all mapped out. There’s your winner.
Disclosure: I hold no position in any of the stocks mentioned here.
4 comments May 9, 2008
