Deja Vu at SGI

In a bid to rise from the ashes of bankruptcy, SGI today announced that it would broaden its product line to provide lower-cost options, including the introduction of an x86-based server.

Said an SGI marketing manager: "Obviously, one of the things we need to [do] is expand our market reach." She added that the new products "are very much part of our path back to profitability."

But haven’t we seen this show before from SGI? If I remember correctly — and, surprisingly, in this particular instance, I do — SGI originally attempted to repel commoditization in the visual-computing marketplace back in the bad-old 90s by joining the league of hardware vendors designing and selling industry-standard workstations and servers based on Intel microprocessors and Microsoft’s Windows operating system.

It didn’t turn out all that well for SGI the first time, and there’s no reason to believe it will resolve itself any differently today, even though they’re using Linux instead of Windows this time around. Some companies, such as Dell, are built to make thin margins on huge volumes of box shipments. Others, such as SGI, were build to charge a premium and reap higher margins for exclusive, research-intensive features and functionality that cannot be obtained from run-of-the-mill workstations and servers.

However, as the industry-standard boxes got faster, better, and "good enough" for a wide range of applications in visual computing, SGI found that its value proposition, and its higher prices, retained appeal for a rapidly diminishing audience involved with increasingly esoteric applications. 

It tried, back in the 90s, to remake itself as a lean, mean operational machine, selling industry-standard machines with a subset of its previous functionality, but SGI wasn’t built to play that game. The result was the perception of competitive capitulation, a damaged brand, and increasing irrelevance. It’s difficult to envisage how it will turn out any differently this time.

If the definition of insanity, according to Ben Franklin, "is doing the same thing over and over and expecting different results," then it’s time to summon the doctors in the lab coats to a former star of the technology firmament based in Mountain View.

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New Boss, Same Fuzzy Strategy at Novell

As we suspected in our earlier post on the executive-suite overhaul at Novell, not much will change strategically under new CEO, previously COO and president, Ronald Hovsepian.

The company’s strategic direction, which essentially is an accommodation with a dog’s breakfast of products and services accrued through mergers and acquisitions, won’t change markedly. Hovsepian apparently believes there’s nothing scattershot about the current strategy, saying a "narrow focus and energetic push" are all Novell needs to get back on track.

Even if Hovsepian and his team, which will undoubtedly go through some personnel changes, improves the operational and field execution of Novell, it won’t end happily for him or for his company if Novell plots a nebulous strategic course.

Comcast Fires Drowsy Service Technician

Comcast Corporation fired a service technician on Monday who fell asleep on a customer’s couch after spending an hour on the phone waiting in vain for his own company’s customer service.

Videotape of the sleeping technician, who had visited the customer’s residence to replace a faulty cable modem, had been posted on YouTube.com, costing Comcast great embarrassment and the technician his job.

There’s no word on whether Comcast fired any of its tardy customer-service representatives, who appear to have given the customer nothing but grief before the narcoleptic technician finally made an appearance.

Myhrvold’s Business Model: “Invention Capitalist” or “Patent Troll”?

Former Microsoft CTO Nathan Myhrvold and his company Intellectual Ventures are discussed extensively in a feature article published in the latest edition of Fortune.

The fundamental question about Intellectual Ventures (IV) is whether it is an “invention capitalist,” as the polymathic Myhrvold would have us believe, or a “patent troll,” as executives from HP and Cisco contend. It’s a vigorous debate, and Fortune gives both sides a fair hearing.

From his time spent at Microsoft, Myhrvold has accumulated enough wealth to do whatever he wants, as often or as seldom as he wishes. At just 47, he presumably has many years ahead of him, so it’s puzzling to many that he would choose to launch a company that purchases and invent patents and then licenses them to manufacturers. As a project, it doesn’t seem to possess the gravitas or nobility with which an obscenely wealthy ex-Microsoft CTO would want to be associated as he saunters toward his golden years. Bill Gates aims for unprecedented philanthropic largess in his post-Microsoft incarnation, whereas Nathan Myhrrvold reputedly has hoarded from 3,000 to 5,000 technology patents.

While many in Silicon Valley are skeptical or hostile to Intellectual Ventures, assuming that Myhrvold and company are preparing to launch patent litigation like Microsoft issues press releases, Myhrvold claims his intentions are not nearly so sinister. He says he merely is following a well-established business model.

“We want to build a portfolio just like those companies have, with licensing approaches broadly like they have … I want to achieve what IBM has achieved. That’s my financial model. This is a play where I take portfolio theory and apply it to something illiquid to deliver a return for my investors. I don’t see that as evil. I don’t see that as particularly threatening.”

Also, it would seem there’s some ambivalence toward Intellectual Ventures in Silicon Valley. Microsoft is among its confirmed investors, and other reported investors include Intel, Apple, Sony, eBay, and Google.

HP definitely is not among Intellectual Ventures’ investment group, with an HP executive quoted in the story as follows: “We’re trying to run a business. We’re not in the business of running around the world pissing everyone off.”

Anyway, I recommend the article. Feel free to let me know what you think.

If nothing else, this quote from Myhrvold, on how big technology companies, with their phalanx of legal eagles, historically infringe with impunity on the patents of smaller industry players, warrants your expenditure of time and energy:

“This isn’t some X-Files conspiracy theory. I was in the meetings at Microsoft!”

Enough said.

Why Microsoft Unveiled Its Unified-Communications Vision Now

Microsoft’s unveiling today of its vision, technology road map, and partner framework for unified communications was long on promises and short on near-term deliverables.

There’s no question that Microsoft is on the right track with its overall strategy for unified communications, and the product roadmap looks good if Microsoft can stick to the schedule.

Microsoft’s SIP-based Live Communications Server, renamed Microsoft Office Communications Server 2007 to avoid brand confusion with the Windows and Office Live Web-based services, is the real-time communication platform that will form the roadmap’s cornerstone, facilitating presence-based VoIP call management, multimode conferencing, and instant-messaging communication within and across existing software applications, services, and devices. Unfortunately, it won’t reach market until the second quarter of 2007, if all goes according to plan.

Similarly, Microsoft Office Communicator 2007, a unified communications client — which ultimately will be available in desktop, browser-based, and mobile permutations — that works with Office Communications Server 2007 to deliver a presence-based, enterprise VoIP softphone capabilities, plus instant messaging, and multiparty, multimode conferencing will be on the same schedule. The same goes for a new version of Live Meeting, a panoramic videoconferencing device called Microsoft Office Round Table, and for hardware IP phones and associated peripherals that Microsoft partners, such as Siemens and Motorola, will deliver based on a software platform from Microsoft.

Some pieces of the product-strategy puzzle will reach market before then, with Microsoft Exchange Server 2007 scheduled to be released in late 2006 or early 2007. and Microsoft Speech Server 2007 slated for commercial release late this year.

Clearly, Microsoft wants to position itself as a visionary industry leader at the vanguard of bringing unified communications to the enterprise, breaking down communication silos — such as email, IM, and voice — while layering integrated presence across those messaging conduits as well as across core business applications, so that productivity-enhancing real-time communications can occur efficiently and within contextually relevant parameters.

But why is Microsoft preannouncing so many products now, so far in advance of their commercial release?

One reason is competitive pressure. On the same today that Microsoft laid down its unified-communicaitons strategy, replete with announcements of hardware partnerships and product roadmaps, IBM was announcing that it is overhauling its Sametime enterprise IM system so that it integrates better with Microsoft’s Outlook, Office, and SharePoint applications.

The Microsoft links will be delivered early next year in Sametime’s new version 7.5, said Ken Bisconti, IBM’s vice president of workplace, portal,and collaboration products. Sametime 7.5 is currently being beta tested and is slated to ship in this year’s third quarter. According to IBM, about 25% of its Sametime installations are in hybrid environments, cohabiting, in effect, with Office and Exchange rather than in true-Big Blue Notes Domino settings.

“The two most interesting aspects of this announcement are the frontal assault on Microsoft and IBM’s emphasis on openness and interoperability for Sametime,” said Matt Brown, a Forrester Research analyst.

But it’s not just IBM that Microsoft must worry about. As VoIP continues to proliferate within enterprises, convergence of voice, video, and data finally is coming together in a meaningful way, underpinned by the standards-based SIP protocol and sophisticated, contextually-aware presence. As world converge, new competitors collide. Cisco and Microsoft, which have eyed each other warily for years, are moving gradually from classic “coopetition” toward a more clear-cut competitive relationship.

As IDC analyst Tom Valovic says, “The supplier that solves this problem is really going to stumble onto a huge business opportunity.”

Mel, Are You Sirius?

Speaking at an industry conference on media convergence at the Museum of Television and Radio in New York, Sirius Satellite Radio Inc. CEO Mel Karmazin mused publicly that his firm might be interested in acquiring its only competitor,  XM Satellite Radio Holdings Inc.

Karmazin allowed that the price would have to be right, and he acknowledged that regulatory issues might prevent a deal from being consummated.

Well, one would hope so. As much as I realize the Bush Administration has ushered in a period of elitist corporate cronyism in which government regulation appears to favor the rule of established behemoths over the principle of open competition, it’s difficult even for me to imagine that the Bush Administration would allow the merger of the only two companies in an industry.

Seriously, how would a merger of the only two satellite-radio firms in existence serve the interests of consumers or the principle of competitive market dynamics? The US government should not be in the business of blessing monopolies.

Google Preparing to Launch Writely-Based Service?

If Garrett Rogers of ZDNet is correct, Google is preparing to launch a word-processing service based on its acquisition of Upstartle and its Writely service earlier this year.

In the foreseeable future, Google probably will have an Office-like suite of services that it will make available to both consumers and businesses. It already has a spreadsheet service in beta testing, and several PowerPoint-like business-presentation applications are being developed and refined. There’s a slew of wiki-based collaborative application services on the Web, too. The problem of offline use remains an impediment to the Web-based personal-productivity suite, but solutions to that problem — based on based Flash or Java, for example — are being proposed and developed, as well.

Too much of what is blithely billed as Web 2.0 is nothing but shameless hype, programmer canoodling, or conniving hucksterism aimed at separating nostalgic VCs from their money (which is not really their money, but I digress). Nonetheless, the Web is becoming more interactive as a result of Ajax and other programming tools, and there are real business benefits, practical advantages, and a certain symmetry that can be derived from to using the browser as a universal desktop.

It will be interesting to see how Google and others build out their application-service portfolios. I’m sure the folks up in Redmond are paying close attention.

Will Nokia’s Storefront Retailing Work?

Shoppers apparently flocked to the opening of Nokia’s first US flagship store in downtown Chicago, just down the street from a temporary retail store Motorola set up to showcase its email-capable “Q” smartphone.

The stylishly appointed Chicago retail outlet is the first of four flagship stores that Nokia — the world’s largest mobile-phone maker, but second to Motorola in the US market — plans to open in the North American market. Nokia launched its first flagship store in Moscow in December last year, and plans to open 18 stores worldwide in the next two years.

Nokia says the flagship stores are aimed at giving the company total control of brand presentation. With the company-owned stores, Nokia makes “the ultimate presentation of our brand,” according to a corporate spokesman quoted in a story that appeared over the weekend in the Chicago Tribune.

Does that mean the wireless service providers, who also sell Nokia phones as well as accompanying service plans, don’t do a good job presenting the Nokia brand? Yes, most certainly.

Service providers are in the business of putting their own brands front and center, and subsuming the brands of handset vendors to their own marketing programs and strategic machinations. For carriers, it’s all about seeming more creative, innovative, and valuable than they are in reality. They have to create an illusion that they’re doing more than running a transport network with associating logistics and billing systems.

Even so, wireless carriers have their aspirations, which some might call delusions, and they might be upset that Nokia is selling their own phones and sending an underlying message — cutting-edge phones are sexy, networks are just plumbing — that undercuts the value proposition that service providers are attempting to market and sell.

Nokia says it’s not a problem, that there’s no conflict, that it will also help the service providers by offering relevant service plans along with the phones. Service providers are control freaks, though, and they won’t like Nokia’s retail gambit.

The wireless carriers are as much problem for Nokia as vice versa. Nokia is attempting to control its brand, but wireless service providers, with their walled gardens and presentation-layer transcoding, can significantly influence the ultimate customer experience of the subscribers who pay for privilege of shunting voice and data packets across their networks — irrespective of whether they’re using Nokia’s phones or other handset brands.

So, even though it’s clear Nokia wants to replicate the fashionable, high-gloss, upscale marketing brand that Apple was able to attain in the world of personal computing, I don’t think Nokia is as favorably positioned to pull it off. The oligopolistic wireless carriers control too much of the mobile experience, from closed technical standards to proprietary content, and Nokia’s branding exercise won’t change that.

From those of you who might be wondering, Nokia says it didn’t choose Chicago as its first US retail center to take a shot at hometown heroes Motorola. Evidently, the Chicago real estate simply was available before suitable property in New York could be found. That’s the story, anyway.

Dell Investigating Exploding Laptop

Dell Inc. has acknowledged that the laptop computer that exploded in flames at a conference in Japan was indeed one of its products. The tale of the exploding laptop was originally disclosed last week by British technology-news site The Inquirer.

Dell wants everybody to know it is on the case. Said a Dell spokesman:

“We’re aware of it, and we’re digging into the details. There’s an investigation going on right now. When something like this happens, we want to know why.”

Microsoft Invokes Cone of Silence on Taylor Affair

Microsoft has activated the cone of silence regarding the departure of Martin Taylor. The company, clearly caught off guard by the circumstances that resulted in Taylor’s departure, has regained its typical corporate composure, closing ranks and enforcing its customary communications discipline.

Leaks do not appear to be forthcoming, and the trade press has lost interest in the story. It’s unlikely that the details of Taylor’s parting with Microsoft will ever be known.

I know many of you are following this story, however, so if anything does come to light, I’ll let you know.

Homestore Founder Faces Jail

Stuart Wolff, the founder and former CEO of online real-estate listings company Homestore Inc., was found guilty Thursday of insider trading, lying to company accountants and federal regulators, and conspiracy in a scheme to defraud investors by inflating revenues.

The information-technology industry attracted a lot of disreputable characters during the delirious, hype-fueled 90s, and we’re still paying the price — one way or another — for  the amorality, excesses, greed, and hubris that characterized the worst of that period.

It appears that Mr. Wolff will pay a price, one that might entail as many as 35 years in prison, for his sins. He is appealing the verdict, but his chances of avoiding the slammer are not good.

I have no sympathy for people who defraud shareholders, including their own employees, or who deceive and lie in a bid to boost their already spectacular personal fortunes at the expense of others.

I also wonder about the board members and VC investors in Homestore. What was their fiduciary responsibility, ethically and legally, and did they do all in their power to check and prevent abuses perpetrated by the company’s executives?

Let’s hope some lessons were learned.

Yahoo Trades Up On Merrill’s Microsoft Acquisition Theory

On a day when the major market indexes were in the red, Yahoo shares bucked the trend on the questionable strength of that Merrill Lynch report suggesting that Microsoft ought to consider buying Yahoo to better compete with Google.

As I said in my post earlier today, I couldn’t disagree more with the theorizing from Merrill Lynch.

Microsoft shouldn’t acquire Yahoo. What’s more, I don’t believe it will happen. As I think about the timing of the report and its highly speculative content, I now believe this was just a bored analyst’s spreadsheet exercise that metamorphosed into public conjecture on a slow Friday.