Monthly Archives: August 2006

Forget About An Apple-Sun Merger

John C. Dvorak is an odd bird. He’s still capable of thinking and writing convincingly and perceptively, but too often his muse deserts him or takes him down blind alleys in dodgy neighborhoods.

Sometimes he gets lost entirely and can’t find his way back to reason. Such is the case with his latest speculation regarding a possible (well, nearly anything is possible) merger between Apple and Sun. He got the idea as he pondered hidden meanings and ulterior motives behind Google CEO Eric Schmidt’s recent election to the Apple board of directors.

Dvorak’s logic on this one is convoluted and more twisted than some of the plot lines in Oliver Stone’s JFK, so I invite you to see for yourself rather than have me go through the psychic contortions of trying to explain it to you. Suffice it to say, I’m not buying this leap into the deep end of the conjectural pool.

Dvorak also mentions longstanding rumors of a 3Com-Apple merger, which is even more ludicrous — if only slightly less so — than a melding of Apple and Sun.

What is 3Com today? It’s got TippingPoint IPS product portfolio, some enterprise LAN switches, a me-too line of IP PBXes, a diminishing and diminished presence in SME products and the channels that serve them, and a joint venture with Chinese networking powerhouse Huawei that increasingly is becoming 3Com’s only real hope of future success. Now where, I ask you in all seriousness, is a compelling fit between Apple and that particular melange?

As for Apple and Sun, again, where’s the business logic? He says cultures between the two companies are similar, but I don’t see it.

Perhaps some of the board-level guys at each company see each other occasionally at golf courses, ridiculously expensive eateries, charity polo matches, bocce tournaments, and whatever else the obscenely rich in the Valley do when they’re not devising means of making more money, but the working cultures of the two companies couldn’t be more different.

Sun’s roots are in technical computing, and that lineage remains. It grew up serving engineers and scientists as core customers, and it in some ways it has retrenched into that identity in its post-bubble incarnation.

The company doesn’t have a clue what consumers do or how they interact with technology, and it doesn’t want to know. That’s not its audience, not the ones who pay its freight.

Look at its awkward, unwieldy attempts at taking Java to the masses. It worked so well that other companies commercialized the technology far more effectively in most markets.

Sun doesn’t understand consumers, and it never will. Instead, it knows and understands engineers, scientists, and system administrators. It makes a mean server — Andy Bechtolsheim and his team have done more with the AMD Opteron server architecture than any other team in the business — but I’m not sure Apple really wants to part with scads of capital (Sun sports a current market capitalization of $17.8 billion) and a larger measure of control to get into that business.

Speaking of Apple, what does it know best? Not technical computing, that’s for sure.

Apple knows how to design and create elegant, robust, reliable, and immensely fashionable computing and entertainment experiences for consumers and creative professionals. The Sun culture and the Apple culture — where it counts, not on the golf courses — could not be more different.

Apple’s creativity and laser focus on the consumer experience would clash horribly with Sun’s hardcore under-the-covers, engineering-is-all ethos.

Only at Sun could the RISC-based SPARC architecture still commend such a significant share of corporate time and resources. Why? Because Sun’s SPARC-based servers address the needs, however esoteric and specialized, of the small but influential (especially at Sun) high-performance computing market segment.

The only way a Sun-Apple tie up would make sense is if the latter wanted to get into virtualized clusters and supercomputing in a big way, and I don’t see that happening.

Think carefully about his one, folks. Apple buying Sun? In a word, no.


Ellison to Speak at RSA, but is Oracle Serious About Security?

Perhaps following the security trajectory blazed by their nemesis to the north, Microsoft, Oracle is signaling that it is on the cusp of getting serious about security.

Word comes today, in a story published at CNET’s site, that Larry Ellison will take the podium to speak at the RSA Conference 2007, slated for February. If it comes to pass, it will be the first time Oracle CEO Ellison has spoken at the biggest event on the security-industry calendar.

In recent years, the security of Oracle’s products and its security practices have come under increasing attack. As Gartner analyst John Pescatore summarizes:

Oracle has lost the high ground in security. I think this is part of them seeking to come back.

What better way to stage a comeback than to set Ellison loose before the gathered security cognoscenti at the RSA conference?

Well, as Pescatore and others point out, it would be advisable for Oracle to do more than talk about security.

Before Ellison bounds up the steps at RSA to make his pitch, Oracle would be wise to have made appreciable and sustained progress at plugging security holes in its software and at correcting its wayward security practices, including its truculent dealings with security researchers. What Ellison says to the crowd would carry more weight if he can cite tangible progress the company has made toward rectifying its security shortcomings.

Another interesting aspect to this development is to see wonder whether it is a harbinger of security acquisitions by Oracle.

When Microsoft first announced its commitment to security, with Bill Gates hitting the hustings to tell anybody who would listen that Microsoft was serious about cleaning up the security mess it had created, the oratory was followed (and occasionally preceded) by actual deeds, including security acquisitions.

Since 2003, as Microsoft increasing proclaimed its commitment to the security of its software offerings, the company has acquired six security-related companies. Although Oracle’s needs will be different than Microsoft’s, it could be about to embark on a similarly focused shopping expedition.

VCs Get Used to Slower Exits, Maturing Companies

The ghost of the burst bubble continues to cast a long shadow over the technology industry.

Venture capitalists, for example, continue to be haunted by the mocking ghost of their past irrational exuberance. They invested in thousands upon thousands of companies before the market imploded, and now they’re still trying to keep those companies afloat and profitable, in never-ending hope that lucrative exits will materialize.

In 2000 alone, according to VenutreOne, VCs financed 2,638 companies, 966 of which remain privately held. Most failed, some were acquired, and fewer still have gone public. It is what it is.

The problem for venture capitalists is that many of the companies they funded so long ago still need financing and remain a long way from exits. Unless those private companies are profitable, VCs must continue financing them or face the unpalatable prospect of walking away from long-term investments. Understandably, most choose to stay the course.

That’s changing the demographic profiles of the companies in VCs’ portfolios. An article published today by Dow Jones Newswires provides the following portrait:

Charles River Ventures expects its portfolio companies to generate a total $1 billion in revenue this year, double last year’s amount. Advanced Technology Ventures says it has a significant number of companies with more than $10 million in annual revenue and several exceeding $25 million.

Overall, 86 percent of technology companies in VCs’ portfolios are generating some revenue and 25 percent are profitable, according to VentureOne. That 25 percent represents 1,094 U.S. companies in the information technology, and retail and consumer sectors, which include many Internet companies.

Interestingly, VCs appear to have inured themselves to this brave new world of long waits for exits and serialized rounds of investment that might extend throughout the alphabet.

The constituency that appears most disconcerted by this new state of affairs are the employees at private companies, many of whom joined with the expectation that exit-derived riches were just around the corner. It’s why many of them enlisted to work for startups, and it’s what kept them at those companies through the hard times. Now, though, they’re facing the sobering reality that the exits might not come.

The mythology of the startup company — you know, getting in on the ground floor of a promising startup enterprise affords the opportunity to share in tremendous wealth in exchange for maniacal commitment and a tireless work ethic — could be dying an agonizing death.

At minimum, prospective employees need to do their due diligence before making their investments, just as the VCs should have done before creating this problem in the first place.

Why Are We Still Talking about the Mobile Internet?

At CNET, Marguerite Reardon has written an article about the current status of the mobile Internet.

For those who care, the current status of the mobile Internet is about where it was in early 2001.

While rapid, sometimes head-spinning innovation has occurred all around it, the mobile Internet, such as it is, has not progressed much since the days of boundless optimism in the spring of 2000, when the irresistible draw of the CTIA Wireless Conference and Exposition filled the New Orleans Convention Center to capacity.

I was there, and I can remember all the buzz about the coming of the mobile Internet, about WAP, about the future of 3G, about the endless promise of mobile data applications. Incredibly, we still are talking about all those things in the future tense.

It’s like Waiting for Godot, but with mobile phones.

The mobile Internet, my friends, is a cruel hoax. It is perpetrated on application developers, on content providers, on the great hoi polloi of mobile punters and subscribers, and on anybody else who believes that the essence and zeitgeist of the Internet can be transferred into an incorrigible and recidivist telco world of wireless operators.

People, it’s never going to happen, not as long as carriers and telco executives run wireless operators. As much as we might want them to go away, they seem intent on staying the course.

The problem, again, is not technology. There are passable means of delivering relatively rich content over the comparatively constrained bandwidth and onto the small-screen real estate of mobile devices. Technologically, there are adequate solutions to the challenge of providing a reasonably satisfactory user experience over a mobile network and onto a mobile device.

The real problem, though, is the mindset and attendant business models that wireless operators employ. These companies and their executive custodians never liked the Internet in the first place.

In their view, the Internet moves too fast, it’s anarchic, it’s disruptive, it’s ceaselessly innovative, and it’s populated by entrepreneurial types who don’t seem to know their place in the rigidly hierarchical order that telcos like to impose on everything around them.

What made us think that wireless operators would embrace innovation? What make us believe that their executives, simply because they ran mobile services rather than landline networks, would be any different than their telecommunications forebears?

Well, fool my once, shame on you, but fool me twice, shame on me. I won’t be fooled again.

It’s no knock on Reardon, who must write about she sees before her, but what’s in that story could have been in an identical piece written in 2000. We’ve not moved forward in mobile computing, not nearly enough.

Meanwhile, look at the amazing technological advances that have been made during the past six years on the Internet, on the Web, and on areas that aren’t under the dead, stultifying hand of the telcos, wired and wireless alike.

Just think about what real innovation might come to mobile computing if wireless networks weren’t owned and operated by today’s wireless operators but by service providers who were more creative with respect to business models, and who understood that a more enlightened approach might work better than a rigidly controlled, stiflingly micromanaged, vertically integrated business structure that endlessly overpromises and underdelivers.

The mobile Internet is chronically impaired and severely retarded because it’s not really the Internet at all.

It’s a telco-world version of what they think the Internet should be like, replete with walled gardens, restricted content, decades-long product cycles, minimal innovation, and pricing models that consumers despise and fear rather than understand and embrace.

Google’s Schmidt Elected to Apple’s Board; What Now?

Apple Computer announced today that Google CEO Eric Schmidt has been elected to its board of directors.

Niall Kennedy cites some pre-existing coziness and board-level interconnections between Google and Apple, while Om Malik says today’s announcement portends hard times for Microsoft and all other comers in digital media.

I figured Microsoft and its Zune were in for a dauntingly uphill fight against Apple’s iPod and iTunes even without having to contend with the additional resistance that Google might bring to proceedings. As the MSN/Windows Live debacle demonstrates, Microsoft is not nearly as close to the web-connected consumer as it presumes to be, nor as close to that market as many observers believe it to be.

Increasingly, I see Microsoft as more of a threat to incumbents in SME business markets — beware security, business intelligence, database, and asset management vendors — than in consumer-oriented services. Microsoft has gotten things right, for the most part, with the Xbox, but not so much with its online offerings.

What’s interesting about today’s announcement of Schmidt’s ascension to the Apple board of directors is the relief into which it throws Google’s decisions earlier this month, as announced at the annual National Association of Recording Merchandisers (NARM) conference, to refrain from entering the online music marketplace. It all makes sense now, doesn’t it?

So, now that the deal has been signed in boardroom blood, so to speak, what sorts of quid pro quos will Apple and Google exchange with one another?

Viisage and Indentix Merger Complete; Resulting Company Moves to NYSE

Viisage Technology, Inc. and Identix Incorporated, both of which had been listed on NASDAQ, have completed their merger.

The resulting company, L-1 Identity Solutions, will begin trading on the New York Stock Exchange (NYSE) tomorrow, when the company’s chairman, president, and CEO Robert V. LaPenta will ring the exchange’s opening bell to commemorate his new corporate entity’s public-market debut.

I’ve written about Viisage and L-1 before. The more I look at this company, the more I believe it will succeed at selling a broad range of biometric-security solutions — comprising authentication systems based on fingerprint, facial-image and iris-pattern recognition — to government agencies and large private organizations inside Fortress America and beyond.

Just look at the board of directors, composed as it is of a veritable who’s who of Beltway insiders. But if you try visiting the newly merged company’s website, you’ll be confronted with a login screen. I don’t know about you, but I don’t have a login name or password.

Perhaps LaPenta and company are taking security a bit too far. At least they didn’t subject me to a video-camera-delivered retinal scan.

Analyst Predicts Hard Times for InfoSpace

InfoSpace is in serious trouble, according to an WR Hambrecht & Co. analyst quoted in a story published online today by the Associated Press.

The company, which has carved out a niche for itself as a content aggregator and search provider for wireless operators and their subscribers, will be under increasing pressure as content providers, such as Walt Disney Co. and Time Warner Inc., seek direct relationships with wireless operators; and as search giants, such as Google and Yahoo, increasingly move into InfoSpace’s territory.

At least, that’s what Denise Garcia, the WR Hambrecht & Co. analyst, suggests.

Actually, her argument seems reasonable and sound, and all indications point to the end of what has been an up-and-down roller-coaster ride for InfoSpace. It managed to squeeze out an existence from dealing with wireless operators, and for that it should be commended, but the golden age of the content intermediary (or middleman) would seem to be coming to an end. There’s too many of them, particularly now that the major content providers are insisting on their own direct relationships with the mobile service providers. 

So, what will happen to the company? Writes Garcia:

We do believe InfoSpace makes an attractive acquisition target for a mobile content aggregator seeking to expand its mobile content library or media company wanting to expand its content delivery platform

But Garcia says the company is overvalued by the public market at the moment, and that its price must fall before it can become sufficiently attractive to a buyer. That, too, sounds like a reasonable assessment.