Monthly Archives: January 2010

Back Soon; Quick Comment on Google’s Chinese Problem

I have been preoccupied with professional concerns most of this week, but I will be return shortly.

The conflict between Google and China is interesting, but it’s one element in a bigger picture that has more to do with Chinese nationalism and mercantilism than with espionage. I am not saying that Google didn’t take a principled stand against the Chinese government, but I am suggesting that it was easier for Google to take that stand against the backdrop of a Chinese market that systematically favors a domestic search vendor over foreign players.

It’s no coincidence that Google has done well in search in nearly every other geographic market it has targeted worldwide. What’s different about China? The answer to that question has major implications that reverberate well beyond Google’s purview.

HP Engineering Exodus?

LIke many people, I hear rumors occasionally. The challenge is in determining whether the source and substance of the rumor can be trusted.

If you’re dealing with a familiar source, you’re in a relatively good position to assess the veracity of what you’re being told. When that’s not the case, you’re in uncharted waters, left to navigate without a GPS or a compass — and sometimes without even a paddle. It’s in those cases that you invoke deduction and intuition.

There’s a rumor I’ve been hearing lately about engineering defections at HP’s American operations. I don’t have granularity on the numbers involved, where or in what departments the exodus is occurring, or how widespread the flight might be.

At first, I dismissed the rumor. Given the state of the economy, I wondered, where would these migrating engineers go? Still, at the top of the food chain, somebody always needs a good engineer. The best would find new employers.

But why would it be happening?

Well, under the rule of Carly Fiorina and now Mark Hurd, HP has become less the redoubt of the engineer. Under Fiorina, marketers were ascendant, and under Hurd we’ve witnessed the rise of beancounters and operational technocrats. It’s not the company of the eponymous founders, and the HP Way is as likely to be a street address as a company ethos.

Then, if you’ll remember, there was the recent survey, listing the best and worse of technology-industry employers. HP ranked as one of the lowest-rated technology companies for which to work, and Mark Hurd was not viewed favorably by HP employees.

In 2008, Hurd gave a talk bemoaning the deteriorating pool of technical talent in the USA. Said Hurd:

“In this country, we have a problem. The source of this country’s greatness has been its technical talent . . . But you have to go where the tech talent is, and right now the tech talent is in Asia.”

“We often can’t keep [engineers] in the country even after they’ve graduated from U.S. universities like Stanford.”

Hurd said that only 40 percent of HP’s then-40,000 engineers were based in the US. Previously (he did not specify an earlier date), HP employed about two thirds of its engineering staff domestically, according to the HP CEO.

The evidence suggests that HP was having an engineering problem in its home market. In his 2008 talk, Hurd rationalized HP’s engineering offshoring. It isn’t a stretch to suppose that HP’s American engineers might wish to seek employment at a company more committed to their job security.

Finally, HP recently announced the acquisition of 3Com, formerly an icon of American computer networking that has remade itself into a Chinese company with an American history. Most of 3Com’s engineering is done in China. When the deal was announced, I wondered whether HPs ProCure engineers might be the ultimate losers.

I don’t have hard data to confirm the rumor about engineers leaving HP. If the rumor were to be confirmed, though, it wouldn’t come as a shock.

Will Google Waver in Its Commitment to White Spaces?

I am excited about the potential for unlicensed white spaces, unused broadcast spectrum serving as a buffer between television channels. As a lowly user, I see its enormous potential as a high-bandwidth successor to unlicensed Wi-Fi.

My enthusiasm for white spaces probably isn’t shared by the wireless operators, though. Having largely vanquished the commercial threat once posed by Wi-Fi, they aren’t eager to see another chunk of unlicensed spectrum impinge on their profit margins and business plans.

Not sharing the biases and business models of the carriers, Google’s disposition toward white spaces is more expansive.

While speaking at a session of the Churchill Club in Menlo Park, Calif., Vint Cert, an Internet progenitor who now serves as a vice president and chief Internet evangelist at Google, said his company would like to see white spaces unlicensed. He also said technology exists today to enable use of white spaces.

Google recently offered to run a white-spaces database. Such a database, which could have several providers, is required to ensure that devices do not cause interference with nearby signals used for TV broadcasts. Google — along with Microsoft, HP, Motorola, Dell, and others — is a member of the White Spaces Database Group, which works on technical specifications for the database.

An early member of the White Spaces Coalition, an industry consortium that promoted the delivery of high-speed broadband Internet access over white spaces, Google also sponsored a campaign called “Free the Airwaves,” which touted white spaces as unlicensed spectrum that could be used like Wi-Fi.

As a Google product manager wrote on a company blog in the summer of 2008:

At its core, Free The Airwaves is a call to action for everyday users. You don’t need to be a telecommunications expert to understand that freeing the “white spaces” has the potential to transform wireless Internet as we know it. When you visit the site, you’ll be invited to film a video response explaining what increased Internet access could mean for you, to sign a petition to the FCC, to contact your elected officials, to spread the word, and more.

When it comes to opening these airwaves, we believe the public interest is clear. But we also want to be transparent about our involvement: Google has a clear business interest in expanding access to the web. There’s no doubt that if these airwaves are opened up to unlicensed use, more people will be using the Internet. That’s certainly good for Google (not to mention many of our industry peers) but we also think that it’s good for consumers.

As Google presses forward to establish carrier relationships for its Nexus One smartphone, we should watch closely to see whether its commitment weakens to white spaces as a complement or successor to Wi-Fi.

By the way, white spaces are mentioned only incidentally in the InfoWorld article on Vint Cert’s remarks to the Churchill Club. He talks about other issues, too, including the need for data-portability standards in cloud computing.

Google Dismissive of Microsoft as Mobile Rival

When it comes to the world of smartphones, the mainstream business press likes to fixate on an imaginary zero-sum death match between Apple’s iPhone and Google Android-based handsets, including Google’s very own Nexus One.

On the surface, it seems a great story. You have Apple’s enormously successful iPhone serving as the protagonist, setting the benchmark as the “one to beat.” Journalists and market watchers have been searching tirelessly for an “iPhone killer,” somebody to take the fight to Apple and complete the narrative. The Apple antagonist they’ve found, it seems, is Google.

Never mind that the story doesn’t make sense, that it’s more hype than substance. That doesn’t matter. What matters is being able to trot out a hoary narrative mythology – hey, it’s Apollo Creed versus Rocky, Coke versus Pepsi — perspective and reality be damned. If the storyline puts bums in the seats or readers on the site, it will endure.

It’s sad, really, because there’s an even better smarphone story, one that’s just as compelling but anchored firmly in the real world. It involves Google on one side, yes, but its adversary isn’t Apple. No, across the smartphone ring from Google, girding for a battle to win the votes of the judges – represented, in this context, by handset OEMs – is none other than Microsoft.

Yes, Microsoft.

It isn’t that Google and Microsoft are fighting for mobile-market dominance. Microsoft fell out of that contest a long time ago. It’s well behind the likes of Apple, RIM, and Nokia, and it is rapidly losing ground to newcomer Google.

Still, Microsoft and Google are destined to fight fiercely against one another for the affections of the handset vendors who don’t have mobile-operating systems of their own. These vendors – Motorola, Samsung, HTC, Sony Ericsson and the like – license their mobile software, from Microsoft historically and now, increasingly, from Google.

All of which makes Google’s decision to release a handset of its own somewhat perplexing. Crusty marketing types like to say you can’t suck and blow at the same time. But Google – in licensing Android to handset vendors while effectively competing against most of them (HTC partially excepted) with an Android-based handset of its own – is doing just that.

Microsoft is drawing attention to Google’s contradictory approach. In a Bloomberg story, Robbie Bach, the president of Microsoft’s Entertainment and Devices Division, argued that Google will have difficulty attracting partners to its mobile platform after introducing its own Nexus One handset.

Bach reasoned that because Google now sells its own phone, handset makers are likely to be concerned that their software partner might favor its own handset over theirs. Such a scenario, he deduced, would drive Android licensees out of Google’s embrace, presumably into Microsoft’s welcoming arms.

Said Microsoft’s Bach of Google’s conflicted game plan:

“Doing both in the way they are trying to do both is actually very, very difficult. Google’s announcement sends a signal where they’re going to place their commitment. That will create some opportunities for us and we’ll pursue them.”

Microsoft needs all the help it can get. Its Windows Mobile operating system has been a nearly unmitigated disaster, serving to put out a welcome mat and open the door for Google’s Android-based appeals to Microsoft’s stable of handset-vendor licensees. If Microsoft had done its job, Google wouldn’t be enjoying the marketing opportunity it’s now exploiting with Android and Nexus One.

Google, for its part, tells us not to believe our lying eyes. Notwithstanding appearances, Google says all is peace and love around the Android campfire. Said Katie Watson, a Google spokeswoman:

“It’s not our objective to compete with our partners. Our expectation is that the Nexus One will push the entire mobile ecosystem forward, driving greater innovation and consumer choice. We look forward to working with other hardware manufacturers to bring more Google-branded devices to market.”

In other words, there’s nothing to see here.

But that probably will sound like marketing pabulum to Android’s licensees. It’s all well and good for Google to say that Nexus One “will push the entire mobile ecosystem forward,” but, as the legendary Alan Partridge once said to a Geordie, “that’s just noise.” Google can be in league with its partners or working against them. And, if it chooses the latter course, you wonder how long they’ll remain Google’s partners.

Michael Gartnernberg, an analyst with market-research firm Interpet LLC, explains Google’s mobile dilemma:

“No one has ever succeeded in selling their own device while trying to license to partners simultaneously. As much as Google can say it’s not a Google phone, the phone says Google on it. They’re going to have to convince their licensees they’re not in competition with them.”

Gartenberg would be right, of course, if the mobile universe were unfolding as it should. But it isn’t – and the problem is Microsoft.

My supposition is that Google is breaking with convention partly because it can. At least in the mobile space, Google doesn’t respect Microsoft. It looks at the sad state of Windows Mobile, and it figures that Microsoft doesn’t offer handset vendors a viable alternative to Android. It’s arrogant and cocky of Google – and it’s entirely dismissive of Microsoft – but that seems to be the position Google has taken.

Google thinks it can have its cake and eat it, too – serving handset OEMs slices of Android while putting some aside for the Nexus One – because it believes its licensees aren’t about to visit the cake shop in Redmond.

It’s too bad Microsoft doesn’t appear capable of proving Google wrong.

Mystery Surrounds Acquisitions by Motorola’s Home and Networks Mobility Business

In November, the Wall Street Journal published an article quoting sources who said Motorola was preparing to sell its home and networks mobility business for as much as $5 billion.

Since then, as noted by Billing and OSS World, Motorola has not been behaving as though it’s inclined to sell the business, which is its largest. To the contrary, Motorola has gone on an acquisitive tear, buying three small companies that are being folded into the group.

The latest purchase involves SecureM, LLC and its wholly owned subsidiaries, which together operate as SecureMedia, a developer of software-based digital rights management (DRM) and security systems for IP video distribution and management. SecureMedia develops and markets software systems for securing the distribution of digital entertainment over multiple platforms to multiple devices, including set-top boxes, wireless handsets, PCs, and portable entertainment devices. Its products are apparently approved by all major film studios and TV broadcasters.

Quoted in a press release announcing the acquisition, John Burke, senior vice president of Motorola Home & Networks Mobility business, said the following:

“Motorola continues to invest in our video infrastructure solutions as our customers evolve their networks to handle the explosion in consumer demand for video. SecureMedia has superior expertise in IP-based video security and digital rights management — critical capabilities for the emerging Internet Era of Television, where video content is mobilized across the three screens of TV, mobile phone and PC.”

As with the two preceding acquisitions — of Israel-based BitBand, involved in content-delivery networking and IPTV, and RadioFrame Networks’ iDEN business — terms were not disclosed. Doubtless these were not bank-breaking transactions, but one wonders how they are consistent with Motorola’s reported desire to sell the business into which they are being integrated.

It’s certainly possible, as I mentioned in a previous blog post, that Motorola might intend to sell the business in pieces, with part of it to be sold earlier to one buyer and the rest to be kept or sold later to a different acquirer.

The report that appeared in the Wall Street Journal was relatively detailed, with sources providing the identities of prospective acquirers and the names of the investment banks, J.P. Morgan Chase & Co. and Goldman Sachs Group Inc., said to be advising Motorola on the sale. I suspect there was some fire behind the smoke, but it’s difficult to know whether we’re dealing with a cigar stub in a wastebasket or a five-alarm blaze.

One presumes there’s some method behind the ostensible madness, so stay tuned.

Google Energy Open to Interpretation

Google isn’t on the cusp of entering the electricity business, but in forming Google Energy, a Delaware-based subsidiary, and requesting regulatory permission to buy and sell electricity on the wholesale market, the search giant has signaled more than a hobbyist’s interest in the energy industry.

The official story from Google headquarters is that Google Energy has sought regulatory approval from the Federal Energy Regulatory Commission (FERC), the agency with oversight over the power grid, because of the parent company’s desire to have flexibility in pursuing its corporate goal of carbon neutrality.

Quoted by Martin LaMonica of CNET News’ Green Tech, Google spokesperson Niki Fenwick explained:

“Right now, we can’t buy affordable, utility-scale, renewable energy in our markets. We want to buy the highest quality, most affordable renewable energy wherever we can and use the green credits.”

I don’t doubt this is Google’s near-term objective. In the long run, well, anything is possible, even Google as an energy purveyor.

Google retains a longstanding interest in energy-efficient computing, particularly in its immense data centers, where savings from reduced energy consumption have the potential to deliver favorable results to the bottom line. With a 1.6-megawatt solar installation at its headquarters in Mountain View, Calif., Google already produces energy to support its operations. Clearly, as its application to FERC attests, it would like to do more, on its own and through the purchase of low-cost, utility-grade electricity on the open market.

In this context, Google’s corporate goal is carbon neutrality. If it attains that objective, though, would Google consider something more ambitious, taking it into the realm of serving the energy requirements of others?

At this point, Google says it doesn’t have “concrete plans” for its energy subsidiary, but that it wants “the ability to buy and sell electricity in case it becomes part of our portfolio.”

That could happen, as Katie Fehrenbacher writes at earth2tech. She cites a New York Times interview with Bill Weihl, Google’s energy guru (yes, that’s what he’s called), who admits to ambiguity about what the future holds for his employer.

Will Google’s Sweetened Bid for On2 Close the Deal?

Here and elsewhere, On2 shareholders dissatisfied with Google’s takeover offer for the video-compression company have campaigned against the proposed acquisition.

They’ve actually done more than that, alleging improper and untoward conduct by On2 principals and board members, some of whom were deemed to have gotten too cozy with Google and not open enough to offers from other potential acquirers.

It has been an ugly episode, for On2 and for Google, which never misses an opportunity to burnish its self-proclaimed corporate image as a non evildoer. While it hasn’t been established that Google perpetrated any dubious deeds in the context of its pursuit of On2, the ensuing charges and countercharges were unedifying. It could have gone better, and perhaps it would have done if Google had made a higher offer at the onset.

Figuring that late is better than never, Google has decided to sweeten its bid for On2. In what it described today as its “final offer,” Google proposes to give On2 stockholders an extra 15 cents in cash for every On2 share they hold, plus the originally proposed exchange of 0.001 shares of Google Class A common stock for each share of On2 stock.

Said On2 and Google in a statement:

“By increasing the consideration offered to On2’s stockholders by an additional $0.15 per share in cash, On2’s stockholders will receive additional value for their On2 common stock that Google and On2 believe better reflects the value that On2’s stockholders would have received had the acquisition closed closer to the time of its announcement in August 2009. This increase in the consideration that Google is offering to On2’s stockholders constitutes Google’s final offer.”

With the modified terms in effect, the deal would be worth about $134 million, up 20 percent on an initial arrangement valued at about $107.4 million. A large number of On2 shareholders weren’t happy with that offer — or how it came about — and they rebuffed it forcefully, compelling the company to twice postpone a shareholder meeting designed to confer official approval on the deal.

The company’s board, which has approved of the sale to Google all along, recommends acceptance of the revised bid. Shareholders will have an opportunity to pass judgment on the deal at a meeting on February 17.

Will they be favorably disposed to the sweetened offer? Will this meeting, unlike the other ones, actually take place? I’d like to hear directly from On2 shareholders, especially those — and there were many of them — who were opposed to the initial bid.