First you can always blame the Greeks, and so I shall.  Timing is everything in life.  The problem is time is rarely within ones control.  And so it was with the Facebook IPO.  As people complain bitterly about the US economy in an election year, it has become increasingly difficult and complex for the average American worker to understand why Greece matters so much.  But the reality is it does.  It affects all the global financial institutions who hold Greek debt.  It jeopardizes the stability of the Euro.  If  Greece is to be bailed out it means Germany will have to intervene, then the question of who is next, Spain , Italy, Portugal, etc…  In the end though it creates jittery financial markets.  Jittery markets are not local they are global and therefore Europe’s jitters come to American shores. Which is exactly what Facebook entered into, a jittery global market.  I think many thought Facebook would create a “new” dotcom boom.   However the current global crisis has deep roots and deep wounds that will scar the global economy for a long time.  The expectations of the Facebook IPO were too great and never realistic.

The second issue was the NASDAQ’s handling of the IPO.  When I first heard Facebook was going public I thought it would race towards Apple and Google prices of over $500 per share.  However after the first day of trading it was apparent it would not get anywhere close to those levels,  Some said the opening price of $38 per share was too high.  Others, and I count myself in this group, said too many shares were made available.  Even at $30 a share you are still looking at a company valued at $90 billion. You are looking at over 2.74 billion share that were made available.  To put in perspective after all the split and buybacks Microsoft has 8.4 billion outstanding shares, two splits and Facebook will be at that number.  Do not expect  a Microsoft with splits on a yearly basis over a decade for Facebook.  It seems as the NASDAQ caved into the hype and now will pay the price in the form of numerous lawsuits.

There is also the glamorous side of things with CEO Mark Zuckerberg marrying his fiance Pricilla Chen.  Makes for nice press and it may seem charming to marry your love on the same day as your baby goes public making you a mega multi-billionaire.  Then surprisingly disappearing from site for a while.  He is young and he may be smart, but some of his wisdom is lacking when it comes to life’s experiences.  Though I am a bit confused as to why the press thinks his missing status a few days after getting married….try a bedroom?  Just suggesting as the press is oh so smart.  Don’t trust the Wall Street Journal on this one, go with People magazine or dare I say the Enquirer?

With all the negative attention I am not too concerned about Facebook’s future prospects.  Some have asked or questioned Facebook’s mobile strategy as this is the next holy grail.  I think Facebook was one of the first companies to get the need for mobile applications.  Early on in the iPhone craze Facebook was the “killer” app.  Can they monetize mobility?  I think it will be relatively easy for them to do this.  When I use Pandora for music on my iPhone I see a lot of ads that I find relatively non intrusive.  There is also the persistent rumor of a Facebook smartphone.  Could be interesting lets just hope it is not another Microsoft Kin.  In the end though I have always viewed Facebook as a leader in the mobility space and I expect that to continue and I expect them to monetize mobility.

It also seems in the ad business right now that the place companies want to be is Facebook.  This will be a major threat to Google as there will be less perceived value for search ads versus an internet application where people hang out, in large numbers.  Despite Microsoft’s investment in Facebook it is a double edge sword as companies are even less likely to maintain or increase budget to advertise via Bing or MSN.  The attraction for advertisers is people literally hang out on Facebook  For ad execs that is a more understandable revenue model as it in some ways is just like watching television.

Looking down the road given its audience size I see other prospects.  Video content seems the obvious one, but maybe more broadly entertainment in general.  I have long felt that we will soon have a day where a movie is released straight to the internet by passing theaters (I find this sad, but the writing is on the wall).  Facebook with 900 million subscribers would be a very attractive channel.  Music Entertainment could be the same.  A key for all this will be hooking up to my flat screen, though I love my laptop the entire family cannot gather around it.   In this regard it will be interesting to see what Facebook defines as its channel strategy.

In the end despite the negative publicity around the Facebook IPO I am optimistic about its future prospects.  Things will turn in Facebook’s favor, unless at the executive management level there is a complete meltdown.  All eyes will be turned to when Facebook announces its Q1 earnings and I think they will be good and start the path to having a predictable growth model.  We know already that they generate $4 billion in revenue with a net income of $650 million, so it will be interesting to see the cost structure of the company in more detail.  Maybe more impressive is that it is doing this with a little over 3500 employees. We do know that once an internet based company gets rolling the momentum can carry a company forward quite rapidly.   Then we can start getting excited about the next big IPO, Twitter.

Good Night and Good Luck

Hans Henrik Hoffmann May 25, 2012

The borders are becoming increasingly blurred even as video becomes more pervasive in our day-to-day lives.  This is something I pulled off of the Yale – New Haven Teachers Institute sight, written by Angelo J. Pompano, but it does a clear job of illustrating a point:

No, this is not your father’s Candid Camera. Privacy in the Age of Video Surveillance is a serious concern. With the proliferation of video surveillance equipment in every conceivable situation of our daily lives, concealed video cameras are not a source of amusement as on the old Candid Camera television show, but a real restriction on our right to privacy. Consider a hypothetical, but possibly typical day: you wake up and walk out to your mailbox. A neighbor’s private security camera is trained on his driveway across the street and picks you up. Later, you drive to work and when you get to the light on the corner, a video camera is watching to see if you went through red. You stop off at an ATM and you are taped. You go into the 7 Eleven-taped; pump gas- taped; get on the interstate and the traffic control cameras are focused on you. You get to work and the camera in the parking lot follows you into the building. Then you finally get you your desk and once more you are monitored. Let’s not even consider the possibility of hanging out at the water cooler or going into the bathroom. It’s only 8:15 AM and you have already had more TV exposure than Regis Philbin. You begin to think that maybe you shouldn’t have worn that plaid tie with the checkered shirt.

This example is current. It exists today.  We bask in watching reality TV shows when in actuality we are already living it.  We just fail to notice or simply do not care.  Thinking our lives dull.  However everywhere we go we are being watched.  And not just in real-time.  The video content is stored so if we need to, we can access later. As time goes by more and more of our lives will be caught on video, until the point we can stitch them all together to create a complete view of our life, however interesting or boring it may be.

This does raise concerns, and in today’s world when we have concerns it is usually a question of how it is defined in our legal systems. When my life is in the public domain what rights do I have to say what can be viewed and what cannot?   Can someone take some of eth embarrassing clips of me and post to Twitter or on YouTube?  Many states have laws erected around hidden cameras and surveillance cameras.  More interesting may be that many states do not.  Video Surveillance is being discussed at both state and federal levels with arguments on both sides.  Employers would argue that video surveillance can be used most anywhere on corporate campuses (yes..including locker rooms and bathrooms).  The one that so far has been determined off-limits is intrusion into people’s private homes.  However it is apparent that the boarders of video surveillance are expanding not contracting.  Beyond places of business it has morphed into our daily lives.  It may be just the video app on your iPhone, but that in and of itself is a new form of surveillance.  When we got our iPad at home I was amazed at my young boys ability to quickly find and create home video’s with the iPad.  It seems video technology, like it or not is everywhere.  We may not be able to depend on our governments to regulate because to do so will require us to regulate individuals.  Can government keep up with the  fast pace of technological change?

When we think of technology it is an industry that never sleeps.  An industry built on dreams, of dreaming a brighter and better future for mankind.  Of course it is odd, to me, that these technological advancements often happen in our military establishment. Things that we associate with military advancement make their way back to domestic products.  That is what makes this area very difficult for lawmakers as congress does not work as fast as technology.  When they have get involved it is not clear if they had a positive impact (The Microsoft DOJ comes to mind).  When I think of video and where it is today and where it could be in five to ten years it is pretty daunting.  In a commercial today for healthcare they actor talks about swallowing a pill that has a camera that can capture and send video of your internal systems.  That is pretty useful and amazing.  What if the military could create a robotic fly or mosquito that had a camera?  That would be pretty cool for military intelligence?

Today when you look at directions via Google Maps the level of detail you can drill down to is pretty specific.  I can see my house, my lawn etc..But these are still just photographs.  However the question is how long before I can actually see activity going on around my house?  I have seen numerous demos that show 3-dimensional views of a city, what would the natural evolution of this be?  How long before it captures me leaving the house for work or to walk the kids to school? How zoomed in will the view be?  Will the camera view capture a smile or a frown on my face?  Who will be watching me?  Today when police arrest someone who may have stolen a TV from a home, they can view in detail where the person has been by viewing the recent log files of Google Maps, to show where the suspect has been recently.  This could be a boon for couples where one suspects the other of cheating…just a thought.

In the end how far will all this go?  All you have to do is imagine. In the end reality TV is going to die because we will all be on it 24 by 7.  Will we enter Orwell’s, “1984″?  Or maybe Suzanne Collin’s “The Hunger Games”.  We may have to, for I fear when we are all on video ,the reality will be that many of us will not be worth prime time viewing.  Will we need social security cards anymore when we can in real-time pull up fingerprints, or maybe more realistically swipe our thumb and have it cross referenced with some centralized (and distributed) master database?  What about a PIN for your ATM?  That brings some gruesome mobster kind of thought when your thumb is a valuable piece of information.  As has been pointed out there will be many benefits but at the same time we always have to weigh in with at what cost?  In today’s world we are great at figuring out the financial costs, but we seem to have lost sight of the social costs.  But then who needs to see what’s on mans mind since we seem to think we know everyone when they are on video.

Good Night and Good Luck

Hans Henrik Hoffmann April 19, 2012

Lets head to Utah for bad decision number one: WordPerfect.  This was a company that when the personal computer first came onto the scene quickly became the number one player in Word Processing.  Competing against other notable companies like Wordstar, Wang, and Microsoft Word.  If one thing killed them off quickly it can be summed up in the acronym GUI (Graphical User Interface).  When Apple launched the Mac, Microsoft used it as an opportunity to learn about creating software for the GUI.  WordPerfect on the other hand dipped their toes in the water and when they did not see the sales they wanted on the Mac, killed it.  As Microsoft became more enamored with something called Windows, WordPerfect dug their heels in and supported DOS, where they were a leader.  The problem being Microsoft owned both DOS and Windows and had more or less stated Windows was the future.  Towards the end the only thing WordPerfect had going for it was free technical support.  Sounds nice from a  customer perspective, but if you looked at the costs, not sustainable.  WordPerfect over time just seemed to disappear.

Apple actually makes the list.  During the period where there was no Steve Jobs.  Early learning here is Steve Jobs killed  himself off when he hired Pepsi executive, John Sculley.  Steve’s pitch to John was, “Do you want to change the world or sell sugared water”.  As Steve learned people who sell sugared water don’t change the world.  However they are master politicians which led to Steve’s ouster.  Apple would go through several CEO’s  before Steve returned.  Some like, Micheal Spindler would start to pursue a OEM model where they license the software, like Microsoft.  A nice form of flattery, but not in the Apple DNA.  Steve would come back, kill this plan, and we know the rest.

Next up we return to Utah and Novell Netware.  When the computer network first became popular, Novell was the dominant player for our file and print services.  However one stupid decision killed the company.  Why just a file and print server and not a app server to?  I remember I was in a meeting with Bill Gates and he went off about why Novell did not do this.  He was stunned that they did not have the foresight to see what was coming in the industry. In his view had they just added application services, Windows Server would never have garnered the market share it did.  A second more technical item was Novell had a proprietary protocol called IPX/SPX.  They did not support the dominant internet standard called TCP/IP. Eric Schmidt, when he was at Novell worked on fixing this, but then this startup called Google came knocking and he left for greener pastures (much greener as it turned out). As I am sure you all know this internet thing became rather large and Novell played themselves out of the market.  Oops.

As we entered a new millennium things would change.  My old company, Microsoft, which seemed to do no wrong would make plenty of mistakes in the new century’s beginning.  They might say search was a big mistake, but as I have said they never would have figured it out.  Google developed a new software business model.  They did a classic Sun Tzu, when faced with greater numbers change the playing field.  Probably the first blunder was the mobile phone space.  Though they might say they were successful prior to the iPhone I never saw it that way.  THe Microsoft strategy was a smartphone was a business phone and they went head on after RIM.  I never saw it that way.  I saw smartphone’s just a natural evolution of mobile phones and as more intelligence was put in the phone, the smartphone would be a consumer phone.  Then the iPhone launched and that was the end of the Microsoft mobile story.  I know they have this Nokia thing going on, but as good as the phone is, everything I am reading is it is too late.

Going back to search the big loser was Yahoo.  Jerry Yang had a dotcom success story, but was really just pushed aside by a competitor with a better search engine and a better business model.  Google ate everybody up in this space.  They proved the age-old business adage, revenue is king.  It was not long before Yahoo was on the defensive in everything they did.  Google was the tech darling and Yahoo had fallen into the worst place in the industry:  Yesterdays News.  Even when they got a get out of jail free card in the form of a massive Microsoft takeover offer they blew it.  Jerry Yang managed to convince everyone they had a future.  With the recent news of a massive layoff and reorganization, all is but lost. Jerry Yang will be a case study in graduate school, and it will not be flattering.  It will be along the lines on increasing shareholder value.  But then Mr. Yang is an engineer not a finance guy.

Amazon was not a likely candidate to be the early leader in cloud computing.  Next thing you know everyone was left standing with their pants of the ground.  Some rode the wave very well, companies like VMWare.  But across the lake the from Amazon’s Seattle headquarters a  Redmond based power was scrambling.  Google was also behind in this space.  When I look at Cloud based posting these days I see many references for people with experience in Amazon Web Services.  I am not sure I have seen one for Azure (Microsoft’s cloud service). VMWare is always in the conversation with its virtualization software, it is always a good place to be, “in the conversation”.  Most companies building out cloud services usually have either Amazon or VMWare, if not both, as part of their cloud offering

Finally there was the tablet phenom.  When Apple founder Steve Jobs announced Apples plans to make and sell the iPad, Microsoft CEO Steve Ballmer was quoted as saying, “They will never sell those things”.  As it turns out they can sell those tablets.  In the last quarter they sold over 15 million of these items Steve said they could not sell.  In the meantime a slew of Android based tablets have hit the market and as for Microsoft, we wait for Windows 8.  Why do I feel like this will be the Windows Phone all over again?  When the new tablets hit the market will it be revolutionary or just another Tablet?  The market is already 3 years down the road and the company that changed people’s lives sitting on the couch and watching TV was Apple.  That is what technology has always been about, changing people’s lives.

In all the examples I have given one thing is clear.  To create these industry and societal changes it takes a leader who see’s beyond today and looks to tomorrow.  When we look at what I provided in each case we have visionaries that we all know Gates, Jobs, Bezos, Maritz, to name but a few.  In the also ran category you see companies always flat-footed and never embracing the future, but reacting to a race that has already began.  If you are racing Usain Bolt and you are slow off the starting blocks do you think you will win?  Even if you were that fast and physically fit you cannot make up a half a second in a sprint.  That is how today’s tech sector works.  Even if you were to catch up the industry has moved on to a new race.  To win you need to jump the gun otherwise you will be but a  distant reflection in the rear view mirror.

Good Night and Good Luck

Hans Henrik Hoffmann April 9, 2012

I was actually meeting with an old co-worker at AT&T who let me handle the Windows Phone. It was the HTC Titan.  The screen was bigger than my iPhone3 (I am always running behind the latest and greatest). When the iPhone5 comes out I may upgrade.  In any case back to the HTC Titan.  The much discussed Metro interface was nice, is it a game changer? No, but nice and I guess it comes down to personal preference.  Some will like the iPhones, others Android and yet others will like the Metro interface.  There does seem to be high hopes around Windows 8.  I remain skeptical, but Microsoft has the clout to make the new operating system a success.  Not just on the desktop but the smart phone and the tablet.  Back to my friend, he let me hold the device. Which was the first time some one had let me do that.   Note to Microsoft phone people stop withe the demo’s and geeky talk, let people experience the phone.

Can either of these two companies create an Apple size comeback?  Nokia is more Apple like in that it is spiraling towards rock bottom.  Microsoft still has Windows and Office generating over $20 billion so though not a company with a lot of “panache”, they are not dying yet.  My fear for Nokia has always been the move away from software and going head to head with Samsung, LG, HTC and the Chinese handset manufacturers.  It will be hard to distinguish themselves as different from the others.  Of course they did do just that when they selected Microsoft as their phone OS vendor.  Nokia had also blown the US market years ago when they refused to make a flip phone.  For a decade Nokia was a much bigger provider outside the US than inside.  For a time it seemed to be ok, “hey we don’t need the US market”.  Odd, but it is what they did.  Then like so many things in mobility, the iPhone hit and changed the landscape.

Moving forward it is apparent that Nokia will need a tablet play as the idea of just providing smart phones is simply not enough.  Due to their relationship with Microsoft, Nokia is in a holding pattern until Windows 8 arrives in the fall.  If I have a concern here for Nokia/Microsoft it is that no one is holding off on their purchase of the new iPad 3 in hopes of a better Windows 8 tablet.  The iPad has garnered so much mind share that I think many people do not realize Microsoft and its OEM partners are coming out with a tablet.  It does not hurt that Apple stock is now trading over $600 a share and they just announced a quarterly dividend of $2.64 a share.

What about Microsoft in this space?  Well as discussed they will not go broke anytime soon, but this is a last stand in the phone space.  Never has Microsoft attached its sails to one strategic partner like it has with Nokia.  For Microsoft it is important that Nokia maintain and start to regrow its international footprint.  An area where Windows Phone has traditionally been weak.  It i also a major reason for partnering with Nokia.  Nokia invested early and heavily in India and China so it makes sense, this unique partnership. It also needs success in the US market, it only to offset the market presence of both Apple and Google.  Apple really rocked the industry with the iPhone, but no company was caught as off guard as Microsoft.  I was there at the time and there was a flippant view towards Apple in this space, thinking they were naive and would fail.  Revolutions happen and if you don’t anticipate them you will be over thrown.

In conclusion, the next 12-18 months will determine if this partnership will succeed or fail.  There will be challenges.  Microsoft has other mobile handset partners.  What if one of them makes the ultimate Windows Phone experience?  How quickly would Microsoft dump Nokia and how quickly would Nokia run to Google’s arms?  If share doe snot grow but remains stagnant when does one throw in the towel?  AT&T is the largest carrier and promoter of Windows Phone in the US, but how long will their commitment be if the Windows phone continues to falter?  Will Nokia and Microsoft be able to build up a strong developer community to build applications?  There are a lot of unanswered questions and only time will tell.  Some say this partnership needs to succeed, to create an alternative eco system to what Google and Apple provide.  I have always found this a perplexing and humorous notion.  Why do we need a third system?  That is something only the technical people say.  The “people” I cannot see really care one way or the other.  If they did care the Microsoft Zune would still be around.

Good Night and Good Luck

Hans Henrik Hoffmann March 27, 2012

There is no doubt the traditional Google business is under threat.  The very business landscape that Google pioneered is shifting as companies look to spend their ad dollars in places where the perceived monetary return is greater than ad words.  Facebook will be a big test to that business, as will Twitter.  Don’t get me wrong Google has been nothing short of amazing.  It’s end of year statement in December showed a company with over $37 billion in revenue.    This from a company that was incorporated in 1998.  When I started at Microsoft it was already 16 years old and talking of its business units in terms of its first billion.  The fear for Google, from the start has been, is Google a one trick pony?  Can it take sits enormous revenues and invest those in other web-based services to generate new streams of revenue.  There is some hope on the horizon in this area.

The good news for Google lies in the success of its mobile platform, namely Android and the mobile search business.  In our increasingly on the go and mobile society the opportunity for new revenue streams in the mobile search business is immense.  If you go by one Gartner report mobile search revenue will grow worldwide to over $20 billion by 2015.  Based on last years earnings Google already generates $2.5 billion in mobile ad revenue.  Google has been very successful in getting mobile handset providers to adopt their Android platform as the mobile OS.  Premier providers like HTC and Samsung have been major advocates of Android both for the smartphone, and in the case of Samsung its tablet offering.  If there is one note of fear, it is the amount of mobile ad revenue generated from Apple’s iOS platform.  Apple and Google are direct competitors in the handset space, so how long Apple chooses to ship Google’s search as a part of its standard offering of apps with both the phone and tablet is open to debate.  I am sure Microsoft just waits in the wings waiting to provide Bing as the default search offering for the iPhone.

The other bets will be the continued growth of Chrome as a browser and internet platform.  Chrome continues to increase market share ( Use Chrome as my default browser).  This is significant as the browser war is the battle fr the internet OS.  Today we have four to five players: Chrome, Internet Explorer, Firefox, Safari and Opera.  In my view it will come down to three as we are already seeing Mozilla people leave the Firefox camp and Opera is still very small in market share.  The other three combined have close to $200 billion in the bank, so I feel safe in choosing them to fight the last battle.  This is an area where I feel Google is well positioned as they don’t have a PC OS.  Apple has its MacOS and Microsoft Windows.   It can be a big advantage to not have a legacy mindset in the industry.  Hardware manufacturers have introduced a “PC” without Microsoft Windows.  A Chrome Netbook was released.  The reviews were mixed as it is a bit different to have a Netbook with no hard drive.  Thus your experience is dependent upon connectivity.  It is too soon for this device, but if you envision a world where we have ubiquitous connectivity you can see the writing on the wall.

As you see, primarily, Apple has taken the lion share of the tablet market place a new thing is happening.  The Windows growth rate over in Redmond is slowing and in some quarters shrinking.  The big concern here is not just Windows, but down the road Microsoft Office.  Luckily for Google they have been investing in the desktop productivity space with Google Docs.  It is not a bad bet on their part as when you are competing against a product with 90 percent market share the only way is up.  Given the large cash hoard that Google has they can commit to this space for the long-term and with the rise of tablets and, if we believe, the disk less netbook then the outlook for Google Docs long-term is fairly bright (I wrote about Google Docs in a previous post).  They can charge far less than Microsoft and still make billions.  It will not be an easy task however we can see the paradigms for the  future of how we consume technology changing.  One thing for certain in the information age is nothing is forever.

This is the new paradigm we have entered into as the web seems to build up companies overnight into social phenomena’s.  Especially with web-based services like a Google, Facebook, Twitter or Groupon where nothing is manufactured.  There is no physical output.  No handheld device.  No PC.  Just a bunch of services out in cyber space.  The fact that Google has become a $37 billion business in a little over 13 years is truly amazing.  Facebook pre-IPO already is generating $3.7 billion in revenue.  The internet is creating a velocity of business we have not seen before.  The ability to communicate and spread the word of whatever is new and cool is what makes the technology space the most exciting industry on the planet.  For a company like Google to continue its path of success it will constantly have to adjust and seek new business opportunities.  As long as you have smart people envisioning the future, you can determine your own destiny.  Ball is in your court Google.

Good Night and Good Luck

Hans Henrik Hoffmann March 20, 2012

Well on the surface yes and I would argue and agree with Mr Ford that in time, we will enter a future where we are not as responsible for our driving as some would like to be.  Many cars today already come with a GPS system, many have satellite radio, have a connection for our iPhone so we can stream music via Pandora or play whatever we have purchased and loaded from iTunes.   As car technology matures the amount of data we will be able to capture, analyze and utilize will only increase.  We should be able to get a lot of information about drivers driving behavior. As cars move through the streets of America, we will also be able to capture information about the surroundings that they are traveling through.  Your insurance company would love to have this information so they could adjust your rates up or down.  A car is becoming a data collection device among other things.  How we manipulate and utilize that information will be a topic of hot discussion in the years to come.

The most dangerous thing about a car today is the people who drive them.  In fact it has pretty much been that way since Henry Ford rolled the first Model T’s off of the assembly line in Detroit.  The thing that makes humans interesting is their imperfections.  In most cases we inspire by doing the right thing or taking the right action.  However when we make the wrong decisions the results can be disastrous.  How many people are killed every year due to a drunk driving accident?  Or perhaps drivers who just have the thrill for speed or are just in a plain hurry and make reckless driving decisions?  Overall the statistics are pretty grim as is pointed out in Wired magazines article between 2001 and 2009, American roads claimed the lives of 369, 629 people. What if those choices were taken away?  To some (like myself), oh great joy.  I can just program in an address and let the vehicle get me there.  I might even be able to read a book or just enjoy the landscape on my drive.  No traffic issues as my auto computer has determined the quickest route to my destination base on up to the second traffic information received through the wireless network it receives.  My gas mileage will also be regulated and optimized, thus increasing my miles per gallon.  To those who scream at the thought of not being able to drive their beloved roadster and push the pedal to the metal I have but one phrase, “Get over it”.  As drivers you need to all understand.  Your precious driving ability can be summed up simply compared to what you will be competing with, “You suck”.  Your human, live with your imperfections. In the end technology moves forward gaining velocity as it does.  To try to stop or deny its progress is a waste of energy.  Look at the bright side you will now be able to text while driving.

Now that I have railed against everyone’s inadequacies I shall give you room to breathe.  When will all this happen?  As Mr. Ford has observed on his travels to the Silicon Valley, Detroit is in Michigan not California.  The entrepreneurial spirit is not evident in Detroit, at least not at the speed in which to make these changes happen.  The ability to shift and move quickly is not part of the old school automotive industry DNA.  This has always been a challenge for Detroit.  They did not see any of the oil shocks over the past four decades.  Every time oil prices go down they abandon ship on any typo of alternative fuel.  They seemingly have an amazing ability to not think about the future.  When you think of hybrid vehicles who do you think of?  The Toyota Prius.  There is about to be a slew of new competitors as both India and China get in the game.  Given their limited natural oil resources they are motivated to look at alternative fuels to feed their increasing upward mobile societies. Given the current price of gas (over $4 a gallon n Washington State). Are we looking within ten years?  Maybe.

The February issue of Wired magazine had an article regarding the state of robotic vehicles today.  Companies like Google are at work on creating the driver less experience on the roads of Silicon Valley.  They have prototypes on the road of the bay area today creating the experience of a vehicle with no driver.  Many auto manufacturer for years have had offices in the Silicon Valley to push technology into the vehicles we drive.  These include the likes of BMW and Mercedes.  Anyone who has had an older car can always marvel at the simplicity of the motor.  Look under the hood of today’s vehicle wonders is their room to out anything else in the vehicle’s engine space.  But cars are evolving as many come with new digital features with every iteration.  We can regulate temperature, get directions, satellite radio, cruise control,break systems, etc..It does raise a whole new set of regulatory issue that will need to be addressed. In Nevada they having already passed law regarding unmanned motor vehicles.  Many auto accidents today you can point to driver error.  What happens when you have a bug in the software that leads to an accident?  Do you then sue Chrysler?

The car, as Wired writer Tom Vanderbilt explains, is becoming a digital platform that we can, through the magic of software, create new value streams.   When the discussion of digital convergence first became a phrase we limited ourselves to media converging and being made available via the internet. But in the future it is apparent it will be far greater  than media, Technology will be pervasive in everything we touch.  We have entered an error where software in increasingly flying away from our desktops (Remember the Flying Toasters Screen Saver??).  Software will invade every aspect of our mechanized world in ways many have not imagined before.  The Americans beloved motor city automobile is no exception.  Detroit is a city as has well been documented that has struggled mightily since the oil shocks of the seventies.  A major US city that is actually shrinking as housing projects are being torn down and turned back into farm land.  As has always been the case in US history to see the future one only needs to look west.

Good Night and Good Luck

Hans Henrik Hoffmann March 9, 2012

When Steve Jobs launched the original Macintosh computer back in 1984 it ushered in the era of the graphical user interface (GUI).  He was not the first to do this as it was based on work done at XEROX PARC Labs, but he was the first to bring into to a mass audience.  One person saw the immediate impact and value of what the GUI would bring and set to learn all he could: Bill Gates.  Next his company, Microsoft, would start creating apps for the Mac, such as Word and Excel.  This is all, so far, common knowledge and those in the industry know the rest of the story.  But the question I put forth is “is Microsoft Office taking the same approach to Tablets as Microsoft did with the Mac”?   The reality is by the time Windows 8 ships it is pretty likely Apple will have sold another 25 million iPads.  I would also bet pretty strongly that when Windows 8 ships its initial year, it will not sell anywhere close to 25 million tablets (last quarter Apple sold 15.4 million iPads).  I am sure the Microsoft Office team, under the able leadership of Chris Capposella have had these discussions.  I am also sure that if they know those numbers they are asking,  ”Are people buying tablets instead of PC’s and are we in danger of losing market share”?

The second thing, and  I can only speculate here, is that this type of development is not going down well with the Windows 8 team.  A release of Office on a tablet other than Windows, before Windows releases their tablet. There was a time that  Windows and Office seemed to work hand in hand.  Those days are long gone.  With Steve Sinofsky hard at work releasing Windows 8 and launching Microsoft into the tablet space (yet again).  I am sure they would love to launch the first version of Office for the tablet as a competitive edge.  But based on what the rumor mill is saying, it sounds like Office cannot wait for that train, they will be catching an earlier one.  The market will be over 100 million tablets when Windows 8 launches and the reality is the Office team cannot wait for its brother in arms to catch up as the train will have long since left the station.  The good news for Windows is that at least for now it is limited to iOS and there seems to be no plans for Android.  But unless Windows 8 makes substantial headway in a short amount of time, the temptation and reality for the Office team will be too much to ignore.

A final question would be the viability of desktop productivity applications in a Tablet, a device with no mouse and no keyboard.  Would I find myself using Excel to make pivot tables on my tablet?  How about animation slides with PowerPoint?   Probably not.  I would hope that the Office experience would have been rethought with the different type of interaction between human and technology with the tablet.  Technology is in an exciting phase where we are no longer confined to the desktop, but can access technology solutions wherever and whenever we would like.   For a long time Microsoft Office has been trying to be part of that experience.  Pocket Office for Windows Mobile anyone?  They are not wrong to try but maybe the challenge is they are trying to create a mass consumable experience that nobody really wants.  When I am hard at work on an important presentation or financial review , being at a desk in front of my desktop or laptop makes sense.  But when I am out one the town do I need Office with me?  When I am on my tablet am I doing business or browsing the web?  Playing games?   All questions that have answers.

Microsoft Office is the most successful productivity suite in the industries history.  But as technology changes so are people’s needs and understanding of technology.  A lot of the ninety percent market share can be attributed to people buying PC’s that came pre-installed with their purchase.  That did not necessarily mean that people were actively using Microsoft Office.    It reminds me of the days when Windows Mobile launched and there was a lot of bickering between Windows Mobile and MSN.  MSN was on mobile platforms such as Symbian and RIM, where as Microsoft Mobile felt they should be only supporting one; Windows Mobile.  The problem was that if MSN had done that it meant the prime competition at the time, AOL and Yahoo would east up the rest of the market share, which at the time was the other 85 percent of the market.  Moving forward it seems  one of those titanic shifts is taking place in technology that occurs every  five years. It is rethinking the boundaries of how we consume and experience technology.  A final point is any time you ship a device with Office, you add cost.  Yes Microsoft expects money for its service.  In an increasingly cost conscience environment is Office something we need so bad on our tablet?  As part of the Apple App store how many people will actively search for and pay for Microsoft Office?  The question for Microsoft Office, in order to maintain 90 percent market share does Windows have to be content with 50 percent

Good Night and Good Luck

Hans Henrik Hoffmann February 27, 2012

In the tech boom and bust there were a lot of things that went wrong, but maybe most notably was a loss of common sense.  A lot of discussion was around new business models and throwing away the old all due to the internet.  Though this was most certainly true it did not mean we replaced balance sheets, income statements and cash flow.  Second, as exciting as the internet was, the infrastructure was simply not in place to support some of the grand ideas.  Yes we were laying down fiber that would cir cum navigate the globe many times over, but most people were still connecting via a 28.8 modem with ungodly slow connection speeds.  The initial Application Service Provider (ASP) model was a precursor to Software as a Service (Saas) or what we refer to as the cloud today.  Your Facebook experience would have been very different and don’t even think if adding photos.  Another thing that was interesting was many companies you could not figure out what they did, it was like Wang computers all over again.  The classic was the Razorfish founders being interviewed on 60 minutes, nit being able to answer the question, “What is it you do?”  It was like asking Bob Dole, “Why do you want to be President”.  Just think Mark Cuban made billions all because he wanted to stream Indiana Hoosier basketball over the internet.  The sucker there was Yahoo, who bought a pile of nothing.

I am optimistic this time around.  Exactly for the two reasons I outlined above.  Today we have a viable and always improving infrastructure for the internet.  Not just via lanline support but wireless connectivity has improved in leaps and bounds beyond what we could have anticipated.  We can thank the iPhone for making the wireless internet an enjoyable experience.  We can now view so many applications and services wherever whenever we want.  Services like Netflix, which will destroy the need for a DVD player in time.  New services are springing up all the time to further improve and enhance our online experience.  Though a lot of videos I stream through YouTube still need to be viewed in the Flash player within the browser, more and more video contents is being done in HD and allowing me to view full screen.  Within the next five years that will simply be the norm.

More importantly many of the IPO’s filed of late have business models and real revenues.  It’s not a promise of a better future, because the future is now.  The idea that old business models are, well old is not exactly true.  A solid income statement and strong balance sheet still matter.  In the case of Facebook they are starting to capitalize on their status as a “place to hang out” on the net.  The filing with the SEC already shows a company that makes $3.7 billion a year.  In a recent coffee I had, someone had met with the Microsoft Advertising team in New York.  the word in the street was that companies looking to spend online ad dollars wanted to deal with Facebook.  Back in the dot-com days you did not hear stories like that and certainly did not see revenue like that in the SEC filing.  It was always just a promise of a brighter future.  With Facebook the word one the street is they are set to grow and grow fast.  When you consider how much time people spend on Facebook versus Google or Bing there is more than just hope.  Advertisers want to spend with Facebook.  Facebook just needs to execute.

Many of the companies pre-Facebook have been impressive LinkedIn, Pandora, Zynga, and Zillow.  Are they Facebook?  No but with such a huge captive audience who is.  They are, however, companies with existing business revenues and opportunities to build on what they have.  This then just becomes a question of vision and execution.  It is by no means guaranteed.  Some I am not sure they are thinking big enough and attracting the audiences they have.  Pandora, as much as I love, needs to think of themselves as digital entertainment and not just music.  But the opportunities are there as we have come a long way since the original dotcom boom days, where we had grand idea just not the infrastructure or platform to execute those ideas.  We have those now.

There will be challenges along the way and as I have said before when America gets excited it starts to see riches, and a bubble will be born.  Our gold rush mentality makes it so.  We will over value companies and do so until basic economics takes us back to earth.  There will be those who time the market and capitalize on its excesses.  We call them Mark Cuban,the numbers of what happened in that transaction for a pile of nothing are staggering.  Mr. Cuban’s company Broadcast.com, generated $13.9 million in revenues in 1999.  It was sold in 1999 to Yahoo for $5.9 billion.  I don’t think this time around well see those type of valuations as business fundamentals will rule during this go around.  But the opportunities to cash in for a great profit will be there again.  Hopefully most will have learned this time around when to cash in.  Only god knows how many paper millionaires we had the first go around.  I met many of them and saw their egos rise and then fall back to earth.  The thud was rather distinct.

Good Night and Good Luck

Hans Henrik Hoffmann February, 7 2012

Looking at the iPhone sales the number is staggering.  They sold 37 million units of primarily the Apple 4s, not 5 but 4s.  The 4s was what we used to refer to as a “dot” release, not a major release. Just a release with minor enhancements like Siri.  To put in perspective Nokia has announced they have 1 million Nokia Lumia 710 in the channel.  That is not in consumer hands but just to resellers.  Apples number reflects units in people’s hands.  The other thing is due to Apple’s channel that is pure money back to Apple.  With Nokia they get most and pay back a small percentage to Microsoft for the OS.  Then there is Google with Android, which is an indirect model as the hand set manufacturers keep the money and Google looks to make money via apps and mobile search.  The units of Android phone is impressive but to date it doe snot have the bottom line impact of Apple’s iPhone.  That could change as the mobile web grows and mobile ads increase the revenue to Google’s bottom line.  Though Microsoft Bing is challenging traditional search, Google seems light years ahead in mobile search.  With a major release from Apple due in 2012 with the iPhone5 could they beat 37 million?  One can only wonder.

Tablets are the fashionable device of the moment.  They have been since Apple made them so.  Steve Ballmer said “they will never sell those things”.   They sold over 15 million units in the quarter.  Though there are Android tablets I have not seen the excitement for Android Tablets like I do for Apple’s iPad.  The iPad seems to be playing its own game, in the short-term that could change with newer revs of Amazons Kindle Fire and further down the road with Windows 8 tablets.  The challenge for the competition is they may be talking about exciting new releases but no one I know of is putting their purchase decision on hold to wait for an Android or Windows 8 tablet.  I expect for the next 2-3 quarters that Apple to rule this domain, unchallenged.  The question will be how far in front they will be when a competitive alternative enters the market.  We will likely see a iPad3 this year, probably before Windows 8 Tablets hit the market, no one is waiting.

An interesting area of growth for Apple is its “old” business of Macs.  They sold 5.2 million units in the quarter an increase of 26%.  That is at the expense of Microsoft Windows.  Apple with around 10% market share is in an enviable position as they are not the leader and can only grow their market share.  As Microsoft Windows Revenue has flat lined (it’s still in the billions in terms of revenue) and Apple is enticing more and more developers to its platform you are seeing the first significant threat to the Microsoft crown jewel in over twenty years.  It’s interesting that it is coming from a competitor whose environment is considered very closed.  I think many people felt the most likely threat to Windows was going to come from the Open Source community in some variant of Linux.  But with Apple’s success in Smartphones and Tablets I can see the traditional Mac business was going to follow and it has.

With all this success it has led to that great American problem.  What do you do with $98 billion sitting in the bank?  When I was ta Microsoft we had (and they still do) usually upwards of $30-$40 billion in cash.  It would seem with Apples cash they could do almost anything they want, but in actuality it is a bit of a capitalist’s dilemma.  The obvious thing to do is return money to shareholders in either a quarterly dividend or one time payment.  They could also do a stock buy back, with  a market cap over $400 billion this could further drive the stock up benefiting shareholders.  They could do acquisitions, but Apple has never done the big multi-billion dollar purchases of tech companies.  I am not a big fan of these anyway as in the short run they slow progress down and when complete the industry has moved on.  It takes a couple of years for full integration, look at Microsoft’s acquisition of Skype for $8 billion and we have yet to see the fruits of this hit the bottom line.  It’s not a bad problem to have but the one thing that is for sure is they will have to do something as sitting in all that money does not seem a viable option, nor will shareholders allow for it.

Apple is truly in a state of grace.  It seems even when they do wrong, as in the previous quarter, they rebound.  It would be easy to see a future where we all are using Apple products, luckily tech and society do not work that way.  There will come a time when younger generations will not think Apple s cool as their parents think it is.  We are in a time when tech trends start with the teenagers and young adults.  Do I see a time when younger generations say “wow Microsoft or Dell is cool”.  Right now I am having a hard time believing that scenario will ever happen.  More likely it will be a young fresh start-up similar to a Facebook or Twitter.  When will this happen?  All I can say for sure is the next 2-3 years it is not likely to happen and the Apple strength will continue.  There are exciting horizons with iCloud and AppleTV.  But as I am fond of quoting Bill Baker, “The future comes slowly, change happens quickly”.  This will be the case with Apple as well but in the meantime let us just enjoy being, “Wowed!”.

Good Night and Good Luck

Hans Henrik Hoffmann January 30, 2012

It has been over two years since I was at Microsoft, but when I left we were on the .NET Framework 4.0.  As I write today we are still on the .NET Framework 4.0.  There has been little  heard from Microsoft regarding the future of .NET.   In the mean time  the industry continues its march to the cloud.  If you go to the Microsoft Azure page you will see for development a lot of tools supported other than .NET.  Beyond .NET there is node.JS, Java, PHP and “other”.  This highlights the Microsoft conundrum.  Microsoft went down the path of .NET and for a long period more or less ignored what was going on in the world of development.   Microsoft needs developers writing to the Azure platform, in fact for the Server and Tools division at Microsoft, its very life depends on it.  But getting developers to pay for development tools when so many are available for free on the internet is becoming an increasingly hard challenge.  Therefore they need to be “friendly” to the non-Microsoft development community.

Open Source is big and it is a developers paradise.  It was one of those things when open source first became a household name at the dawn of the consumer internet.  It’s the largest development community on the planet.  There is a lot of innovation that is happening out there on the internet that is far larger than what 90,000 Microsoft employees can do, of which less than 1000 are focused day-to-day on these issues.  On the net speed is everything.  What I ship one day can be gone the next.  At the same time on the net you can quickly generate mass, which leads to wide-spread user acceptance and “viral” marketing.  One day Facebook was a university social network and shortly thereafter it was a global phenomena.  The inability of Microsoft to effectively leverage the open source community has stunted its ability to attract new and emerging development communities.  They do have something called Codeplex which is Microsoft’s open source community.  However it is not as big as other development communities on the web.  This inability to leverage the web development community to its full potential has fostered an environment where Microsoft is chasing innovation and is not driving innovation.

As we look at Windows 8 the discussion is around the Metro interface and writing applications to the Windows Runtime or WinRT.  I guess when we talk about the Metro interface we are talking about a desktop UI,  a question is how much time will an end-user spend within Windows and does a new UI matter a whole lot for Windows when the first thing I do when I log on is go the internet.  A stat I heard several years ago said that 75% of development is focused on the web and 20% is focused on Windows (the other 5% is targeting hardware).  That number may have changed, but I doubt Windows development went up and web development went down.  Is Windows 8 development targeting the 20 percent?  Which then brings us back to the central question, where does .NET fit into all this and what is Microsoft telling developers to do with .NET?  I feel like .NET is going the same way of Silverlight…confusion.

When looking at the market for developers in the coming year I was sent the following list of top ten development skills (click here).  It is interesting to note that Microsoft development skill sets are not a part of the list.  That is not to say everything is open source as iOS development skills is in the top three.  It does highlight where open standards and innovation lay a large role in the future development road map.  It is apparent that Android and iOS are leading the way for mobile development and will do so in the coming year.   This will be challenging for Windows 8, as developers can target an existing market or a potential market.  In the end I think many will do both but it’s apparent that Windows 8 is not going to make anybody put aside their plans for developing on Android or iOS.  It used to not be that way.  The release cycles for the latter two is fast and furious and keeps the development community engaged.  When your company is building a platform, engagement is paramount because it means they are listening.  You could be presenting the worst crap on the planet, but as long as the developer are listening to your crap and not your competitors that is ok.

Finally the biggest and most important question moving forward is does .NET have a future??  It is known that current Windows Chief Steve Sinofsky is no big fan of .NET and the move to WinRT could be viewed as the death of .NET.  But then if the development community is out their debating whether .NET is relevant to the cloud or not, what should they be doing?  Silence is not an answer and providing a bunch of marketing spin until an answer is provided is just insulting.  Changing direction is hard, especially when so many have invested in .NET Development, and will likely continue to do so.  We could be looking at a situation similar to Visual Basic 6 developers, who refused to move to .NET, until around ten years later support was finally pulled from them.  It is also a question of enterprise apps versus consumer apps.  Enterprise do not move as fast as consumer based apps.  Can you message a development platform to both with equal success?

Steve Ballmer likes to tout the largest development community with the largest market opp in the world when you target Windows 8.  He is wrong.  He has been wrong for some time.  The largest market opp in the world is the internet and that is not going to change anytime soon.  It seems rather stupid that I have to write the obvious.  The viral ability of the net. Most developers are leveraging the internet for development so it comes as no surprise when they start looking at cloud development they look to open source to provide the tools and the guidance.  It is really no different than society has always worked, when we look for advice we look to our peers.  Now they are simply our virtual peers.  Microsoft’s cloud message so far had been confusing and I think most so for developers.  At the end of the day developers will do what they have always done, which is follow the money.  No developer likes to write an app that nobody uses.

Good Night and Good Luck!!

Hans Henrik Hoffmann January 24, 2012