mjfern

Note, I just installed my new memory and it turns out that the new and old modules are branded with Micron/Crucial and produced in China.

The two solutions are to either (a) find a mentor you can trust with confidential information or (b) keep your "secret sauce" information private until you have created others barriers to entry.

In terms of social features, you can make any interest public and share it with others. You can also follow or fork any of the public interests (like Github).

We are in early stages with the social features (and overall product) and would really appreciate any feedback/input! You can email me at mjfern@intigi.com or use the feedback button throughout the site.

Thanks in advance!

- Calxeda (formerly Smooth-stone) is developing servers based on ARM-based technology. (http://www.calxeda.com/)

- In November 2010 it was revealed that Dell is prototyping ARM-based Cortex-A9 servers.

- In January 2011, Nvidia announced Project Denver, with "plans to build high-performance ARM based CPU cores, designed to support future products ranging from personal computers and servers to workstations and supercomputers."

- Microsoft recently announced that Windows 8 will support both x86 and ARM architectures.

- In a February 2011 analysts presentation, Warren East, CEO of ARM Holdings, suggested that ARM is seeking to expand into the PC and server market: "There's a blurring between computers and smartphones, and ARM's success in smartphones is helping us get into computing...Cortex A processors support multiprocessing and that delivers the high level of performance required by server applications." (http://www.theregister.co.uk/2011/02/01/arm_holdings_q4_2010...).

In October 2010, I posted a related article, "The End of x86?," that examines the potential disruption of x86 by ARM using Christensen's disruptive technology framework: http://www.fernstrategy.com/2010/10/21/the-end-of-x86/

I recognize that it's not just ARM's business model that poses a threat; the threat stems from a combination of ARM's business model, its current technical advantage (in energy efficiency), and trends in computing, with a shift away from PCs (and the Wintel standard) to connected devices running Android and iOS. To your point, the shift away from the Wintel standard has significantly reduced the barriers (i.e., backward compatibility) to the adoption of the ARM architecture for OEMs.

(Note, ARM's recent "rapid rise" in the processor market is illustrated, in part, by the company's stock market performance, with a market cap that has grown about 5x over the last two years.)

"20% of all residents reported sleeping an average of 5 hours or less per night, with 66% averaging 6 hours or less per night. Residents averaging 5 or fewer hours of sleep per night were more likely to report serious accidents or injuries, conflict with other professional staff, use of alcohol, use of medications to stay awake, noticeable weight change, working in an "impaired condition," and having made significant medical errors." - http://www.ncbi.nlm.nih.gov/pubmed/15124713

A Wikipedia article focused on medical resident work hours: http://en.wikipedia.org/wiki/Medical_resident_work_hours

The title of this article causes me anguish. It should read "IPad's Rivals Can't Beat it on Cost." Businesses compete on value and on cost. Value is the benefit to the customer (value proposition) and cost is the fixed and variable expenses to the firm for producing that value (cost structure). Value and cost are strategic, and price is a tactical choice that follows from your value-cost position and the competition. If a business offers more value at a given price, relative to a competitor, it will gain market share. If a business has a lower cost at a given price, relative to a competitor, it will have higher margins.

Confusing price and cost has caused the downfall of established companies. For instance, in 2003, Delta launched its Song subsidiary to compete with Southwest Airlines and Jet Blue. Delta conceptualized Song as a "low-price airline," while Southwest and Jet Blue are low-cost airlines. What happens when you compete with low-prices, but are burdened by the high-cost structure of a legacy airline, such as Delta? Song was disbanded in 2006, after considerable losses.

I find it surprising that it's been 15 years since the commercialization of the Internet and (near) instant global data communication and it still takes banks 3-5 days to confirm payment (e.g., the time it takes to send a physical letter, coast-to-coast, via the USPS). This is the timeframe of a standard Electronics Fund Transfer (ETF) for bill pay, bank-to-bank transfers, etc. The only alternative, as far as I know, is a wire transfer, which is a tedious and expensive option.

Does anyone know what's preventing the U.S. banking system from improving its electronic transfer capabilities? Given the importance of the free flow of money and goods (and liquidity) to our economy, it seems like the quick movement of funds would be a significant priority for our overall banking system.

(Note that if banks could confirm electronic transfers within a few seconds (and if we added an extra layer of security beyond simple passwords, such as a challenge/response system), we could significantly reduce the occurrence of fraud. Near instant confirmation would also alleviate, or eliminate, the issue of short-term credit mentioned in this article.)

1. There are significant barriers to entry in search that do not exist in the browser market, including learning effects, economies of scale, and network effects. Any enhancements to the technology (e.g., algo) or user experience (e.g., UI) by a competitor must provide substantially more value to searchers and/or advertisers to overcome the significant network value (effects) in this market.

2. Despite Google's size it's still quickly responding to market and technology changes making it difficult for a competitor to chip away at its market share. For instance, despite significant investments by Microsoft (and some creative and smart decision-making), Bing has only been able to gain incremental market share, primarily at the expense of Yahoo. Google, thus far, has been able to sustain its dominance, commanding about 90% of the global search market.

"While Bing hit 4.37 percent and Yahoo dropped to 3.93 percent, Google still dominates worldwide with 89.94 percent of the search engine market share, the web analytics company reported."(March 1, 2011; http://blog.searchenginewatch.com)

No, I don't think so.

There are tremendous learning effects, economies of scale, and network effects in search that do not exist to the same extent (or at all) in the browser market.

I. The learning effects arise from the number of searchers and advertisers using a particular platform over a given period of time. This enables Google (with the largest market share) to improve its algorithm at a faster rate in response to the behavioral data that it collects. The sheer amount of data that Google collects permits much deeper (and faster) multivariate analysis relative to competitors.

II. The economies of scale exist because Google can spread its huge fixed costs of developing, refining, and operating its search engine over a much greater number of users. For instance, if Google employs 2x the number of engineers as Microsoft in search, but fulfills 4x the number of search requests, its per search engineering costs are 2/4 = 50% of Microsoft's. The same holds for other significant fixed costs, such as data center costs.

III. The network effects arise from a feedback loop between searchers and advertisers. As the number of searchers increase on Google search, it attracts more advertisers because advertisers can reach a broader and more targeted audience. The reverse is true to some extent as well. For instance, as the number of advertisers using Google AdWords increases, it attracts more searchers, assuming that searchers find some value in the sponsored search results.

Note that the learning effects and economies of scale exist in browsers, but not to the same extent as in search. There are no obvious network effects in the browser market, while the network effects in search are quite strong.

Google's dominance in search will persist into the future, until:

1. A competitor develops a protectable technology (e.g., new algorithm) or user experience that delivers significant value to the average searcher and/or advertiser.

2. A substitute for search emerges, which provides a much more effective method for obtaining information that you would otherwise obtain using Google search.

3. Google is unable or unwilling to respond to the competitive threat in #1 or the substitution threat in #2 in a reasonable period of time.

Given Google's quick response to customer feedback (e.g., content farms) and technology change (e.g., real-time search), I don't have a sense that the company is resting on its laurels.

Note there is still room for niche search engines, such as DuckDuckGo, that emphasize particular features of significant importance to a segment of users. For instance, DuckDuckGo does not collect or store a user's IP address, yielding greater privacy.

Apple’s time-to-market in tablets has generated at least five key advantages for the company:

1. Apple has locked up the market for critical components, including 60% of the global supply of 10” touch capacitive screens.

2. The company is much further along the learning curve in tablets, with refined hardware and software as well as more efficient production through its partnership with Foxconn.

3. Apple has achieved significant economies of scale to drive down per unit costs, having already shipped and sold 15m+ iPads.

4. The company has developed a sizable collection of complements in the form of apps and content (via iTunes) and physical accessories.

5. Apple has generated strong brand awareness around the iPad, given the limited competition for consumer mind share in this market.

These aforementioned advantages build upon Apple’s already significant, corporate advantages in the areas of technology, distribution (e.g., retail stores), customer service, and overall brand recognition.

Credible Android-based tablets will arrive soon. For instance, the Motorola Xoom is due to hit stores this Thursday. However, it may take some time (measured in years) for competitors to catch up to Apple in this market.

While apps and content are just break even businesses for Apple, they are instrumental to the company's financial success. The iPod, iPhone, and iPad are each technology platforms that bring together consumers, apps, and content. The value of each platform (iPod, iPhone, and iPad) to consumers hinges on the availability of apps and content; and the value of each platform to app developers and content publishers hinges on the number of consumers that have adopted the platform.

In short, there is a virtuous circle in effect; hardware sales to consumers attract more app developers and content publishers, and more apps and content drive more hardware sales to consumers.

Apple’s new subscription model might strain or even break this virtuous circle. First, since Apple is only requesting 30% of revenues if content is subscribed to through iTunes it will likely cause content publishers to encourage consumers to bypass iTunes and purchase content directly. Over time this may reduce the relevance and significance of iTunes. Second, this 30% cut will compel app developers and content publishers to find alternative, less-expensive distribution channels. Google is the natural alternative given Android and the Android Market, and the company has already launched the “One Pass” payment system, which charges a lower fee (10%).

If this new subscription model is potentially damaging to Apple’s financial success, then what’s motivating Apple to launch such a model?

It’s possible, though very unlikely, that Apple failed to consider the implications of the model and the strain it would place on app developers and content publishers. A second, more likely scenario is that this subscription model reflects efforts by Apple to generate greater revenues and profits from its apps and content business. A third likely scenario is that Apple is trying to create barriers to entry for competing distribution platforms, such as Netflix and Amazon, which will find it cost prohibitive to offer their service through iTunes given the 30% in fees. These barriers may give Apple time to further develop its own content distribution business. The immediate risk that content publishers will turn en masse to Android is low given the delay of Android-based tablets and other connected devices (e.g., connected TVs).

This subscription model may boost iTunes revenues and profits, and it may create a barrier to entry for competing distribution platforms, such as Netflix and Amazon. That said, I believe this move is a strategic mistake. There may be some short-term benefits to Apple, but overall it will strain the company’s relationship with app developers and content publishers. Over time this will reduce the selection of apps and content available via iTunes, reducing the value of Apple products to consumers, thus putting downward pressure on hardware sales. In the meantime, partners and resources will migrate away from Apple, towards Android. Over time this will add further energy to Android adoption for app developers, content publishers, consumers, and hardware producers. Android is already emerging as a force in smartphones. With the launch of Motorola’s Xoom and other tablets, Android will soon gain significant share in the tablet market as well.

First, the company is still heavily dependent on its brick and mortar retail operations, but the demand for physical media (including books) is declining rapidly. Second, the company's future depends on its ability to transform itself into a digital distributor of content. In digital distribution, B&N must contend with Amazon, Apple, Google, and others (e.g., Sony). These competitors have significant advantages in the areas of economies scale and scope and technology.

Borders bankruptcy will give B&N some reprieve, allowing the company to direct cash flow from its bricks & mortar operations to its developing digital strategy (e.g., BN.com, Nook). Nevertheless, I think B&N will face a rocky future. Investors seem to agree, with B&N trading at close to a 5-year low.

Most people attribute Apple’s stunning financial performance to its differentiated products, which integrate excellent hardware, software, and content. If you dig deeper, however, you realize that other critical factors have played a substantial role in Apple’s financial performance over the last decade.

One factor rarely discussed in detail, but that has significant impact on Apple’s success, is the way in which the company manages the critical forces within its industry. There are five key industry forces, according to Michael E. Porter, but here I just want to focus on one force: “the bargaining power of suppliers.”

Let’s start with the iPod and iPhone. Most iPod’s except for the “Classic,” rely on flash memory -- instead of a hard drive -- for storage. The benefits of flash memory are reliability, form factor, and energy consumption. Realizing the significant benefits of flash memory for portable media devices, Apple formed long-term relationships with Samsung, Intel, and Micron, and by mid-2007 commanded about 25% of worldwide flash production.

Fast forward to today, and we are seeing a similar scenario unfold for the iPad and the tablet market. It turns out that Apple has secured about 60% of global touch panel capacity, with a focus on 10-inch displays. As mentioned in the article, this has forced some competitors to initially focus on devices with 7-inch screens, such as Samsung with its Galaxy Tab.

What’s the effect of commanding such a large portion of the worldwide supply of a key component for a product?

First, because Apple is buying these components in such large quantities it can exercise significant leverage over suppliers. This leverage enables Apple to negotiate favorable terms and pricing. For instance, South Korean Fair Trade officials alleged that Apple struck a special deal with Samsung to obtain flash chips at below market rates. This favorable pricing means that Apple has a lower cost structure for its products relative to competing products. And all else equal, this lower cost structure results in higher margins for Apple versus a competitor.

Second, when Apple commands such a large portion of the global market for a key component it creates enormous barriers to entry for potential competitors. Competitors can obtain the component in limited quantities but at a higher price, therefore placing the competitor at a cost disadvantage. Next, the competitor can launch a different product -- a hard drive based portable media device or a 7-inch touch screen tablet – that may not match the preferences of consumers. Alternatively, the competitor can just sit and wait until more supply of the component is made available, which in some cases takes years.

In sum, Apple’s financial success as a company hinges in part on commercializing differentiated products. But this is just part of the story. As important to Apple’s success is the company’s strategy around managing key industry forces. As described above, Apple’s control over the worldwide market for key components has reduced Apple’s cost structure and has created significant barriers to entry for competitors. This yields significantly higher margins and market share for Apple, among other benefits.

There has been discussion lately about whether recent valuations of emerging Internet companies reflect a second Internet bubble. A recent investment by Goldman Sachs valued Facebook at $50b. In the secondary markets, Facebook’s valuation has since increased to $70b. The sky high valuations are not exclusive to Facebook. Analysts suggest that Groupon is planning a $17b IPO. Meanwhile, Zynga has an implied valuation of $5.8b, based on trading of its shares on the website SharePost. The list goes on. The question is, do these valuations indicate a second industry-wide Internet bubble, much like the bubble and subsequent crash in 2000? Or is something else going on?

A look at the progression of other infrastructural technologies is useful. Consider the history of electricity. Paul David, an economic historian at Stanford, noted that it took many decades for business and society to reap tangible benefits from electricity. While important technologies were introduced throughout the 1800s (e.g., electric motors, light bulbs, generation stations), David suggests that an observer in 1900 would have found scant evidence that electricity was having an impact on business efficiency. To take advantage of electricity required not only the introduction of new technologies, but also a deepening of our understanding and in turn a transformation of business and social processes. For instance, manufacturing facilities, which were originally designed for steam power, needed to be significantly reconfigured.

Although David’s discussion was focused on the lag in productivity improvements resulting from electricity, it provides some useful insights about the state of the Internet and its commercialization. While the first computers emerged in the 1940s, and the Internet was born in the 1960s, it wasn’t until much later that computing and the Internet were widely adopted by business and consumers. For instance, it wasn’t until the early 1990s that the Internet transitioned from a government/ academic project to a commercially available system, and the Internet wasn’t broadly available to consumers until the mid-1990s.

In a mere five years from the commercial emergence of the Internet, we faced the first Internet bubble and bust in 2000. Looking back at history, it’s no surprise that the first wave of applications generally performed disappointingly, both technically and commercially. Broadband connectivity, the Internet backbone, and critical software and hardware standards were still in the early stages of development. Along with an emerging infrastructure, there was a limited understanding of the potential of the Internet among entrepreneurs, established companies, and broader society.

Now that we’ve had 10 more years to develop core infrastructure and to deepen our understanding of the Internet (and computing) from a technical and commercial standpoint, we are witnessing the emergence of a new crop of high-growth companies. Distinct from many of the Internet companies that arose in the late 1990s, a greater percentage of today’s companies receiving venture funding are both technically and commercially viable. Many deliver real customer value and have a tenable revenue model. In addition, to companies such as Facebook, Groupon, and Zynga, there are a myriad of smaller successful ventures, such as Pandora, Dropbox, and Airbnb.

To conclude, the 2000 bubble arose just a few years after the commercialization of the Internet. There was excitement about the potential of the Internet, but the supporting infrastructure and our knowledge was in its relative infancy. A decade later, we have made significant progress on both fronts. The latest new ventures incorporate technologies and business models that reflect significant infrastructure improvements and our maturing knowledge-base. Are select companies, such as Facebook or Groupon, overvalued? It’s certainly possible. Does this overvaluation reflect an industry-wide bubble? I don’t think so. In fact, I think we are at the early stages of a multi-decade transformation, catalyzed by computing and the Internet, and we will continue to see significant opportunity and new venture growth in this space. We are moving toward ubiquitous computing and connectivity, where technology pervades our business and personal lives. Personally, I look forward to participating in this exciting and dynamic future!

Steam (and other platforms for downloading and streaming videogame content) are a disruptive threat to Gamestop and the videogame sales of other retailers, such as Wal-Mart.

Given that online distribution has now disrupted music, newspapers, books, movies/video, and now tv/broadcast, I'm surprised that investors think Gamestop is worth $3b.

First, there is a question of development and time to market. By the time Nokia launches MeeGo and handsets, Android, iOS, and others (WP7, RIM, Palm) will be further entrenched in the market (e.g., market share, brand, hardware partners). Second, there is the fundamental issue that succeeding with MeeGo hinges not only on the OS but also on a thriving application market. Because of the application markets, there are strong network effects with mobile platforms. These network effects make it very difficult for a new platform to break into the space.

To complement investments in MeeGo and WP7 for the smartphone market and Symbian for the feature phone market, Nokia should immediately invest in an Android strategy as a fail-safe. I understand this conflicts with Nokia's historical strategy of controlling both software and hardware, but it's quite possible that Android will eventually emerge as the winner-take-all platform in smartphones, aside from Apple/iOS and several niche platforms. If this were to happen, Nokia's singular bet on MeeGo (or WP7) may destabilize the entire company.

In short, I propose that Nokia pursue a four-pronged strategy, pushing forward with MeeGo, WP7, Symbian, and Android -- Symbian for feature phones, which still account for roughly 80% of the worldwide mobile phone market, and MeeGo, WP7, and Android for the smartphone market. As uncertainty is reduced over time regarding 1) the potential of each of the smartphone platforms and 2) the pace at which geographic markets are shifting away from feature phones to smartphones, Nokia can appropriately adjust its investments. By making investments in each area, and adjusting the relative amounts over time, Nokia can better ensure its survival and prosperity despite the quickly evolving mobile phone market.

The real staggering fact is that it's just not the tablet market. Both Microsoft and Intel are also absent or significantly behind in smart phones, eBook readers, portable media players, connected TVs, and almost every market that represents computing (devices) beyond the PC for consumers.

The End of x86? - http://www.fernstrategy.com/2010/10/21/the-end-of-x86/

If it were just the end of the consumer market, then Intel and MS should be concerned, but at least they could take comfort in the fact that they still dominate the enterprise space. The issue is that their dominance in the enterprise space is eroding as well. For Intel, a central issue is the ascension of ARM. Smooth-Stone (a well funded startup), Dell, and NVIDIA (see Project Denver), as well as others, are now prototyping ARM-based servers for datacenters. A related issue is that Intel's latest processors now overshoot the performance needs of a majority of customers. Meanwhile, Microsoft's enterprise business is eroding due to several trends, such as cloud services (e.g., Gmail) and cloud computing (e.g., PaaS and IaaS). And both companies have to overcome some reputational issues stemming from their historical power in the PC space through the Wintel standard.

Intel and Microsoft have tremendous resources to respond to these threats, but the clock is ticking.

Now Microsoft needs to leverage the success of the Kinect to further expand beyond the PC. An obvious direction is to use the Kinect to gain additional market share with the Xbox, since the Kinect is currently designed as a UI for this device. But I think focusing exclusively on the Xbox is a mistake. The Xbox (and other consoles and set-top boxes) may soon get enveloped and displaced by other technologies, particularly connected TVs.

I suggest that Microsoft leverage the Kinect as an element in a coherent connected TV strategy. Connected TVs are just emerging, and there is still time to match the developments of Google, Apple, and others in this space. To enter the connected TV market, Microsoft needs to quickly develop a connected TV OS, forge relationships with app developers, and acquire or partner with content providers (e.g., Netflix, OnLive.com). This is all feasible given Microsoft's significant software expertise and its existing relationships (e.g., with Netflix, game developers, etc).

Microsoft has been struggling to gain leadership in markets outside the PC. For instance, it's behind in smartphones, tablets, and portable media players. The Kinect could give Microsoft the edge to dominate the emerging connected TV market. The technology strikes me as an excellent UI for the 10-foot viewing experience, especially for interactive media. It can then leverage success in this market to gain further ground in related connected device markets. I think there is a significant opportunity here. Thoughts?