Wednesday, August 31, 2005

Wed - Microsoft enters internet telephony race

Microsoft is preparing to introduce an internet telephone service allowing calls from PC's to fixed-line or mobile telephones, extending the rapid advances by internet rivals such as Yahoo! and Google into the communications business.

The software company will today announce the acquisition of Teleo, a small private company whose voice-over-IP (VoIP) technology will extend the range of Microsoft's existing internet communications services. The deal echoes the acquisition by Yahoo! two months ago of Dialpad and comes a week after Google launched a service called Google Talk that connects users over the PC.

The Microsoft and Yahoo! acquisitions will let users of their instant messaging services connect to the wider telephone network. Google, while not yet adding such a feature, has said it plans to at least link to other instant messaging services.

Microsoft have not yet decided how to charge for the service, but say options could include looking at charging subscriptions and fees or linking ads to the service.

This push by the big internet protals into VoIP telephony looks very interesting and is yet another knock to fixed line telco's. We look forward to when VoIP extends itslef effectively into mobile telephony as well.

Oh, and a last tip. Skype looks like a better and better bet for someone like Google or even AOL to snap up!

Tuesday, August 30, 2005

Tue - The software industry matures; from pioneering to buccaneering

I read an interesting article in Barron's this weekend, which stated that many software makers are peddling similar programs to corporate clients, fueling a sweeping industry consolidation. They then had a look at who might be bought, and who will buy.

The article is well worth reading in full, but it also stimulated my own thinking. For the last four or five years I have been talking to people about the software industry moving from pioneer to buccaneer, i.e. like more mature markets, growth generally comes via M&A than through innovation. I may actually have been onto something all along. I even flirted with the idea of setting up a buy out fund purely to focus on 'rolling up' the software sector. It could have become the KKR for the tech space. What a fool I may prove to be for not following through on this.

Since the end of 2000, according to FactSet Mergerstat, there have been more than 12,000 acquisitions in the software sector, with a combined value north of $200 billion. In the process some storied software names have been swallowed: Peoplesoft, JD Edwards, Macromedia, Veritas, SunGuard, Legato and Documentum, to name just a few. And of course there are still many left to gobble up and indeed M&A activity just keeps increasing.

So what does all this mean:
1. The big will get bigger and in not too long the corporate software sector will be owned by a handful of companies such as Microsoft, Oracle, IBM, SAP, SUN, EMC etc.
2. Those that are not already one of the above six monsters need to get on the acquisition trail fast, or they will become also-rans or cheap fodder for the bigger guys. These companies include Adobe, Siebel, BEA, Computer Associates and Sybase.
3. Corporate buyers will increasingly look to buying their software from one or two strategic big brand software suppliers and will want comprehensice corporate suites as well as universal, standards based infrastructure software, such as application servers.
4. Private equity groups will look at buying out mature software companies to fatten them or even roll a few of them up. A West Coast VC I worked with in the past, Vector Capital, is making waves and recently bought Corel and Broadvision.
5. There will be less venture money available for software start ups and innovation in general, as it will become increasingly impossible to sell coporate software unless you are a big guy.
6. Lots and lots of smaller, or less successful (corporate) software vendors will fall by the wayside over the next few years as the handful of buyers have a considerable oversupply of choice when it comes to acquisition candidates.
7. Lots of work for consultants billing themselves as experts in successfully helping you to integrate the latest software merger or acquisition.
8. Less and less software (particularly corporate software) company IPO's.
9. Lots of VC's will get left with unexitable private software companies if they do not ensure that they are sold off to one of the acquirers soon.

So, I do believe that the software industry has moved from the pioneering stage to the buccaneering phase and growth will increasingly be sought via M&A activity. I think that in the next 5 years or so the corporate software sector will have consolidated and will basically be dominated globally by around 10 major players. The key will be figuring out who the ten are going to be. I will give my views on this in a future feature.

I also believe that there is still room for smaller players to be successful in the consumer space and possibly wireless, but not for too long. I also believe that there will always be room for the next big innovator to come from scratch (eg Google), but it will be increasingly tougher and they will only come around every decade or so.

Tue - Google launches services to compete with telcos

Google is off again announcing sweeping new products. This time they are stating that they will soon launch a VOIP internet telephony service similar to that offered by Skype and a universal IM (Instant Messaging) service.

Both move Google closer to the big brand portal models of Yahoo!, AOL and MSN. Is there really room for four global portals and if not, who is the most likely to lose out from Google's aggressive push? Techboard's bet is that AOL could be the most likely to get hurt, particularly as they seem to have lost their way since the merger with Time Warner.

Thanks to this and other recent product announcements and launches, the market is increasingly suggesting that Google could become the next Microsoft. The more everyone says it, the more it may even become a possibility!

Mon - Dell & HP deliver contrasting results

Dell and HP, the number one and number two PC manufacturers announce contrasting results in the same week.
Dell has just seen their year on year revenue growth slip below the 15% mark for the first time in a few years, even though the global PC market is booming and against the backdrop of HP announcing improved results, thanks to an increase in PC sales for their latest quarter.
Perhaps the Dell model is not so perfect and perhaps the ousted Ms Fiorina's strategy in combining HP and Compaq was not so loony after all!
Techboard will keep a watch.

Mon - Autonomy takes on mighty Google

Autonomy, a small UK search software company, has just announced that it intends to compete with the likes of Google and Yahoo! in the provision of search tools for video over the internet.
Autonomy has announced a joint venture with China Netcom Broadband, who already have 110M subscribers in China.
The emerging market for video and TV over the internet will pit Autonomy, Google and Yahoo! in a race to become the search provider of choice for viewers to be able to cut through the increasing clutter of video materials on the web.
Video and TV over the internet has to be one of the next big trends and this looks like becoming a battle well worth winning!

Friday, August 26, 2005

Friday - Interactive & internet marketing gets boost

WPP plc, one of the world's largest marketing and advertising groups has just announced that their recent sales growth has come thanks to technology improvements in direct, interactive and internet marketing.
They also stated that tradional advertising mediums seem to be declining - e.g. TV, newspapers and magazines.
So, interactive and internet marketing is on the up and up. And that is before mobile advertising and marketing has really taken off!
Well, it's gotta be good for Google et all!

Friday - Intel chips give a boost

So, cut through it all; do the Intel chip announcements that state that their chips will be ten times faster and a great deal more efficient by the end of the decade mean a whole load. Always hard to tell. My gut tells me that Intel is getting back on track.

AMD has given Intel a bit of a run recently with some great products based on a strong architecture. Intel had to respond. Now it looks like they have. Also, with the market for mobile chips and home entertainment sytems set for considerable growth Intel seems to have a rosier future ahead. Let's see. I'll keep a watch and keep ya posted.