Twitter World

The Twitter phenomenon has been truly amazing. I wrote last year that I thought Twitter would be bought or dead in 2009. Well they are not bought or dead. Since then Twitter has been embraced by the media, celebrities, and any other narcissistic individual that wants to tell the world in 144 characters or less what they are doing. What is even more interesting is they still have not found a business model or solved their infrastructure problems. It is down so often that the Twitter fail whale should be their homepage.

I was recently at Web 2.0 and I heard Ev’s conversation with John Battelle. Not much has changed. He seemed very coy about his plans to figure out a business model or solve Twitter’s scalability issues. Even during his talk I could see several people in the audience getting the Twitter Fail Whale trying the access Twitter. But one of Ev’s problems might be solved sooner rather than later. The two search titans Microsoft and Google struck deals with Twitter to get access to its valuable real time data. Both Microsoft and Google most certainly had to pay for it. Sheryl Sandberg made it a point to say she didnt believe in charging for data. Early this year Ev closed another round of financing putting the total at $100 million with a whopping $1 billion valuation. With all this hype Twitter is seeing their growth plateau  and they are getting more and more competition from Facebook.

T-Mobile Sidekick Disaster

In 1928 twenty-seven cars filled with gasoline exploded outside Zyba, Kansas. The explosion could be seen from miles away. The chaos and horror of this event was cemented in peoples’ memories for decades.

The T-Mobile Sidekick disasteris turning into one of the biggest train wrecks in recent years. In the era of cloud computing and people dependent on their mobile phones Microsoft is in the middle of  a PR disasters.

Its not everyday Perez Hilton breaks a tech story wide open by ranting on his blog how for seven days he has not been able to access email or contacts on his T-Mobile Sidekick. He immediately ignited the twitt-o-sphere by telling all his loyal fans to tweet #TmobileStillSucks. What came next was so unbelievable it had to be considered a sick joke to Sidekick customers. T-Mobile issued a letter to all of its Sidekick customers saying that based on Microsoft/Danger’s recovery assessment, they basically lost all of peoples’ data. And to make matters worse they have no backup.

Update: T-Mobile halted selling Sidekick devices. T-Mobile is now saying that “Recent efforts indicate the prospects of recovering some lost content may now be possible.” CNet reported that those who do suffer permanent data loss will get a $100 “customer appreciation card” good toward T-Mobile service or products.

The Apple Tax

Over the last few months Microsoft has been dialing up the rhetoric around the “Apple Tax”. Timing is everything and it is no different in advertising. When people were not worried about losing their jobs or paying the bills spending a few hundred bucks more on a Mac didn’t seem to be a problem. But times are changing and this economy sure helps. Steve Ballmer, who told a Business Week-sponsored forum last month that Mac customers were paying an extra $500 to get the Apple logo on what is essentially the same hardware.

Microsoft launch an advertising campaign called Laptop Hunters where they give people a set amount of money to find a laptop to meet their needs. If they get it for less they keep the cash. The recent commercial has a kid and his mom shopping for a new laptop.

This marketing campaign does get enough credit for being smart and effective. Microsoft’s response to Apple’s commercials has been direct and bold. Given the current economic environment, people are much more focused on making every dollar count. And these commercials hit and the heart of Apple’s premium pricing which has helped them amass a war chest of cash. Now that premium pricing will be under pressure.

Microsoft Misses Earnings and Cuts 5,000 Jobs

The economy must really be going down the tubes. Microsoft announced today it missed its revenue and earnings targets and plans to cut 5,000 jobs.  Amid slow PC sales, revenue for the quarter came in at $16.6 billion for the second quarter, up just 2 percent from a year ago. Microsoft’s revenue was $900 million less than the company projected.

For Wall Street, this was a big surprise given IBM and Apple had strong quarters. People were expecting Microsoft to perform well given its diversified business. I think Microsoft performance is a result of a broader economic downturn that could become much worst before  it gets better. And a growing problem with the effect of netbooks and losing share to Apple. With the economy in more of a reset mode than a recession I think we are in for a long downturn and IT spending will be impacted broadly.

 With this news Steve Ballmer announced that Microsoft would cut 5,000 jobs and reduce other costs across the company. You can read his whole email below. Read more

Windows 7 Makes Netbooks Fly

If you want to see how much progress Microsoft has made with Windows 7, try it on a Netbook. I have been testing an ASUS Eee netbook with Windows 7 Beta 1 for the last couple of weeks. The netbook sports an Intel Atom processor and only 1 GB of RAM.

We have seen the netbook PC category explode over the last two years and Microsoft was forced to make a key decision. Give up market share to Linux or lower the price of Windows. With the average price of a netbook selling for around $400 Microsoft made a smart business decision and sold Windows XP at a discount. Microsoft now has over 80% of the netbook running Windows. But Windows Vista would never be a credible alternative on netbooks. It required too much hardware to run optimally and Microsoft was worried about cannibalization.

 In comes Windows 7, when I first booted Windows 7 the first time I could tell something was different. It was snappier and more responsive. Applications loaded fast and even with the minimum hardware requirements the Windows Aero interface was enabled and performed like my desktop running Vista. After using it for a while I can only describe it with one word, solid. There are not any flashy features but several enhancements that you quickly become accustom to. Microsoft has clearly taken a different approach with the design of Windows 7 and it shows running on netbooks. Windows 7 is by far the best Windows beta I have ever seen come out of Redmond. It looks like Microsoft is starting to get its mojo back.

Race For A New Game Machine

Sony’s PlayStation 3 is nothing short of a greek tragedy. There haven been many companies before it suffer similar fates, Magnavox, Atari, and even Nintendo but none have squander their opportunity like Son.  But now David Shippy, the “brains”  behind the cell processor which powers the PlayStation 3 tells the story of how Sony was part of one of the biggest business failures of all time.  

In a new booked called The Race For A New Game Machine, he describes how the project went off the rails, ending up with IBM engineers creating the processing chips for two rival video game consoles. In the process IBM sold parts of the cell processor design to Microsoft for their Xbox 360 and Microsoft benefited from over $400 million in R&D funded by IBM, Sony, and Toshiba. The R&D teams worked in the same building and in some cases Shippy met with Microsoft engineers right after meeting with Sony engineers. Ultimately Microsoft benefited a great deal from Sony’s work on the cell processor. Microsoft launched their Xbox 360 a year before Sony launched their PlayStation 3 and the rest is history.

Facebook Loses $14 Billion In Value

Facebook has lost $14 billion in value in less than a year. With a 140 million users and growing Mark Zuckerberg’s social network company has gotten a reality check.The value of Facebook has been a hotly debated topic.

Last October Microsoft solidified Facebook’s value to the world, $15 billion. Microsoft got a paltry 1.6% stake in the company for $240 million.  Some thought that Steve Ballmer had lost his mind. But what people didn’t realize is how smart he really was. To Microsoft, $240 million is a rounding error, so if they were really crazy they would have bought more of Facebook at an insane valuation. What was brilliant about this move was it established a public valuation for Facebook that was so high and unjustified no one on the planet would touch them. Unless you are Li Ka-shing the Chinese billionarie that put up $60 million at that valuation. Essentially it was a poison pill for anyone that would try to acquire them. (hint, hint, Google)

Even Facebook internally didn’t believe the $15 billion valuation. According to inside sources they were offering employees options at $10 billion and some employees got options at $5 billion. Mark Zuckerberg recently canceled a employee stock buying program when no company would agree that Facebook was worth $4 billion. So what is it worth now? Valleywag was reporting rumors of of people willing to sell their stock at $2.50-4.00, that would put Facebook’s valuation at $1.3 billion. If you look at the numbers Facebook is worth much less.  Read more

Future of Microsoft’s Zune

Zune came on scene in 2006 when the iPod had 90% market share and was on pace to hit 100 million units. The Zune design was nothing short of an ugly brown brick of a device. Microsoft tried to differentiate the Zune by adding “the social” to the experience but the party was already over.

Apple had launched the iPod Nano a year earlier and the game was over. Apple’s unit volumes went up exponential and in no time,  everyone that was ever going to own a music device on the planet had an iPod. In Zune’s 2nd generation Microsoft started to get the software right and in many ways its superior to the iPod software but it seems too little too late. The puck is already shifting away from pure play music devices. 

At first you would think that this is a razor blade business. Sell the razor (hardware) for little to no profit and make all the money on selling razor blades (content and services). Except the paid content business is a horrible business. There is no money in that business, it just adds value to the device you are using. Apple makes all their profit selling hardware. So what is the future of Zune? Read more

Google Apps Has No Future

For a little more than two years Google (GOOG) has been in the productivity apps business, trying to chip away at Microsoft’s Office dominance with over 500 million users. First they went out and bought a bunch of start-ups including Writely, Tonic, XL2Web, and JotSpot. Then Google gave them a new paint job and duck taped them together calling them Google Docs & Spreadsheets.

For the past two years they have been trying every strategy in the book to try and get traction in the market. First it was consumer free then it was an enterprise paid model. With all the P/R hype, all the data points to Google Apps being an utter failure. According to Compete, Google only gets 4M unique vistors to their Google Docs & Spreadsheets Web sites. Still the irony is while jouranlists were busy predicting web based apps would make Microsoft Office obsolete, they were busy typing away using Microsoft Word. Google even got on the feature treadmill and started banging out must have features like “print” and “charting”. Still no one is showing up to their party. Read more

Microsoft Launches First iPhone App Seadragon

Microsoft’s Live Labs group launched Seadragon Mobile on the Apple iPhone. Its available through the iTunes app marketplace. Seadragon Mobile enables you to view gigapixel images from any device.  Microsoft calls the technique of viewing large images “deep zoom” and its a key technology in their Photosynth product.

What is interesting about this move is Microsoft is making Seadragon Mobile available on Apple’s iPhone even before you can get it on the Windows Mobile platform. Is this a change of heart for Microsoft? Probably not. Seadragon Mobile uses graphics accelerated hardware and there are not many devices on the market today that take advantage of those capabilities. Microsoft is probably using this as an opportunity to test some technology early and also doing a little bit of hedging.

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