Posts Tagged ‘Microsoft’

Are tablet computers flash in the pan?

Sunday, April 17th, 2011

Today, we will divert away from our usual discussions on the macro-economy and look into a big picture trend in the field of technology. If you are looking into investing in technology stocks, this article will give you food for thought…


There is no doubt that Apple’s iPad is a roaring success. Indeed, they are so successful that almost the entire consumer electronics industry is throwing its weight behind the concept of tablet computers. Apple is so successful that it is almost believable that they are the pioneer of the tablet computer.

But the truth is that, Microsoft was in fact the pioneer of the tablet computer.

Before 2000, Microsoft already had a stylus operated pocket computer operating system (Windows CE). As early as 2005, Microsoft was already producing tablet editions of their Windows XP operating system for the first tablet computers. But as we all know, Microsoft?s tablet computing initiative was eventually abandoned and left in the recycle bin.

Then Apple came up with their iPad in 2010. Conventional thinking predicted that the concept of this tablet computer cannot be a success. Physically, its size makes it less portable than Apple?s highly successful iPhone.

Functionally, it cannot do half the things that a netbook computer (that runs Microsoft?s Windows operating system) can do. Therefore, conventional logic says that since Microsoft?s tablet computer failed to take off, then the iPad should suffer the same fate as well.

But amazingly, Apple?s iPad defied conventional logic and became an incredible success?so successful that the entire industry is following the tablet computer bandwagon.

Meanwhile, Microsoft, having failed once with their table computer initiative, was tiptoeing timidly on this bandwagon. As this article reported,

As virtually the entire consumer electronics industry throws its weight behind tablet computers, Microsoft’s global chief research and strategy officer Craig Mundie said today that he did not know whether the booming new category was here to stay.

Speaking at a lunch held in Sydney by the Committee for Economic Development of Australia (CEDA), Mundie, who reports directly to Microsoft CEO Steve Ballmer, said he did not know whether tablets like the iPad would “remain with us or not”.

For this reason, we believe Microsoft is making a major strategic blunder. They have completely failed to read and understand the consumers. In other words, we believe the tablet computer is here to stay and it will continue to grow into a major part of the industry. In fact, recent reports from IDC and Gartner find that tablet computers are cannibalizing the PC market. We believe this trend will continue for quite a long while. Therefore, Microsoft?s continued timidity will see that it will become irrelevant in that part of the technology industry in a few years time.

So, you may wonder why we are so sure of that.

To understand our why we think so, we have to look at this trend from two perspectives?one from the technologists? view and the other from the consumers? view. Since the wish of the consumers will ultimately decide the fate of the industry, we will, it will be the one that is relevant for investors.

Firstly, let?s look at it from the technologists? point of view. As we mentioned before, the tablet computer is not as portable as the smart-phone and not as functional as a full-fledged PC (including netbooks). We may be able to carry a smart-phone with us wherever we are, but not for a tablet computer. There are still many things that we cannot do on a tablet computer. For example, we cannot imagine ourselves writing this article on a tablet computer by tapping continuously on a screen with our fingers. We doubt it is possible to professionally edit videos and photos on a tablet computer. Neither can software be engineered on a tablet computer yet. In other words, from the technologists? point of view, the tablet computer is a half-baked computer compared to the PC.

Now, let?s look at it from the consumers? point of view. The average consumer does not care about the underlying details of the technology behind any gadgets they use. All they care is that the gadget must work instantaneously and reliably anytime they need to use it, according to their expectations. For example, whenever they turn on a tap, they expect water to flow out of it 100% (well, almost) of the time. Whenever they press a button on the microwave oven, it works 100% of the time. When they press the button on the TV remote control, they are able to watch their favourite TV programs in less than a couple of seconds all the time.

But when it comes to the PC, the consumer often sees it as an unreliable, slow and frustrating piece of crap. Most of the time, the PC works adequately. But it has a frequent habit of stymieing the progress of the consumer with incomprehensible and unexpected error messages and other kinds of show-stoppers. That mars the consumer perception of the PC as unreliable, slow and frustrating. The consumer wants his electronic gadgets to be as reliable and instantaneous as his everyday kitchen appliances, without any unwanted surprises.

Unfortunately for the consumers, they are denied this want since the very beginning. They do not know of an alternate universe where computers are gadgets that are a joy to use and can be relied upon as much as their everyday kitchen appliance.

Out of the blue, Apple came up with the iPhone and then followed by the iPad. The consumers suddenly realized that such an alternate universe exists after all! Computers are reliable, instantaneous and work without unwanted surprises after all! They can manipulate objects ?inside? the computers with their bare fingers as if they are manipulating objects in the physical world. Finally, computers are joining their collection of everyday appliances. No, a correction?the tablet computer is no longer a computer anymore. It has become an appliance.

When you look at this from the consumers? point of view, you will then understand why tablet computers are displacing PCs. Once consumers have a taste of that alternate universe, they prefer to stay there. No doubt, tablet computers are not as fully functional as the PCs. But for the average consumer, it is able to do most of what they want to get done. For the things that cannot be done on the tablet computer, they will grudgingly return to their PC.

For now, the capability and functional gap between the PC and tablet computers are wide. But as time goes by, with more and more software being developed for the tablet computer, the gap will narrow. As the gap narrows, more and more consumers will ditch the PC altogether (maybe more and more of businesses? workforce will be dragged along into the alternate universe too).

For Microsoft, their existing Windows operating system has too much baggage of the past to be brought to the alternate universe. In fact, in their reluctance to cannibalize this platform in order to preserve compatibility with the past, they are attempting to fit semblance of the alternate universe into the current universe with their upcoming version of Windows. If they continue along this path, we are afraid that Microsoft is sliding towards irrelevance.

What’s the biggest threat to Google?

Thursday, October 22nd, 2009

Following from our previous article (see Google vs Rupert Murdoch- who will win?), we will look at what is the biggest threat to Google. For those who are interested in investing in the technology sector, this is one of the things to watch out for in your business analysis because it will have major flow-on implications on other technology and media businesses in the long run. For those who are thinking of starting an Internet/technology business, it will determine which sides of the dividing line (information as commodity vs free and expansive information) that you will be supporting (or switch sides to).

For starters, Microsoft’s new search engine, Bing, is not the biggest threat. Bing and Yahoo! are there to keep Google competitive, but they don’t pose a long term strategic threat to Google. So, assuming that information will remain free and abundant for the foreseeable future, what can deal a long term mortal blow to Google?

Remember, in our previous article, we wrote that

… information (collectively) is free and abundant, but consumers’ attention (for each individual information provider) is scarce.

And here is the beauty of Google’s business model- it sells access to consumers’ attention.

For a rival to erode the long term competitive advantage of Google, it must be able to:

    1. Steadily gain more and more attention of consumers over the years
    2. Shut out Google from what gained the attention of consumers

    Any rival that can fulfil these two conditions will undermine and erode Google’s capability to sell access to consumers’ scarce attention. Microsoft’s Bing may be able fulfil the first criteria, but it cannot fulfil the second one. After all, the search engine robots of both Google and Bing trawl in the same playground of freely available information.

    But there’s a potential rival in the horizon that fulfils both conditions: Facebook.

    At first glance, Facebook and Google seem to compete in two different market space. Some may argue that they complement each other. But there’s one problem for Google- its search engines cannot penetrate through the wall of Facebook and index the consumer-generated content. With each of the 300 million Facebook users who can potentially interact with each of the other 300 million users (via status updatess, posting and commenting of pictures, engage in forum discussions, play games and so on), plenty of content are generated everyday that is outside the view of Google.

    Then there’s a disturbing trend that may perhaps be happening right now- as people spend more and more time in Facebook, more and more ‘Internet’ activities are migrating towards it, which in theory can make it an ‘Internet’ within the Internet (we will call the former “Facebook world” and the latter “public Internet” from now on). For example, as Facebook contains more and more interactions between people, more people are using Facebook messages in favour traditional emails to communicate with each other. We can imagine a possible future where Facebook messages supplants traditional emails. Also, it is already possible to host forum discussions at Facebook groups within Facebook world, which in theory, can replace public Internet forums. Software developers can also develop Facebook applications, which in theory, can function as services (in Facebook world) normally found in the public Internet (which is the domain of Google). For example, what is stopping Facebook to host blogs, polls, newspapers, forums and other content inside Facebook world?

    Facebook is also intruding into the public Internet. Through its Facebook Connect feature, people can bring their Facebook identity into the public Internet to take part in discussions, which can then be tracked by Facebook. This feature serves to draw people from the public Internet into Facebook world.

    Obviously, Google has already seen this threat as you can see from this article. We believe that it is no coincidence that Google’s next big idea product, Google Wave, is a competitive threat to Facebook’s social media function.


    Meanwhile, for those interested in trading the technology stocks, our friends in Market Club has this to say about Nasdaq- Is the NASDAQ Now in Thin Air?.