A Brief Interview with John Thompson, Microsoft’s New Chairman, Provides Some Clues as to Likely Near Term Future Priorities for this Mature ISV

On February 28, 2014, Mia Saini of Bloomberg TV briefly interviewed John Thompson, Microsoft’s new Chairman. Saini includes some questions about Mr. Thompson’s other significant current venture, Virtual Instruments. But this post will only speak to a few of the discussion topics specific to Microsoft.

John Thompson did not assume a Defensive Posture as He Handled Some Challenging Questions

Anyone watching Thompson’s video on the Satya Nadella web page on Microsoft’s web site will note his objective, in his new role as Chairman, to improve the quality of Microsoft’s dialogue with the investor community.

Saini opened the interview with the following statement: ” . . . Many say, and it’s a widely held view that innovation is not happening on Microsoft’s base products. What do you say to that?” (quoted from a video interview with John Thompson, Microsoft’s new Chairman. The interview was led by Mia Saini of Bloomberg TV. A link to the entire interview is provided above).

Thompson’s reply began with reference to Microsoft ” . . . as a company with an enormous amount of resources . . .” (ibid) and then turned the conversation into his preferred direction: ” . . . The issue, quite frankly, for us is about focus”.

Readers may want to watch the video interview with Satya Nadella on the Satya Nadella page of the Microsoft Site. Nadella spends time in this video discussing the need for innovation at Microsoft. But this new perspective, as presented by Thompson, adds another dimension to the conversation — the need for focus, running parallel.

Thompson goes on to note one of the main reasons Nadella was selected for the CEO role: ” . . . he understands exactly what needs to happen to move Microsoft forward . . .” (ibid) So the viewer is left with a picture of Nadella as a new leader capable of marshaling “enormous resources” in a focused manner to build new base products, etc.

A Couple of Other Points Worth Noting

  1. When Saini noted the importance of Cloud products and services, Thompson interrupted her with a “for sure”. So clearly he gets the cloud imperative. He also made a big claim Microsoft naysayers may want to note ” . . . Office 365 is a very, very successful cloud based application” (ibid). It will be interesting to follow the performance of this product in Microsoft’s coming earnings reports.
  2. It doesn’t look like the consumer products effort will be wound down any time soon. Thompson noted ” . . . another focus of Microsoft’s strategy is how we become even more relevant to consumers, and the Devices and Services strategy that was launched about a year ago, is very much a part of that” (ibid)

Disclaimer: I’m long Microsoft

Ira Michael Blonder

© IMB Enterprises, Inc. & Ira Michael Blonder, 2014 All Rights Reserved


A Good Week for Blackberry in the Media

Blackberry’s QNX OS scored a big win at Ford this week. If readers have yet to catch up with this news, they can read about it in an article written by Craig Trudell and Jeff Green, which was published on the Bloomberg web site on Monday, February 24, 2014: BlackBerry Gains as Ford Said to Pick QNX Over Microsoft. At the same time, the volume of articles written about facebook’s controversial $19Bil acquisition of WhatsApp, engulfed Blackberry’s Messenger (BBM) service. All this news amounts to a positive sign CEO John Chen is succeeding in his attempt to resuscitate this mature ISV.

What’s different about Blackberry’s BBM service, as compared to WhatsASpp, is not at all the feature set, but the installed base of users. BBM users are predominantly people employed by large organizations in the public, private, and not-for-profit sectors. So the monetary value represented by the BBM user community may actually be greater than the same value metric for WhatsApp users, despite the annual subscription opportunity and the enormous numbers of WhatsApp users. Bottom line: teenagers lack the buying power of enterprise business users.

As far as the win at Ford for the QNX OS, put this one on top of the role the QNX OS played for Audi’s Infotainment system and I get the feel of momentum building for further sales of this feature-rich smart car OS. QNX has been at the smart car business for quite a while and presents the market with a particularly rich set of features.

Speaking of Audi’s Infotainment system, another company of recent strong interest to me, NVIDIA, is also playing a part in the architecture of Audi’s Smart Car feature set. In a press release dated January 7, 2013, and titled Audi and NVIDIA Expand Visual Computing in the Car, NVIDIA announces a big win at Audi. Curiously, the win for NVIDIA promises to displace the QNX driven Infotainment system.

Disclaimer: I’m long NVIDIA and Blackberry

Ira Michael Blonder

© IMB Enterprises, Inc. & Ira Michael Blonder, 2014 All Rights Reserved


Can Mozilla Successfully Challenge Android for Significant Share of Emerging Market Consumer Appetite for Mobile Devices?

To date, Google’s Android business unit has claimed to be the sole significant representative of open source O/S options for mobile devices. Leaving aside, for the moment, whether Android’s O/S architecture really complies with OpenSource standards, or not (I don’t think so and some other analysts hold my position), on February 23, 2014, the Mozilla organization made an announcement to enter the fray in a big way: Firefox OS Expands to Higher-Performance Devices and Pushes the Boundaries of Entry-Level Smartphones.

The press release also mentions Panasonic has chosen the Firefox OS for a new smart TV, and a tablet to be built on the Firefox OS by Foxconn. What’s most important for emerging markets about all this activity by the Mozilla Organization, is the low cost of entry it purports to opens up for retail consumers. On February 25, 2014, Sven Grundberg and Tom Gryta wrote in an article titled Smart Phone Makers Aim at Emerging Markets With Low-End Devices: “China’s ZTE Corp. introduced a phone running on Mozilla’s Firefox operating system that will cost $80. Mozilla says it will introduce a phone made in conjunction with a Chinese chip maker this year that will cost just $25.” (quoted from Grundberg and Gryta’s article, a link to which has been provided in this paragraph).

Of course, the close ties Firefox OS has evidently established with Chinese mobile phone OEMs, together with the very low cost to consumers for this technology in Internet ready smart phones, should give Android executives something to think about, at the least. How long will it take before Samsung, and/or Lenovo comes to market with similar products? Only time will tell.

As to how big an impact a serious challenge from the Mozilla Organization may have on Google’s Android bottom line will take sometime to determine. I think there are a lot of reasons, at present, for mobile phone OEMs with a commitment to Android to start taking a serious look at the Firefox OS option.

Ira Michael Blonder

© IMB Enterprises, Inc. & Ira Michael Blonder, 2014 All Rights Reserved


Microsoft Faces Some New, Near Term Hurdles

February 24, 2014 was not a good day for news about Microsoft. Ford announced its intention to stop using the Windows Embedded Automotive 7 technology. On the same day, Dave Their published an article on the Forbes website, Xbox One Gets Its First Price Cut. Just 5 days earlier, February 19, 2014, Farjad Manjoo wrote a critical review of the new high end Nokia Lumia Icon Windows Phone in an article titled This Phone Is Great, Till It’s Time to Add Apps.

On the loss of Ford as a customer for Windows Embedded Automotive 7 Technology
I think this loss is a very big deal. While I’ve held onto a skeptical position on the safety of the consumer demand for internet-connected automobiles, I don’t doubt the very high level of consumer interest in these features. One way or another the consumer will drive manufacturers to maintain Internet connectivity features already in place in automobiles (mostly luxury brands, though the features are sure to trickle down to economy models, sooner or later), and demand the set be expanded. NVIDIA is doing well in this market. Google wants its share, too, and recently announced a joint marketing effort with NVIDIA for smart car technology development. Finally, Microsoft’s platform was displaced, by QNX from Blackberry. With this win, Blackberry looks to be making good on comments by its new CEO, John Chen, to get business back on track around its “enterprise” software products.

Xbox One Price Cut
I’m afraid Microsoft has not done a good job of promoting the Xbox One to the consumer Home Entertainment Center market. The device looks, to me, to be all about gaming. Home entertainment market consumers respond to a different type of market promotion, which, in the case of the Xbox One, appears to be largely non-existent. The Xbox One may be a great home entertainment center, but the marketing communications team for the product needs to do a better job communicating this message to the market.

Hobbled Launch for Yet Another Nokia Lumia Windows Phone — This Time the Icon
The key handicap plaguing the Nokia Lumia Icon, noted by Farjad Manoo, is nothing new. The “lack of Apps” story has been going on for far too long. Perhaps Paul Allen was right, back in November, 2013, when the Chief Investment Officer of Mr. Allen’s Vulcan Capital was quoted, by Dara Kerr in an article titled Microsoft co-founder Paul Allen likes idea of company breakup, as recommending Microsoft spin off the its “consumer businesses”: Xbox One business, Bing, and can we say, as well, its Windows Phone effort? If financial incentives are required to get the App developer community going building Apps for Windows Phone, then shouldn’t Microsoft either provide them, or retreat from the market?


Each of the above points may foretell declines in sales, as well as profit margins, for Microsoft’s consumer market offers over the next few quarters.

Disclaimer: I’m long Microsoft and NVIDIA.

Ira Michael Blonder

© IMB Enterprises, Inc. & Ira Michael Blonder, 2014 All Rights Reserved


How Big a Role did Chromebook Sales Play in HP’s Last Quarter?

On February 4, 2013, HP announced the addition of an HP Pavilion 14 Chromebook to its product family. Several business quarters have passed since the announcement, but, HP earnings reports (and the webcasts of management presentations), to the best of my knowledge, have not included notice of significant sales of this product line.

HP’s latest quarterly earnings report and Q1 2014 webcast is no exception. Beyond a mention of what sounded like “multi O/S” device sales, there was no mention of how HP’s Chromebook products contributed to their revenue performance.

But there’s little remaining doubt about the Chromebooks vs. Windows laptops & notebooks competition. Chromebooks are making themselves felt, but, I think, in lower end consumer sales in the Americas and Western Europe, and, across the board, in emerging markets.

On Saturday, February 22, 2014, Tom Warren wrote an article titled Microsoft combats Chromebooks by cutting Windows licensing fees by 70 percent, which was published on The Verge website. Warren writes: “Microsoft is reportedly cutting Windows 8.1 license costs by 70 percent for PC makers. Bloomberg News reports that the cuts are targeted at devices that retail for less than $250, in a move designed to combat rival low-cost tablets and Chromebooks” (quoted from Warren’s article, a link to which has been provided in this paragraph). It’s not likely Microsoft would move forward on a price cut for its Window O/S if sales of Chromebooks were still little more than a ding to their bottom line. But just where may this impact be occurring, if not in familiar enterprise IT markets?

On December 29, 2013, in an article titled Chromebook Sales Punching Through And Gobbling Market Share, Seth Colaner writes ” … the NPD Group has some startling numbers on commercial computing device sales. From January-November 2012, Chromebook channel sales were negligible at just 0.2% of the total market, but this year over those same months that percentage leapt to 9.6% of all computing devices. They also accounted for 21% of notebook sales. Much of Chromebooks’ success appears to be at the expense of Windows-based machines, which is likely due to a combination of a lukewarm response to Windows 8 and Chromebooks’ significantly lower prices.” Colaner also notes strong sales of Chromebooks on Amazon.com: ” two of the three top-selling laptops on Amazon.com this holiday season were Chromebooks–specifically units from Samsung and Acer.”

Investors may want to factor this information into their view of Microsoft, specifically, to conclude Chromebooks have, indeed, become a meaningful competitor to notebooks running the Microsoft Windows O/S. As to whether Microsoft’s decision to cut the cost of the O/S for its OEMs is good, or bad news, it’s too early to say. The price cuts may, in fact, shore up sales in emerging markets and the lower end of the consumer market, which would represent a win for Microsoft. After all, the Chromebook appears to already own 21% of notebook sales, per Mr. Colaner, right?

Disclosure: I’m long Microsoft, but neither invested in Google, nor any other publicly traded business mentioned in this post.

Ira Michael Blonder

© IMB Enterprises, Inc. & Ira Michael Blonder, 2014 All Rights Reserved


Some Perspective On the Role Played by Personal Data for Online Search

On Saturday, February 15, 2014, The New York Times published an article by Claire Cain Miller, titled ‘The Plus in Google Plus? It’s Mostly for Google’, Miller clearly presents a challenging component of the type of highly effective personalized search ISVs (principally Google) need to leverage to deliver satisfactory returns for the advertisers buying their online promotion services in the form of click advertisements.

Google Plus, for Miller, is ” . . . a lens that allows the company to peer more broadly into people’s digital life, and to gather an ever-richer trove of the personal information that advertisers covet.” (quoted from an article written by Claire Cain Miller and published in the New York Times on Saturday, February 15, 2014. A link to the complete article has been provided in the paragraph above).

I personally think Google “covets” this data a lot more than its advertisers. As I wrote recently, anyone listening to the webcast of Google’s most recent quarterly results will note mention of a more “precise” search technology. This “precision”, in my opinion, can’t be delivered without extensive collection of personal data. Apparently, Google Plus provides Google with a very valuable method of collecting this information.

From Miller’s article, it’s clear Google Plus provides Google with a method of innocuously collecting this data. Is this activity bad? I don’t think so. Rather, it’s an example of present day technical limitation on online search methods like the Google search engine.

A couple of posts back in this blog I argued for a different technical approach, namely one less likely to produce the kind of “bull in the china shop” (pardon my use of a cliché) effect on personalities which, unfortunately, plagues today’s methods.

To reiterate: any ISV with the technical components required to produce a less “person-dependent” online search method stands to make a bundle. If you’ve got the technology, please let me know.

Ira Michael Blonder

© IMB Enterprises, Inc. & Ira Michael Blonder, 2014 All Rights Reserved


Who Really Wins When Chromebooks Run Office Through DaaS?

On February 12, 2014, at the VMware’s Partner Exchange meeting, VMware and Google announced a joint marketing effort. Filip Verloy sums up the effort in a sentence: “Yesterday at VMware’s Partner Exchange (PEX), VMware announced that it is joining forces with Google to modernize corporate desktops for the Mobile Cloud Era by providing businesses with secure, cloud access to Windows applications, data and Desktops on Google Chromebooks” (quoted from a blog post authored by Filip Verloy and posted to his filipv.net web site. I’ve provided a link to the complete post at the top of this paragraph).

A lot of analyst commentary has been produced about this announcement as an indicator of Microsoft slipping further out of the commanding position in the enterprise IT desktop computing market.

The argument goes like this: the Chromebook is more of a native BYOD device than, for example, an ultrabook from Dell or HP (I don’t buy this). Enterprise IT organizations, staring at an April, 2014 sunset date for Windows XP, can purchase Chromebooks (which are, admittedly, less expensive than Dell or HP Ultrabooks, but not so cheap when compared with ASUS product) in lieu of substantially more expensive hardware upgrades. A new, virtual, Windows 7 Desktop, and the Office suite, can be consumed through the VMware Horizon DaaS running on the Chromebooks. The end result: Enterprise saves money on the hardware, but do they really save money on the Windows 7 and Office licensing? I’m not so sure.

A related argument notes how the VMware Horizon DaaS & Chromebook solution will open access to otherwise prohibitively expensive Microsoft Office applications for emerging markets. This argument is certainly compelling, but once again, aren’t we talking about sales of more licenses for Office and Windows, for Microsoft, into these emerging markets than would otherwise be the case?

I also wonder why the same solution can’t be achieved with Windows Azure on the backend and Microsoft’s Hyper-V running on barebones ASUS or HP laptops powered by Intel Celeron processors. Conclusion: I think the VMware Google joint effort is a great way to extend the accessibility of the Microsoft Windows O/S and the Office Suite.

Ira Michael Blonder

© IMB Enterprises, Inc. & Ira Michael Blonder, 2014 All Rights Reserved


VMWare CEO Pat Gelsinger Claims It’s Still All About Costs for Enterprise IT CIOs

VMware’s CEO Mr. Pat Gelsinger participated in a panel discussion during the last day, February 13, 2014, of Godman Sachs’ Technology and Internet Conference. Mr. Gelsinger was joined, for his presentation, by Mr Don Duet of Goldman Sachs, Co-Chair of IT for the firm.

Readers can visit the VMware investor’s website to register to listen to the complete webcast of this panel discussion.

Mr. Gelsinger’s opening comments touch on a couple of points CEOs of early stage ISVs with big ambitions ought to think about. These include:

  • planning for the inevitable transition, from a particularly favorable stage of business ” . . . when you’re golden that long, everything you touch turns to gold” (quoted from Mr. Gelsinger’s opening presentation in this webcast) to one where business success is harder to achieve.
  • how to manage partners. Mr. Gelsinger notes: ” . . . we just finished our Partner Exchange Conference here in San Francisco . . . where we said ‘here are our focus areas and if you don’t get it (right to our partners), then I’m going to tattoo them on your forehead.” (ibid)

But his observations about how VMware’s enterprise customers are grappling with on premise computing vs. public, private, and/or hybrid clouds, are, for me, even more worth a listen.

Software Defined Data Centers (SDDCs)

Gelsinger categorizes the market for SDDC solutions as one of the two focuses of VMware over the next near term. The other important trend is the market for hybrid cloud computing solutions.

If readers are not familiar with this SDDC concept, Patrick Kerpan, CohesiveFT wrote an article on this topic for Wired Magazine back in January 2013, Software-Defined Data Centers: Built for the Cloud, Modern Apps, which is worth reading as it defines the concept.

Gelsinger claims enterprise organizations continue to develop software for on premise use (he points to an approximate 10-15% CAGR). But the growth rate of this need is dwarfed by the growing demand for cloud alternatives (he points to an approximate 40% growth rate for these solutions).

He categorizes the SDDC approach as ” . . . about the on premise . . . ” (ibid), and the off premise trend is ” . . . about the hybrid cloud . . . ” (ibid)

The familiar driver, for most of the CIOs Gelsinger has spoken with, is entirely financial: ” . . . how do I reduce the cost of what I’m doing today . . . and how do I build the infrastructure needed for what I’ll be doing tomorrow.” (ibid). Another nice nugget from this presentation is the estimate of the relative size of a typical IT computing budget, vs. the broad operating expense for one of VMware’s typical customers — 3%. Gelsinger presents this figure during his opening remarks.

On the topic of VMware’s product category, he makes the following claim ” . . . no technology has been more helpful for reducing the cost of today’s footprint . . .[than virtualization] . . . and we’re going to do that for everything you do in the data center . . . ” (ibid)

My advice? Product managers at early stage ISVs should continue to focus on collecting as much data about computing costs for their customers as they can. At the same time, the imperative for them is to use Marketing Communications media to demonstrate how their solution(s) significantly contribute to a reduction in these costs.

As Pat Gelsinger demonstrates during this webcast, those ISVs capable of framing a convincing argument for their products around enterprise IT computing cost reduction, still have the advantage.

If your organization can use a re-alignment of its marketing communications around cost topics, and you lack the internal resources to handle the effort, please contact us.

Ira Michael Blonder

© IMB Enterprises, Inc. & Ira Michael Blonder, 2014 All Rights Reserved


CloudShare’s Development and Testing Offer Meets the Requirements of Modern Software Prototyping Best Practices

Many enterprise IT organizations, and their peers in the public and not-for-profit sectors have embraced software prototyping. A review of the components of an industry-standard software prototyping procedure can provide decision-makers with the qualifiers they need to choose the right solution for their specific needs. A handy guide, in PowerPoint form, can be found in a presentation by Vishnu Chaitanya reddy Nara, Software Prototyping, which is published by Louisiana Tech University.

CloudShare’s Development and Testing offer meets, or exceeds the basic requirements of an industry standard software prototyping process, as it is described in Vishnu Chaitanya reddy Nara’s presentation.

The presentation summarizes three different approaches to software prototyping:

  1. Throw Away Prototyping
  2. Evolutionary Prototyping
  3. and Operational Prototyping

Vishnu Chaitanya reddy Nara writes about “Throw Away Prototyping”: “Throw away prototyping is one type of approach where an initial prototype is built mainly focusing on the poorly understood requirements” (quoted from a PowerPoint Slide Deck published on the web site of Louisiana Tech University. A download link for the slide deck has been provided in the paragraph above). Early stage Independent Software Vendors (ISVs) are prime candidates for “Throw Away Prototyping”. Their “ready, fire, aim” approach to software product development must be built with as close to a self destruct mechanism for concepts as possible.

Certainly there is no better method of rapidly assembling development tools, operating systems environments, and hardware infrastructure, than to make use of virtual computing resources for this purpose. CloudShare has the features required to make this type of prototyping not only possible, but profitable, when the annual cost of $2400.00 for a TeamLabs subscription (permits 3+ users to access a virtual development environment) is compared to the cost of acquiring disposable hardware, and software for a similar effort, albeit one handled on premises .

The foundation plank of a successful “Evolutionary Prototyping” method, the second of three noted above in our bullet list, Vishnu Chaitanya reddy Nara writes, is a set of ” . . . well understood requirements.” (ibid). If we look at this approach, from the perspective, once again, of an early stage ISV, we see a need for “Evolutionary Prototyping” once our “ready, fire, aim” method has revealed a bonafide product development opportunity for an enterprise computing market.

Recent quarterly earnings reports from some of the leading mature ISVs (Microsoft®, Oracle®, and IBM®, to name three) have indicated strong market demand from enterprise users for Software Defined Data Centers (SDDCs). SDDC, one can argue, is a safer step along a path to reliance on cloud computing resources for the kind of large communities of computing uers typical of enterprise business, etc. Of course, the underlying assumption powering SDDC is a combination of on premise computing for data communications of company proprietary information , with cloud Infrastructure as a Service (IaaS) resources.

Once again, CloudShare’s TeamLabs offer can certainly be used in an Evolutionary Prototyping approach to an SDDC system.

Perhaps the final variant presented by Vishnu Chaitanya reddy Nara, “Operational Prototyping”, represents the most promising method of the three, at least for CloudShare’s offer. This approach requires the user to be able to implement “Throw Away Prototyping” and its “Evolutionary” sibling, as required. Certainly it will be substantially less expensive for an early stage ISV to use the TeamLabs subscription offer to deliver, over the long term, for enterprise customers in need of an “Operational Prototyping” model for further systems development than would otherwise be the case with an on premises computing approach.

Ira Michael Blonder

© IMB Enterprises, Inc. & Ira Michael Blonder, 2014 All Rights Reserved


Monopolistic Brand Tactics — Google Style

In an article written by Rolfe Winkler, titled “Android’s ‘Open’ System Has Limits”, which was published by the Wall Street Journal on Wednesday, February 12, 2014, Mr. Winkler notes how Google has deftly won concessions from Android OEMs. These concessions deliver default status for Google’s search for any/all devices manufactured under the terms of the Android O/S license agreement:

“The documents show that Google has imposed strict restrictions on device makers that want access to its search engine, YouTube or the more than one million apps in its Play Store. In return, the device makers must feature other Google apps and set Google search as the default for users, according to the agreements.” (quoted from Mr. Winkler’s article, a link to the entire article can be found in the paragraph above).

Anyone familiar with the U.S. vs. Microsoft® anti-trust litigation of the late 1990s should experience something of a “deja vu” when reading this paragraph. The U.S. case against Microsoft focused on a very similar feature of the Microsoft Windows O/S, namely the “default web browser.” Ostensibly, Microsoft emerged from this litigation with the Windows business intact and still fully integrated. But since the litigation, whether as the result of efforts by other regulatory agencies (principally the European Commission), the process of establishing the “default” web browser has been clearly established as the right of the owner of the PC, rather than either the OEM of the O/S Licensor, to establish.

So is the phraseology Google has incorporated in its license agreements with Android OEMs largely an act of hubris? in other words, a method of reaping unreasonable benefits before the inevitable slap on the hand from regulatory authorities removes the hand from the cookie jar? Sad to say, I think it looks so, doesn’t it?

When activities like this one, on Google’s part, are revealed, one would hope the public will develop a higher level of skepticism the next time one vendor tries to play the “good guy/bad guy” marketing communications game.

Disclaimer: I’m long Microsoft with no position in Google.

Ira Michael Blonder

© IMB Enterprises, Inc. & Ira Michael Blonder, 2014 All Rights Reserved