Q4 Earnings: The Future Is Here

Latest earnings reports paint a very interesting picture. Almost everything is bad news. But here we have exceptions: Apple (AAPL), Google (GOOG), Amazon.com (AMZN), Research in Motion (RIMM).

All the companies with positive news are getting revenue from the sectors which are hurt badly. Apple is in consumer products, which are also fashion accessories; RIMM is in cell phones (OK, smart ones, but cell phones anyway); Google is in advertising and Amazon.com is in retail. What's different? Two companies are internet companies.The other two make devices to connect to the Internet. This is the future, predicted in the 1990s. The future has arrived. The internet business model, which was buried by countless commentators in 2000-2003, is working. And it's taking business from brick and mortar companies in many sectors of the economy.

What's next? It's really easy to predict, just read what was written in the 1990s. Almost everything was right, except the timing. It takes time for any revolution to develop. And the first comers quite often die in droves. But survivors strive.

In the next several years we'll see the complete death of newspapers. Some of them will switch to the internet, but most will die. Printed editions will survive, but just a handful of them and most probably they will be much thinner. Local press will be mostly free, nobody's going to buy some county paper. They are free in many places already. I'm getting local papers for free, without even asking.

The next shoe to drop will be most of retail. We'll see many chains die. Brick and mortar retail will survive, but it will become much smaller. Computer shops are almost all dead now. Remember Egghead, CompUSA? Circuit City (CC) is next. Best Buy is the only big survivor. Of course, there is Microcenter, but it's a small niche player, and probably a survivor. It's the place geeks go to buy parts.

TV stations will go next. Unless they will be able to switch to internet delivery. It won't happen soon, we need good broadband in most places for that, but it will happen. We'll see a lot of fighting, the attempts of cable companies to prevent video over IP, sabotage of traffic a la Comcast (CMCSA), but the future always wins. Horse owners tried to fight cars, too, and sometimes succeeded (red flag laws in England). Never mind. in about 20 years, cable service will be replaced with TV over IP, and most TV stations will die, to be replaced by unknown new companies.

There are a lot of things that are impossible to predict. Just watch for opportunities. And if you see them, pounce. I lost money on several companies I bought in the 1990s. Yahoo (YHOO) and Apple brought enough profits to make those investments wildly successful. The same will happen now. The internet is still in its infancy.

Full disclosure: At the time of publication author had long positions in AAPL and GOOG and no positions in other companies mentioned. Positions can change any time.

Comments

[morph366:]

With everybody at home watching TV over IP, and reading the news online, perhaps pizza delivery outfits should be added to the list as well.

Feb 03 08:54 AM

[brewer:]

Uh, who would deliver the pizza? Newsprint makes it across the wire better than pizza.


On Feb 03 08:54 AM morph366 wrote:

> With everybody at home watching TV over IP, and reading the news
> online, perhaps pizza delivery outfits should be added to the list
> as well.

Feb 03 10:09 AM

[stanmule:]

The internet will die if people cant eat pizza

Feb 03 10:20 AM

[joeldude:]

Great peak at the future based on some 'real' perspective from the last fifteen years...requires visionary glasses that you seem to have.

The future is predictable if you leave out the emotion and just look at the facts even though objectivity is tough when your world is changing.

Remember fifteen years ago 'email', 'texting' 'chatting' and 'blogging' were rarely, if ever used words. (I still don't get blogging, it's really 'bitching on-line' isn't it? ;)

Let's not get stuck in the horse manure of the past.

Excellent article, thanks!

Feb 04 11:06 AM

[dlaw:]

Even I, a deflation believer, admit that the author is right. And in these times of so much gloom, it's important to remember what works - and that things will work out eventually.

But I don't see it as an Internet/Non-Internet dichotomy. I see these successful companies as businesses that have been able to successfully integrate an online presence into their businesses. For Apple, it's the app store. For RIMM it's the fact that the iPhone has finally broken that barrier to bringing the web to the phone and for Google it's just plain integrating every damned under the sun onto their site.

If the author seems a touch optimistic, it is nevertheless a good reminder for us all.

Feb 04 12:04 PM

[261133:]

I

Feb 04 12:39 PM

[261133:]

I only agree on Google. If Apple and Rimm would disappear nobody would even notice and Amazon's best days are already over.
We have to eat, drink , heat/cool our homes , have to dress and a few more things like fill up the tank in our cars, but nobody really needs the stuff these companies are trying to sell and when most people have realized that these companies will get smaller or even go out of business.
Take a look at the stimulus plan, it is all about construction, alternative energy and health care, not about getting everybody an Ipod or a new TV from Amazon. Wake up people, the fun only society is over.

Feb 04 12:46 PM

[brewer:]

@User 261133

Troll much? Actually, who needs Google? If I want to find something, I will use the phone book or the newspaper. Google is too much fun, and we all know that is no longer allowed. Time to switch back to Windoze... In the end, I will save enough for one of those internet pizzas... LOL

Feb 04 02:49 PM