Sean Park

Why Isn't Microsoft's Strategy Working Anymore?

The problem with the World WIndows idea, is that for it to work - commercially, not technically - they would need customers to trust them and I just don't see that happening. Like all good monopolists before them, they have burned through any trust they might have once had by milking their customers that they knew were captive with no alternative. The only problem with this strategy is of course god help you if your customers ever do manage to find an alternative that is compelling enough to finance the switching cost. And as you so eloquently point out in the first part of your post is happening with accelerating velocity.

So because of this trust-deficit, I think the following point is a bit moot, but technically I don't think Microsoft has it in its corporate DNA to actually build such a product that wouldn't be a complete dog's breakfast to use. And this despite having an enormous number of talented developers and engineers. Indeed the only way for them to unlock this value imo, is to put the cash cows into a private equity financed shell to be run as a mature declining annuity, and then either shut down or spin-out the rest of the company (like the break-up of baby bells...baby softies?) - a gaming company, a search company, a cloud company, etc. (these are top of the head suggestions to illustrate the point rather than necessarily the best / most viable split...)

Why I'm (Still) Long Apple

"or if the applications I use become web based" - I think this is another key opportunity for AAPL to gain marketshare (esp. in SME space); as 2contango wrote, I think most people don't care too much (or at all) about the OS per se, it just has to work. As applications increasing migrate to the cloud and the browser becomes the de facto OS from the end user's point of view, one of the last great competitive barriers protecting MSFT will start to crumble. (As an aside, GOOG's Chrome initiative is clearly a hedge on the browser-as-an-OS scenario imo.) Once the OS is irrelevant, the user experience becomes the key selling point. Think Sony in media electronics in the 70s and 80s: only moreso (ubiquitous computing is harder and more pervasive than ubiquitous hi-fi) - many (not all) people will pay more for a stylish product that "just works." Is this position unassailable? No way. (Think Sony in the 90s and 00s!) Indeed, Amish Rake Fighter's comment with respect to trust is valid and will only become more important as AAPL grows market share beyond their 'fanboy' base. AAPL has definitely shipped some lemons over the years, and this is not great but worse is the 'we-can-do-no-wrong' Orwellian approach to managing bad news or criticism in the market. Although I have always hated this and thought it was a poor long term strategy for the company, I could make a case in my head for why they might want to do this in terms of creating this 'reality-distortion-fi... brand: sort of like the cool kid in high school who treats his acolytes like shit and that makes him/her even more cool. However as they gain market share this positioning will flip from becoming an asset to being a liability. Definitely a risk factor to watch for but one I think is at least a couple years and 5-10 pts of market share away for now. Another alarm bell to watch for: when/if they launch their version of the Cadillac Cimarron.


On May 25 10:23 AM 2speed wrote:

>
> Finally I adopted the hated WinTel machine for one reason only. If
> software existed, it existed for the PC. It made money for me and
> it still does.
>
> In my business (seekingalpha.com/symbo...), a switch to
> AAPL would mean real money out of my pocket... first with the cost
> of the hardware... then with the time spent searching for the applications
> I need and use, or to find a compromise... then the higher software
> cost.
>
> I will probably switch when retire or change professions, or if the
> applications I use become web based where the platform is not relevant.
>
>
> In the meantime, my AAPL purchases will be limited to stock, options
> and iPods/iPhones.

Fixing Finance: Incubating New Banks

You raise an excellent point. Regulatory and legislative capture are always a significant risk and substantial barrier to disruptive change in any regulated industry, this is true. But my thinking is that if there ever were a time when this "force field" protecting the status quo was weakened surely this has to be that time. And yet another reason why I think that government backing is very important and is not substituting for private capital in this case and in this moment in time.


On Feb 19 01:30 AM The hand wrote:

> i am with constructe and have written about and supported this concept.
> but the gods are against us. we would immediately have a sound banking
> system. but the bank lobbyists will make sure this does not happen.

Fixing Finance: Incubating New Banks

Thanks, unfortunately Alpha Bank is already taken (big - although less so than before(!) - greek bank...)


On Feb 18 09:48 PM constructe wrote:

> You are right. Several of us in Seeking Alpha have mentioned this
> idea including myself. I fully support this idea. I'd be happy to
> put my deposits and my capital towards a Seeking Alpha bank. Maybe
> Alpha Bank sounds better. It sounds like a Fraternity credit union
> haha.
>
> The upside to doing this is every dollar put into such new banks
> can be aid in adding velocity to the money supply rather than being
> tied up in reserves supporting a welter of bad loans.
>
> There is one catch and one why banks don't support this. As money
> moves to new sound banks money drains from the old unsound banks
> leaving them high and dry (as if they weren't already). This makes
> it 100% obvious someone has to pay the piper sooner rather than later
> and that hopes of their recovery are essentially nonexistent. Another-words,
> they are dinosaurs and extinction has come to claim them.

Fixing Finance: Incubating New Banks

Well you are certainly right that I didn't talk much (or make a case that I knew anything) about the mechanics of banking. And I love the WebVan / bullshit generator analogy: you are right it does come across a bit jargon/consultant speak...ironic since I'm usually the one making fun of that. My only defense is that I was trying to cram an essay into a blog post - never an easy thing to do, or at least do well.

As for the business of a bank - as you say "borrowing, lending, transaction processing, that sort of thing" - a point I implied, but didn't make clear, was that there is no competitive advantage in 'just' being able to do these things. They are commoditized. (Don't get me wrong I'm not suggesting they are trivial or even easy to do well, but that it is exceedingly hard to make a positive difference just by doing this. Like a telco: you can fail by messing up, but it is hard to succeed just by getting it right. It's expected.) And imho is a significant contributing factor in why it all when pear shaped: who cares about getting this stuff right when you can make 20x as much with 100x less blood, sweat and tears, just by punting the market and leveraging up to the max...When the going got tough, the not-so-tough got long. Very long.

So what I was really trying to suggest was that if you were to set out to build a business that lends, borrows, transacts payments, that sort of thing today, starting from a blank sheet of paper, you would not use the existing traditional bank business model, but would do it differently. Because you can. And because your customers' expectations have changed.

But you are right in saying this is not a blueprint. It's not even a napkin sketch, of what that kind of bank would look like. And even if I am talking rubbish, my main point was why funding new banks (just plain old new banks) wasn't part of any country's plan? If nothing else to give some competition to the old banks and to create more data points in terms of measuring policy effectiveness. I figure you could take 5-10% of the sums being thrown around and seed a material number of new institutions, without calling into question the need to shore up the incumbents.

Anyhow, thanks for keeping me honest.


On Feb 18 06:57 PM mathgeek wrote:

> This is dissapointing Technodrivel, and it reads like a pitch for
> Webvan circa 1997. (Those silly grocery stores, they just don't
> *get* technology!)
>
> Perhaps you have some truly innovative ideas for the banking industry,
> or perhaps you don't... but if one were to base their opinion on
> this article, its unclear you understand the business at the most
> basic of levels. (You know, borrowing, lending, transaction processing...
> that sort of thing)
>
> And its too bad, because, you do seem to have a solid grasp... it
> just doesn't show here. As you said so well in past articles...
> actually coming up with new and better ways to serve customers is
> hard.
>
>
>
>
>

Market Predictions for 2009

It seem that Blackstone's CIO Robert Doll has a number of similar views...


On Jan 01 11:16 AM Greg Pinelli wrote:

> Sean..I think your call on the credit market recovery in institutions
> in 2009 will be the call that sets up spark for a major resource
> recovery....There's NO doubt the makings are in place and the reserves
> are stacked to the sky...once the match is struck watch out....From
> that seminal event my take is...
> 1. Buy USO (DBE is also worthy and gives some variety in product)
> and just hold it....this provides a solid base for oils about face...
>
> 2. Get some Gold NOW!! Today!! The boomlet that's on the doorstep
> is fueled by money expansion and prospective credit explosions...ALL
> currencies will depreciate, though just not against each other.
>
> 3. Look to pharmaceutical and large infrastructure companies (SGR...ABB...a
> CEF for pharma..maybe SWZ)...
> 4. Nuclear energy will gain by default...coal is going to be reamed
> big time and there isn't enough nat gas supply for the longer run..electricity
> generation is THE hallmark of civilized society and renewables are
> more correct than plausible...URPTF..DNN...
> Happy New Yeart o all!!!

The VC Asset Class Crisis Thing

While the localized factors (as to why the dearth of VC-backed IPOs) is almost certainly the primary cause of the current situation, the evolution of financial markets is leading to a secular re-positioning of the IPO as only one of many possible liquidity options, as opposed to historically when it was, along with a trade sale, pretty much the only game in town.

Today - particularly for companies with positive cash flow - there are often a myriad of alternative ways to create liquidity for founders, management and early stage investors. Indeed going public is often the least attractive alternative and only becomes attractive if/when the public market is willing to put an - how should we say... - 'ambitious' multiple in terms of pricing.

For most private companies in most industries, an IPO is far from the obvious exit route irrespective of prevailing market conditions. In some instances clearly an IPO is ideal - financially, strategically, etc. - but I would posit these are the exception rather than the rule.