GRiddick

Google At Much Higher P/E Ratio Than Microsoft Was After 1,175 Days Public

This will end up being one of the most notorious falls from grace of our generation ... tech or no-tech.

Simply put, Google does not own enough assets with sizable barriers to entry to justify this kind of valuation. The world has gone crazy ... in my opinion ... much due to the fear of losing out to some of the emerging economies in today's Internet connected world (the BRICs as they call them).

But you don't solve that kind of problem by betting on the "old grey mare with the cool new name". Branding is obviously very important these days, but with virtually no barriers to entry or easy shifts of market share or reversal of fortunes in any of their market segments, a company like Google can fall from grace as quick as lightning.

Look waht agreeing to censorship in China, alone can do to a high tech company these days. It's un-American.

Combine that with the fact that a huge percentage of Google's revenues come from the advertising and distribution of digital content they do not own, and do not even have to rights to display and distribute, and this fall could be a very nasty one, indeed.

In my view, there is no justification in the world that can explain Google's trailing 12- months' multiple at 60 when Microsoft's in its initial hayday was only 21. Who's buying this "Hype"?

Probably the little old ladies in Omaha who depend on their brokers for "rock solid" financial advice. What a shame.

Thanks for bringing this issue to light.

George P. Riddick, III
Chairman/CEO
Imageline, Inc

[e-mail]...

Google: Perhaps It Is Time For An Orkut Name Change?

Google - Mike Tyson with a PhD

Good morning, Carlin

These Googlites are simply brilliant. They are the "baddest". They remind me of Mike Tyson in his prime ... only this time he has a PhD.

Microsoft cannot seem to out-maneuver them at any turn. Here, Microsoft pays a hefty premium for a small stake in Facebook, and Google has them both back-peddling around the ring before the end of Round One.

Don't you think the immediate availability of "OpenSocial" kind of takes the wind out of Facebook's sails as it prepares to announce its own advertising business model next week?

Google is undefeated ... and carries a powerful knockout punch, the likes of which we have never seen in this industry. Every move they make is feared. They are always moving and jabbing ... jabbing and moving. They hit you with an uppercut (strong stock price surge after their third quarter earnings are announced), follow that with a left hook (delivery of "OpenSocial" with all of the powerful third parties already on board), and, before you catch your breath, they nail you with a powerful right to the chin (the new Google phone plan).

Virtually every Google opponent ends up flat on their back on the canvas. Some never regain their former self-confidence, determination, or pride.

But hasn't the Google arrogance and lawlessness started to wear thin ... both on consumers' minds and in the eyes of the investment community and the regulatory authorities? I think so. If not now, then soon. Let's hope I'm not wrong.

But Google doesn't think so. They seem to think they are anointed with a unique right to set their own laws and rules of conduct (business and social) ... both here in the U.S. and across the globe.

You see, Google has its own unique brand of "rape". They too, have tattoos painted on their face. And they'll bite your ear off in a flat second if you get too close to them.

Their entourage includes some of the brightest investment bankers, rocket scientists, public relations specialists, and IP defense attorneys in our land. All as determined as the three amigos at the top of Google to snooker Internet users, business partners, shareholders, and advertisers out of every dime they claim to own.

And all supported financially by the largest group of self-serving advertisers, lawyers, and investment bankers on the planet ... bar none. Aren't you growing tired of these claims of "willful blindness" we hear virtually every day coming from the folks in Mountain View and their business partners?

"We didn't know we were doing anything illegal, your honor."

Google has gained much of its prominence on the backs of other people's hard-earned properties that have been stolen. They are among the most notorious copyright infringers ("pirates") this country has ever seen. They are brilliant ... I'll give them that. But, they are also unethical at almost every turn ... they are arrogant, greedy, hypocritical, and deceptive ... AND many of their operations are illegal.

They routinely treat other people's property as their own. Not just with YouTube, but with many software and search functions within Google itself. They perpetuate and support "public domain" scams. They routinely ignore U.S. Copyright laws ... and subsidize willful copyright infringement at thousands of web sites around the world.

In countries where Copyright compliance is a joke (such as Brazil), Google reigns supreme. I presume this is where the bulk of the Orkut 67 million users reside.

I have studied the U.S. Copyright laws (both civil and criminal) closely now for over twelve years. The U.S. now claims to be requiring copyright "enforcement" enhancements in its trade negotiations with other countries in Asia, Europe, and South America.

Who are we fooling here?

We don't enforce our own copyright laws fairly or consistently in this country. How do we expect Brazil, Russia, India and China (the "BRICs") to follow our lead? ... let alone the hundreds of other countries who are not nearly as close to the spotlight.

Read our criminal copyright laws. You'll see that Google has violated these laws at a rate over 5,000 times the volume (both in dollar volume and quantity of works infringed) as is required to receive the maximum criminal penalty of $1,000,000 per willful infringement and up to five years in jail.

Is the Department of Justice asleep at the wheel? Or, are they, too, simple afraid of being hit by the Google right cross?

Why aren't these laws being enforced? Why is this country leaving it up to the small companies (like my own) and creative individuals who produce over 85% of the new and original copyrighted works in this country to tackle Google and its growing army of IP attorneys and pirating web site partners worldwide?

Only three things stopped Mighty Mike in his prime:

1. His friends and wife told him they were sick of his shenanigans and were leaving him.

2. He couldn't control his own greed and arrogance ... let alone his temper.

3. We put him in jail for breaking the laws of this land.

Don't you think it's high time we consider some of these exact same types of remedies for mighty Google? I do!

I am sick and tired of suffering marketplace "knockouts" at their expense ... especially when their activities are both unethical and illegal.

We need a company we can all be proud of to carry this belt as "World Champion" of the Internet space.

Your thoughts?

George P. Riddick, III
Chairman/CEO
Imageline, Inc.
[e-mail]...

Google vs. Microsoft: Blue/Red Ocean Earnings Productivity

You are obviously a numbers guy, Victor. I applaud that, and realize that most of Wall Street operates that way.

But I think what happens on Main Street and on Consumer Lane is just as important, if not more so in the long haul.

You seem to ignore one crucial ingredient in your analysis. Google achieves a healthy percentage of its revenue and profits by sponsoring and/or subsidizing illegal activity and displaying and distributing property it has no legal rights to distribute.

When investors begin to realize the downside risks of Google gaining its dominance based on this kind of unlawful and unethical business practices, the tide will turn.

Mark my word on this one, Victor. I am 58-years-old, have been involved with the technology and copyright industries for over 30 years now (starting with IBM in the mid 70s), and I've seen this happen time and time again.

It won't just be the "numbers" that bring these companies down.

George P. Riddick, III
Chairman/CEO
Imageline, Inc.

[e-mail]...

Google vs. Microsoft: Call It A Draw

Hi Larry,

I agree with Gardner on many of these points, but not it's overall conclusion. I do not know how many years it will take, and I can't even really name the most logical contenders (if they've even hatched yet) but I will bet my bottom dollar that a different company ends up winning this game.

The skeletons in these two closets are far too plentiful and far too deep ... and each comapny has antagonized far more people than Wall Street realizes.

Corporate cultures, corporate honesty, integrity, respect for both suppliers and customers, compliance with the law, respect for Intellectual Property rights, and fair play are FAR more important than many of the analysts covering these two technology giants realize. I have been at this game now for over 30 years and I've seen it all happen before.

Here's an article I wrote a month or so back on this very subject:

**********************...

It's the "Battle of the Titans" on 5 simultaneous fronts ... but the outcome of this "war" may surprise you

That's the way I see it, anyway ... perched comfortably on my deck ... Blackberry and laptop in hand ... watching the birds chirp away and wondering why everyone doesn't come to see Virginia in the fall. It's absolutely beautiful!

"They're probably afraid they'll catch one of our 'high humidity holdover' days from August", I say to my new Cardinal friend.

Anyway, I read a few interesting articles this morning and it occurs to me that this intra-industry technology "war" is quickly coming down to two major players. I call them the "titans" ... and everyone else is trying to choose their sides.

Look at some of the recent news:

* IBM now supports OpenOffice more aggressively and is throwing Lotus Notes into the mix
* Microsoft officially introduces its "live online" Office Suite in late September
* Google teams up with Sprint and is testing their own set of "advertising supported" mobile phones
* Novel essentially sells out to Microsoft at the expense of many of its long term allies
* Brazil applies to become an official subsidiary of Google, any spreads piracy throughout South America
* Microsoft takes over half of India ... both here and there .. and sponsors it own international cricket tournament in the process
* Google continues romancing China like a teenage boy in a French Class
* Apple sits back and enjoys the battle knowing full well its market value will sharply increase with controversy
* Google's market valuation shoots past IBM, and starts to close in on Wal-Mart ... in just 3 years!
* Sun, IBM, and Google seem to be having a new and interesting "affair"
* Microsoft and AT&T sign up to testify in Washington against Google as a monopoly

If this were a conventional war, "Poor little Google" wouldn't stand much of a chance. But those folks from Mountain View have changed the playing field and they have Microsoft running scared. They're fighting this one out in the jungles, across the sandy deserts, in outer space, as well as in the dark corners of Main Street, Wall Street, and Madison Avenue. They are also well aware of the unique blend of greed and "techno-hype" that drives both Wall Street and Washington. And a few thousand rocket scientists don't hurt their cause much either ... except perhaps when "common sense" comes into play.

The Googlelites are street fighters. They know how to align themselves with the gullible masses. They are excellent at attracting third world cultures and emerging markets. They sponsor elections. They rob from the middle class and give to the poor ... and "donate" to select members of the middle and upper class as they see fit, as well. They make virtually all of their money by selling advertising on web sites, many of which are nothing more than willful piracy sites talking advantage of our youth and our underprivileged ... let alone the undereducated.

They anointed themselves as the organizer of all the worlds' information ... and that includes everything and everyone who don't want the Googlelites to touch their private information or property, as well. Google apparently held a public forum on the issue, but no one showed up to vote other than their senior scientists, CEO, departing CFO, General Counsel, a few members of their Board, half the lawyers in California, and, of course, all of the venture capitalists and investment bankers who helped develop the Google war plan in the first place.

Microsoft has a decided advantage in armament and in size. Problem is, too many of the plain citizens don't like them. Their expense structure is so large they have lost forever what it might take to stay nimble and adjust to changing tides ... let alone lead the innovation train. Doesn't look like the federal and state governments care too much for Redmond, either ... except perhaps some of those who have accepted free software and other bribes along the way.

Another problem is some (let's make that "many") people still believe monopolistic business practices are evil in this country ... especially when they have to pay more for software than is logical and are forced to upgrade in order to use many new hardware devices and software features that might actually help them improve their position on both the economic and self-esteem totem polls. This silent majority is becoming "no so silent" anymore these days.

Case in point. Microsoft had the perfect opportunity to do what was right this fall and modify its "image search" engine functions to comply with the long standing copyright laws in this country ... and guess what? ... they chose not to do so. I know. I brought it to their attention in May and was politely told to "pound sand". Perhaps they thought honesty from Microsoft would give Google an even further marketplace lead. And don't these folks from Redmond depend on the adequate protection of copyrights for their own survival?

I, for one, can't stand hypocrisy. It's probably the only business practice I hate more than piracy.

So, Microsoft has the bulk of the soldiers, all dressed up meticulously in their corporate colors and standing at their guard posts all around the world ... but Google has the guerrilla warriors hiding behind semantic shells and bricks and mortar as well ... let alone innocent women and children who blindfully follow their lead ... and, all the while taking full advantage of the anonymity of the Internet.

So who is going to win this "Battle of the Titans"?

Here's my view. Microsoft will win some battles and Google will win some battles, but NEITHER one of them will ultimately win the war. A new player, or set of players, will emerge. I am almost certain of that. Players who respect honesty and fair play. Players who will not sell out our morals and business ethics for all the oil in the Mid-east, or all the toys in China. Players who respect copyrights and the hard work of the hundreds of thousands of artists, songwriters, musicians, writers, photographers, journalists, illustrators, cartoonists, and poets, who make our country so unique and so wonderful. Players who believe in both the "fair use" of copyrighted works for research and innovation, and the honesty of the "Public Domain" ... but only within the confines of what is legal and what is not.

People who respect the law of the land. Even if they wish some laws would change faster than they do.

People who shoot straight with their customers, their suppliers, government regulators, members of the legislature ... and the judiciary ... and with their shareholders. A new set of players. A new breed of business ethics, honesty, and fair play. A culture that can once again be respected around the world. It will come about. I'm convinced of that. It's simply a matter of how long it will take to evolve.

If the gourmet free lunches and cricket tournaments have to bite the dust in the process, then so be it. The rest of us deserve an honest shake in all of this Web 2.0 excitement as well. And we expect our leaders to have some class, be honest, and set the proper examples for our kids.

Not these two Titans!

George P. Riddick, III
Chairman/CEO
Imageline, Inc.

[e-mail]...

Google Leads in Global Search, But Rivals Are on Radar

Good morning, Judith

I think I represent a minority of folks out here who have an entirely different view of Google than you, and most other financial journalists and analysts, I follow these days.

You see, you continue to report on all the phenomenal upside of this thing they call "google" ... yet you completely ignore the more predictable downside. This misleads investors in my view, and leads to the type of things that happened back in 2000.

The little old ladies in Omaha end up holding the bag.

Google, for years, has written its own rules. Its rocket scientists invented a new moral compass owned and operated exclusively by a select few inside Google .. and several of their lawyers, investment bankers, and venture capitalist friends as well.

They rob from the middle class and give to the poor ... and others in the middle class .. and to the rich ... and to themselves. Over and over again. Google is one of the most flagrant copyright infringers on the planet. Day in and day out ... millions of times a day ... every day.

Not everyone plans to sell out and settle with Google, as they apparently see all of this "shaking out". Wait and see.

And if you don't think a misguided moral compass, unethical business practices, corporate arrogance, hypocrisy, and greed can bring down someone as mighty as Google, you might want to think again.
Can you spell ENRON?

Judith, I would never make such a claim without substantial proof of what I say. I'd be happy to review our research, and our extensive documentation, with you in more detail if you ever decide to tell your readers the flip side of the Google story. The true side.

George P. Riddick, III
Chairman/CEO
Imageline, Inc.

[e-mail]...

Microsoft vs. Google: The New Battle for Your Network

Interesting analysis, Victor. But too statistical for my graphic artist blood. I go as much on instincts, and real world experiences, as I do on the numbers. Perhaps that's why I am not a member of the Forbes' billionaires club like so many of the "visionaries" out there at both Microsoft and Google.

But I did work for IBM when they were "the King". I have seen invincible "empires" come and go in this technology industry. I know what arrogance, hypocrisy, and greed can do to a company. Once your customers, and formerly loyal business partners, start to turn on you, all the accounting maneuvers in the world won't save your ass.

Thought you and your readers might enjoy the article I wrote a month or so back on these two corporate giants. As you can see, in my view, unless some major changes are made at the top, I don't expect either one of them to win this game in the long haul.

Wanta bet me a billion or so on that one?

George

**********************...

It's the "Battle of the Titans" on 5 simultaneous fronts ... but the outcome of this "war" may surprise you

That's the way I see it, anyway ... perched comfortable on my deck ... Blackberry and laptop in hand ... watching the birds chirp away and wondering why everyone doesn't come to see Virginia in the fall. It's absolutely beautiful!

"They're probably afraid they'll catch one of our 'high humidity holdover' days from August", I say to my new Cardinal friend.

Anyway, I read a few interesting articles this morning and it occurs to me that this intra-industry technology "war" is quickly coming down to two major players. I call them the "titans" ... and everyone else is trying to choose their sides.

Look at some of the recent news:

* IBM now supports OpenOffice more aggressively and is throwing Lotus Notes into the mix
* Microsoft officially introduces its "live online" Office Suite in late September
* Google teams up with Sprint and is testing their own set of "advertising supported" mobile phones
* Novel essentially sells out to Microsoft at the expense of many of its long term allies
* Brazil applies to become an official subsidiary of Google, any spreads piracy throughout South America
* Microsoft takes over half of India ... both here and there .. and sponsors it own international cricket tournament in the process
* Google continues romancing China like a teenage boy in a French Class
* Apple sits back and enjoys the battle knowing full well its market value will sharply increase with controversy
* Google's market valuation shoots past IBM, and starts to close in on Wal-Mart ... in just 3 years!
* Sun, IBM, and Google seem to be having a new and interesting "affair"
* Microsoft and AT&T sign up to testify in Washington against Google as a monopoly

If this were a conventional war, "Poor little Google" wouldn't stand much of a chance. But those folks from Mountain View have changed the playing field and they have Microsoft running scared. They're fighting this one out in the jungles, across the sandy deserts, in outer space, as well as in the dark corners of Main Street, Wall Street, and Madison Avenue. They are also well aware of the unique blend of greed and "techno-hype" that drives both Wall Street and Washington. And a few thousand rocket scientists don't hurt their cause much either ... except perhaps when "common sense" comes into play.

The Googlelites are street fighters. They know how to align themselves with the gullible masses. They are excellent at attracting third world cultures and emerging markets. They sponsor elections. They rob from the middle class and give to the poor ... and "donate" to select members of the middle and upper class as they see fit, as well. They make virtually all of their money by selling advertising on web sites, many of which are nothing more than willful piracy sites talking advantage of our youth and our underprivileged ... let alone the undereducated.

They anointed themselves as the organizer of all the worlds' information ... and that includes everything and everyone who don't want the Googlelites to touch their private information or property, as well. Google apparently held a public forum on the issue, but no one showed up to vote other than their senior scientists, CEO, departing CFO, General Counsel, a few members of their Board, half the lawyers in California, and, of course, all of the venture capitalists and investment bankers who helped develop the Google war plan in the first place.

Microsoft has a decided advantage in armament and in size. Problem is, too many of the plain citizens don't like them. Their expense structure is so large they have lost forever what it might take to stay nimble and adjust to changing tides ... let alone lead the innovation train. Doesn't look like the federal and state governments care too much for Redmond, either ... except perhaps some of those who have accepted free software and other bribes along the way.

Another problem is some (let's make that "many") people still believe monopolistic business practices are evil in this country ... especially when they have to pay more for software than is logical and are forced to upgrade in order to use many new hardware devices and software features that might actually help them improve their position on both the economic and self-esteem totem polls. This silent majority is becoming "no so silent" anymore these days.

Case in point. Microsoft had the perfect opportunity to do what was right this fall and modify its "image search" engine functions to comply with the long standing copyright laws in this country ... and guess what? ... they chose not to do so. I know. I brought it to their attention in May and was politely told to "pound sand". Perhaps they thought honesty from Microsoft would give Google an even further marketplace lead. And don't these folks from Redmond depend on the adequate protection of copyrights for their own survival?

I, for one, can't stand hypocrisy. It's probably the only business practice I hate more than piracy.

So, Microsoft has the bulk of the soldiers, all dressed up meticulously in their corporate colors and standing at their guard posts all around the world ... but Google has the guerrilla warriors hiding behind semantic shells and bricks and mortar as well ... let alone innocent women and children who blindfully follow their lead ... and, all the while taking full advantage of the anonymity of the Internet.

So who is going to win this "Battle of the Titans"?

Here's my view. Microsoft will win some battles and Google will win some battles, but NEITHER one of them will ultimately win the war. A new player, or set of players, will emerge. I am almost certain of that. Players who respect honesty and fair play. Players who will not sell out our morals and business ethics for all the oil in the Mid-east, or all the toys in China. Players who respect copyrights and the hard work of the hundreds of thousands of artists, songwriters, musicians, writers, photographers, journalists, illustrators, cartoonists, and poets, who make our country so unique and so wonderful. Players who believe in both the "fair use" of copyrighted works for research and innovation, and the honesty of the "Public Domain" ... but only within the confines of what is legal and what is not.

People who respect the law of the land. Even if they wish some laws would change faster than they do.

People who shoot straight with their customers, their suppliers, government regulators, members of the legislature ... and the judiciary ... and with their shareholders. A new set of players. A new breed of business ethics, honesty, and fair play. A culture that can once again be respected around the world. It will come about. I'm convinced of that. It's simply a matter of how long it will take to evolve.

If the gourmet free lunches and cricket tournaments have to bite the dust in the process, then so be it. The rest of us deserve an honest shake in all of this Web 2.0 excitement as well. And we expect our leaders to have some class, be honest, and set the proper examples for our kids.

Not these two Titans!

George P. Riddick, III
Chairman/CEO
Imageline, Inc.

[e-mail]...

Microsoft and Vista: Trying To Turn Around A Supertanker

Very interesting read, Roger.

I, too, have followed Microsoft closely for years. I also worked for IBM when they took some of these same arrogant approaches to obvious market-driven trends.

From what I've seen in the last year or so, I see nothing but trouble looming ahead for the folks from Redmond. Microsoft's only salvation may turn out to be the weaknesses of their opponents (more on this in another post).

Here are just a few of the MS activities that have gotten my attention:

1. Large scale discounting. Rarely are market leaders heavy discounters. Microsoft recently discounted the price of Works, certain Office versions, and of both the X-Box and their game software from I can see. Do you really think they will make up those profits with volume ... especially when they have already had to take a huge hit due to manufacturing flaws with the X-Box?

2. Zune. Why does the market want, or need, Zune? I personally think its branding is awful, and I've been in the technology branding business for years. Now another round of discounts for Zune as well?

3. Vista. I know several friends and business associates who have tried to buy a Dell, or other computer of their choice, only to find it only available with pre-loaded Vista. This was/is an old business model squeezed into a modern day bottle. It is not going to float. All of these changes you talk about create absolute market confusion, and market confusion leads to a lowering of profit margins ... We should all know that by now.

4. Online Advertising. What do the polls say about the average consumer's trust of Microsoft? Need I say more. Regardless of what Ballmer says he wants, major advertisers will not follow Microsoft blindly into the darkness. Advertisers react to performance, not simply hype or the FUD factor (that's Fear, Uncertainty, and Doubt ... one of the few things Microsoft did learn from IBM back in the 80's).

5. Consumer products and games. Sure Halo 3 is off to a good start, but do people really associate the Microsoft brand with consumer innovation, creative or ethical leadership, and market dynamics. I don't think so.

6. Office Suites. Most of the people I know are not shelling out any real bucks for the Microsoft Office Suite 2007. I think its sales will be too closely associated with Vista to break the bank. Let alone the new competitive offerings coming out from Apple, Adobe, IBM, Sun, and others ... and, oh yeah, Google.

7. Servers. I really think this is still a strong and profitable suite for Microsoft (FUD works on many of our IT departments these days, who use some of the same techniques when dealing with their own internal executives and management), but it also has a reverse affect to a certain extent. Server tachnologies are not exactly what I call end-user friendly. In fact, I have been in this industry for over 25 years and I have never taken the time to learn how these servers really work. Why? I find it boring. It certainly is not the same market who buys creative advertising, plays games, searches the Interent for relevant topics and world news, or listens to music. Who, exactly, is Microsoft's target market? I can't name any company that has ever become "all things to all people" when "things" change this quickly.

7. Below the "tip of the iceberg". I write about this topic frequently, Roger, so I want to tell you up front I have a bias. But I'm not wrong. I have studied this VERY closely for the past 8-9 months, and even had some discussions with senior level folks from Redmond on the subject. Microsoft supports flagrant, and willful, copyright infringements through its image serach and Windows editing facilities, as well as through AdCenter. The magnitude of the problem is almost unquantifiable. We are talking about hundreds of millions of infringements .. occurring on a routine basis ... and with full knowledge of Microsoft executives. Unfortunately, the exact same thing is happening at Google, so you won't see them testifying against Microsft up in D.C. on this issue.

Once disclosed, a time that is rapidly approaching us (did you see the recent "ethics" report on Google at nlpc.org?), these piracy issues will shake the confidence of Microsouls and Googlites everywhere. Average consumers, across all markets, will be concerned ... and negatively impacted. In fact, many of them may also become liable themselves due to their close association, and usage, of the software, content, service, and download tools provided to them by Microsoft and Google.

I could go on and on about this, but keep your ears and eyes wide open on this one. You saw Viacom fire the first significant shot, but there are many, many others waiting in the wings. Some even biger than Viacom.

Once computer users lose confidence in the leadership, business ethics, morals, hypocritical positions, and corporate scandals and greed supported by the executive teams at Microsoft and Google, who knows what might happen? I, for one, have my eyes wide open looking for the next shining stars.

Please let me know what you think. Thank you.

George P. Riddick, III
Chairman/CEO
Imageline, Inc.

[e-mail]...

Microsoft's $154 Billion Question: Accounting For the Unaccountable

Hi Victor,

I am not a financial analyst, investment banker, or lawyer, but I do have a few years experience in common sense, in general, and in the technology industries, in particular.

I also have watched Microsoft closely now for the past 25 years.

It is my view that "brands" are not nearly as important to long term value in the software and Internet worlds as some people would want you to think. Why? It's simple. It's like branding the weather, branding air, or even trying to brand the "perfect storm".

The "unaccountable" value in a market cap such as Microsoft's stays undocumented, in my view, because of the toll it might take on if the company's market perception becomes vulnerable. We saw it in the glory days of IBM. We've seen it time and time again in the technology and Internet industries. Branding an easily replaceable service is far more risky than establishing a worldwide tangible brand for something like Coca Cola, or GE light bulbs.

What are the Lotus, WordPerfect, Netscape, or even AOL brands really worth these days?

When corporate arrogance, greed, deception, theft, piracy, and/or unethical business practices start to wear on a brand, the value can drop lightning fast, and even faster than that if your brands are based on "air", or "promiseware", or "unending beta tests", or "required cultural changes", like so many of the Microsoft, Apple, and Google brands seem to be these days.

Every once in a while the "perfect storm" does come around and I, for one, feel certain aspects of our new technology-based global economy are very, very vulnerable to some of the fastest brand erosion we have witnessed in this country in quite some time.

I appreciate you bringing all of this to our attention. It would be interesting to me to see the same analysis done on the market caps of Google, Apple, and a few other "overnight" success stories.

Thanks for "listening".

George P. Riddick, III
Chairman/CEO
Imageline, Inc.

[e-mail]...

Microsoft Banks $170 Million in First Day of Halo 3 Release

Halo 3 is now free!

What if I could figure out how to deliver Halo 3 to everyone for free and be protected from attacks by Microsoft based on the "safe harbor" or "fair use" provisions of the DMCA (that's the Digital Millennium Copyright Act for those of you new to copyright law in this country)?

What if I could make it run on any game console you had, or sell you a really cheap new one I'm having made in China? We're thinking about calling it the X-Boxx.

What if I could then sell advertising on the web pages where Halo 3 was displayed for downloading and keep most of the money for myself?

What if I could keep records of everyone who downloaded or used Halo 3 and then send them e-mails and other solicitations for hardware and software (maybe even travel and food!) owned by companies other than Microsoft?

Waht if I could bypass the standard distribution channels, like Best Buy, Game Stop, and Wal-Mart and keep all of the money for myself?

What if all Halo 3 users could then join my new social networking community and I could sell even more advertising for every minute they surfed or "stuck around" on the Web?

Well, don't fool yourself. There are only a few things stopping this scenario from happening. It's called "the companies with all the money". It is also sometimes called a "monopoly", or certainly at least an "oligopoly". Some call it "truckloads of lawyers", probably even more dangerous than all of the other three combined. Years ago it used to be called "Japan".

Microsoft routinely steals other people's copyright-protected property every single second of every single day. And so does Google. I know. My small graphic arts development company is one of the victims. We have had to lay off more talented people in the last few years than we have hired.

Let me give you a specific example of how this illegal activity occurs routinely at Microsoft:

1. Microsoft chose to copy Google's illegal image search approach rather than make some simple changes to make their's legal. Again, I know. I pointed this out to senior Microsoft executives and lawyers earlier this year and was politely told to pound sand.

2. I showed senior Microsoft officials a specific example. They claimed they were somehow protected by the DCMA. NONSENSE!

3. At the time, the N.Y. Yankees were 8 games behind the Boston Redsox. Their playoff chances looked "iffy" at best.

4. I found several web site publishers, one called Freefever and the other called Lunapic, that had been infringing our electronic clip art illustrations for some time, AND who had removed the infringing images after receiving an official notice from my company, Imageline.

5. I showed Microsoft exactly how they could still retrieve the Yankees clip art illustrations we had produced and registered with the U.S. Copyright Office many years ago from the Microsoft servers. AFTER they were removed from the infringing web sites. You see, top quality electronic graphic arts content actually increases in value over time. It's not like an old version of WordPerfect or Microsoft Works.

6. Try it now yourself if you want to watch these ongoing infringements in action. Go to Microsoft Live image search and key in "Yankees clipart". You can do the exact same thing on Google if you'd prefer. The cartoon image with the fans in Yankee caps and the "Go Yankees" banner is one of ours.

7. You might also notice the official logo of Major League Baseball, several original Yankees' logos as well, and some other copyrighted works that are displayed by Microsoft on the exact same page with the Imageline clip art. Do you think Microsoft has a license to display and download any of these images?

8. Microsoft claims it is retrieving the Imageline clip art illustrations from Lunapics or Freefever or other infringing web sites, but they are NOT. They are stored in the Microsoft servers. The infringing web sites took the images down long ago!

9. Microsoft encourages you to place the infringed image into the Microsoft Scratchpad. From there, you can a) copy it to your computer, b) re-size it for use in other applications, c) e-mail it to a friend or business associate (or even a Boston fan), d) use it for your computer background as I have done here in Virginia, e) put it into a tiled background for a more dramatic impact, f) create a customized screen saver, or g) use readily available Windows software tools to modify, combine, or animate the copyrighted image. All EXCLUSIVE rights of the copyright holder.

10. We're talking about using the infringing images in the exact same size and resolution as they are stored in the Microsoft servers. This is not "indexing" or "framing" folks ... this is DIRECT copyright infringement.

11. If ALL of the above are not flagrant examples of willful copyright infringement, I do not know what is. And I have been in this technology copyright game for over 25 years now. Remember, all of these infringements occur as a direct result of Microsoft instructions, Microsoft tools, and Microsoft trying to make extra billions of dollars from the hard work of others.

12. How long do you think it would take Microsoft's army of lawyers to ascend on Central Virginia if we tried the the exact same stunt with Halo 3 as referenced above? This is simply corporate hypocrisy at its highest and most dangerous level. And the reason I personally do not believe that the government should take any pressure off of Microsoft for complying with the anti-competitive restrictions placed on them years ago. In many areas, I think they've made a turn for the worse, even while under the government scrutiny.

13. In addition, Microsoft is now selling advertising on the exact web pages where all of this infringing activity occurs. Just like Google, Microsoft's new wicked twin sister in the copyright infringement "evil empire".

14. Neither Microsoft nor Google pay the original copyright holders a dime. While their five top so-called "executives" and "visionaries" have accumulated an astonishing $115 billion+ of wealth. What has happened to the morals and ethics of this country? And why aren't the existing copyright laws enforced against the largest violators in the land by far? Surely, lobbyists cannot be THAT powerful.

15. Until Washington politicians, the judiciary, and the business community as a whole, decide to enforce our laws evenly, and follow the rules of decency and fair play, there will be NO END to the damages caused by willful copyright infringement activity in this country. Let alone any chance in hell of lowering the copyright, trademark, and counterfeiting violations abroad.

How long do you think it's going to take before pirated copies of Halo 3 are everywhere? Does Microsoft really deserve protection of its copyrights while they routinely infringe the copyrights of others?

This is a national crisis, folks. And I haven't heard a single candidate for president mention it even once. Nothing that is happening today could have the negative consequences on both the reputation and the pocketbook of hard working Americans like this issue.

Once our morals and standards are gone, we may as well choose which other country we want to "follow". Who knows, maybe Microsoft and Google will form their own country by then. Why not, they are allowed to play by their own set of rules already. What a shame!

And I hear there's a guy named Gates who might be without a job this time time next year and would love to be "president".

Mark my words on this one!

George P. Riddick, III
Chairman/CEO
Imageline, Inc.

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Microsoft Management Needs A Major Strategy Reset

It's called "We're #1 Syndrome", Kris. I, too, worked for IBM back in its glory days. I actually left in 1980 and have been a graphic arts and technolgy industry entreprenuer ever since.

I started noticing this trend with Microsoft about the same time that Bill Gates announced he would officially step out of operations next summer. Not sure if there is any connection between the two or not.

I will tell you this, however. Once the leader of the pack starts to become too concentrated on defense, they always falter. Not just in business. The Dallas Cowboys were knocked off their perch as well, when they became arrogant, "media focused", and "more important" than everyone else.

In my opinion, Microsoft runs scared these days. Why? I'm not sure. I agree with you, however, their "game plan" is simply too disjointed for the bulk of us to understand. Games, servers, healthcare, operating systems, clip art, office software, game consoles, templates, image search, online advertising, touch screens, desktop publishing, animated graphics, media players ... all things technology to all people.

Here's my view. They have the high end corporate and government folks over a barrel. Combinations of IBM ... and Sun ... and Cisco and ... and Oracle ... and Intel ... and a few key others could start to change that, however.

Office is well entrenched in mid-size businesses, and I don't see any major movement underway to change that. These businesses usually don't have the internal IT resources, or financial ability, to take a chance on the new software solution of the month.

Apple gives them a fit in small businesses and in individual computer installations, especially where graphics are king. I also see this group as willing to try new solutions as they come along. The new HP and Dell decisions to bundle Linux could make a difference over time as well.

Where I feel Microsoft has gotten out of its league is in the consumer markets. This appeqars to be Ballmer's primary focus. Google and Yahoo outpace them in virtually all personal productivity, entertainment, and other Internet usage categories. They seem to be running scared of Nintendo and Sony as well... even with cash cow franchises like Halo in the wings.

The leader of the pack usually only makes steep price reductions for a strategic reason (look at how the Japanese did it with electronics and some other key indsutires). Defensive price cuts almost always signal management or manufacturing weaknesses from my experience. XBox, Office, Halo ... they all seem defensive to me.

Finally, you have to be on one side of major industry issues (like copyright protection) or the other. Microsoft has joined forces with the CCIA yet they publicaly disavow any connection to the recent "embarrassing" report made by CCIA supposedly pointing out the market significance of "fair use" indsutries compared to copyright industries ... waht a joke!. And the total waste of taxpayer dollars as the Google-led CCIA filed a complaint against the copyright industries through the FTC for improper copyright warnings. What?!

Try to figure out what side of this important industry-wide debate Microsoft is on, Kris. No wonder they appear to have no long term strategy.

"We're # 1 Syndrome" is a desease. Once you contract it, it takes over your culture and requires an awesome management team, market leading products in all key target markets, and a focused strategy to get rid of it. I simply do not see any of these at Microsoft these days.

Waht do you think?

George P. Riddick, III
Chairman/CEO
Imageline, Inc.

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