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  • AWS Growth Potential And Margins Are Overestimated [View article]
    An excellent well-written article. Of course, insightful analysis cannot be compared with Wall Street 'expert' analysis. WS is all in a lather over the cloud and Bezos is very cleaver to conceal the real facts of how well AWS is (or is not!) performing. As someone who has done business on the facilities (data center) side of GOOG, AMZN and MSFT, I can tell you that AWS DC's are very inexpensive to build and operate, with GOOG a close second and MSFT builds very expensive DC's. But GOOG and MSFT own most of their facilities and continue to innovate to lower cost (primarily energy consumption) while AWS doesn't have the staff or knowledge to do so. This aligns with your important observation that AWS just doesn't have the bodies their competitors have. Bezos clearly had the vision to see the future is in the cloud, but they will be steamrolled by those with deeper pockets and the app's - GOOG and MSFT. Personally, I think the better play is MSFT if they can get someone at the helm that can set the course and stick with it rather than play me-too to the rest of the industry. Another company with major upside potential is HP assuming Meg continues to get board support.
    Thanks for the great analysis.
    Oct 29 11:45 PM | 2 Likes Like |Link to Comment
  • Pricing Of New iPhone Will Determine Success Of Apple In China [View article]
    With any mass produced product, there is the high margin business derived from those who want to own the best. Then there is the pure commodity end of the business that has low margin for the masses (you lack margin but gain on volume). We often think of masses when we think of China, so we think low end. Apple is now in the position to capture both markets, but obviously prefer the fat margin of the high-end consumers. A big mistake some companies make is to become revenue conscious at the expense of margin. Its a delicate balancing act and timing is everything based on your level of innovation. Think Nokia. Steve Jobs knew this. Let's hope Cook has the same finesse.
    Sep 10 08:52 PM | Likes Like |Link to Comment
  • Pricing Of New iPhone Will Determine Success Of Apple In China [View article]
    There are three misconceptions about the China marketplace that are perpetuated in this article. One is that the Chinese prefer low cost goods. This is not true for big ticket items such as electronics and automobiles. If they are going to splurge on a smartphone, they will buy the most reputable and highest performing device to flaunt their wealth, not the cheapest. The second misconception is that a large well-know company can take their hard-earned reputation they created in the western marketplace and waltz into mainland China and reap the benefits of 1.3B prospective buyers. If you do not let the government get their share, they will crush you. Remember what happened to Google when they fought the government by not providing user info? This is one a hundred examples. Apple had their own experience with this when the government planted stories in the national newspaper about iPhones blowing-up. Apple fell on their sword even before the origin of the phone (real or fake?) was vetted. If a mobile phone manufacturer wants real access to the China market, they better play with the government's capitolist bretheren in telecommunications (i.e. China Telecom) on the mainland. There is just too much money at stake for the government to ignore. No western company will succeed without playing the game. The South Koreans certainly know this, which is why they (Samsung)have such a huge market share.
    The third misconcpetion is to use Hong Kong as a data-point for what happens in mainland China. Hong Kong is still being assimilated into the overall communist/capitolist system and its still employs many more traditional western business practices than the mainland allows - for now.

    I'm always stunned by the lack of understanding of conducting business in China by large western companies. It's really quite straight-forward. Big business is tied to the government. If the government doesn't get their share, you fail. Get connected to their capitolist entities and you get access. But the negotiation can take years. Just look at Microsoft!
    Sep 10 04:20 PM | Likes Like |Link to Comment
  • Windows Azure produced $1B+ in sales in the last 12 months and subscriptions are up 48% in the last 6 months, Microsoft (MSFT +0.8%) boasts. Though the sales figure is less than the $2B Amazon Web Services (AMZN) is believed to have pulled in last year (expected by Macquarie to hit $3.8B in 2013), it drives home the momentum behind Microsoft's cloud infrastructure/app development platform, popular with enterprises due to its hybrid cloud support and integration with Microsoft software. Forrester estimates 20% of firms relying on cloud services use Azure vs. 71% using AWS, but thinks Azure's share can hit 35% in a year. (ValueAct) (Office 365 sales[View news story]
    MSFT's very survival depends on the Cloud and Azure in particular. The first adopters of the Cloud are those that do not want to create an IT infrastructure for their fledgling company (i.e. startup or high growth small to mid-cap firm) and then mid-cap to large enterprise companies who are upgrading their antiquated IT infrastructure. The economics of embracing the cloud will outweigh the security concerns of having their data compromised. Adoption will rapidly accelerate this year forward and I agree that MSFT has an advantage because of the business applications that many companies already use. But for the next few years, both AMZN and MSFT will be a good play because we are in the infancy of adopting this method for accessing common applications and storing the associated content and both are very capable of rising to the fore - MSFT because of their cash hoard to build many new data centers (the "Cloud House") and AMZN because they invest all their earnings to build this expensive infrastructure. By the way, "Cloud Houses" costs are decreasing because rather than have highly reliable and redundant facilities infrastructure, cloud software is providing the redundancy in case of an infrastructure failure, so what's called an N+2 (fully redundant) facility is not necessary for Cloud Houses, reducing costs.
    Apr 30 02:04 PM | 3 Likes Like |Link to Comment
  • Public Cloud Price War Starts Hurting Cloud Software Suppliers [View article]
    Although this thread is dominated by Google and Amazon, don't count out Microsoft. Their very survival depends on the cloud because no one will be buying devices with Office-type apps loaded on them any more. That gravy train is about to derail. So for software revenue, its cloud based apps like Office 365 with Azure running virtual apps, streaming media and managing data. Once consumers and business is confident their data will not be hacked, the cloud will explode and if MSFT is not positioned well, adios. They have the cash to build a lot of Data Centers to house their cloud and control their own destiny. They just need to make a commitment. They have perpetually been me-too which hasn't worked out so well. This could be their last chance to be a leader again. But I'm not sure they have the guts. My $$$ is on Amazon. Bezos has guts, and many investors recognize that.
    Mar 4 09:59 PM | 1 Like Like |Link to Comment
  • Public Cloud Price War Starts Hurting Cloud Software Suppliers [View article]
    When discussing the cloud, you have to consider the entire eco-structure of the offering - the software of course, with virtualization, security and reliability being key attributes, and the hardware to run it, which is the Data Center. AMZN has the whole package and thus can control the cost of the whole cloud eco-system. After consolidation, it will be AMZN, Google and MSFT who own this business while the pure-play S/W providers vanish like so many other tech companies that only had a piece of the next big thing.
    Mar 2 08:15 AM | 1 Like Like |Link to Comment
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