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| http://www.gilder.com/
| Issue 270.0/November 3, 2006
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HEADLINES:
- The
Week / Gilder: The Search for New Paradigm Companies
- Friday
Feature / Kessler: Always a Hidden Meaning to Deals
- Friday
Blogger Bonus / Forbes: Slick Solution
- Readings /
The
Week / The
Search for New Paradigm Companies
George Gilder (10/30/06): The dissolution of Greenfield Networks—a
powerful team from Cisco (CSCO) and Marvell (MRVL) devoted to
creating an application-specific standard product solution for Ethernet
switches—vindicates our and EZchip's (LNOP) contention that network
technology is moving and morphing too quickly to be caught in an unprogrammable
chip.
Charlie
Burger has learned, however, that this generally positive event (for LNOP)
could inflict collateral damage on Netlogic (NETL). Watch for Charlie's
reports.
Meanwhile
I am off to California for another Linley Group conference bringing together a
number of designers and manufacturers of programmable networking systems that
use network processors. Although EZ is not there, IBM (IBM), Applied
Micro Circuits (AMCC), Cavium and others will be presenting. With
the EZ-Marvell deal, system concerns are increasingly relevant to the future of
EZ. It is also relevant to our continuing search for new paradigm companies.
To read George’s complete post as well as what he learned this week at the
Linley Group’s “Programmable Devices for Network System Design” seminar, logon
to the Gilder Technology Report subscriber-only message board with your GTR
subscriber ID at http://www.gildertech.com/.
RELATED READING
EZchip Just Warming Up
http://www.forbes.com/finance/2006/10/31/ezchip-gilder-chips-pf-guru-in_cb_1031soapbox_inl.html
|
George Gilder’s telecosm technologies portfolio is up 308%
since the market low |
Friday Feature
/ There is Always a Hidden
Meaning to Deals
Andy
Kessler (10/29/06): There is always hidden meaning to deals
– the Google-YouTube is no exception. Why YouTube sold is pretty easy - $1.65
billion ain't bad for 20 months work and it would have taken at least $50-100
million from Sequoia Capital, their venture backers, to build the
infrastructure and salesforce to build a real company. That's real money.
But what about Google? Why do it?
Google is an amazing beast. Massive growth AND huge 64% EBITDA profit margins
from basically one service: serving ads on pages with search results. A $10
billion run rate and $130 billion market capitalization. As Darth Vader might
say: impressive.
So why bother buying YouTube? Is this a sign of strength ("we bought them
because we can turn anything into gold") or weakness (like, say, Ebay
buying Skype as their auction franchise weakens) or desparation (Excite merging
with AtHome). It makes a difference. On the surface, this looks like a deal
from strength - video is the next frontier on the Internet, blah, blah. But
really, did Google want to do it or have to do it?
Despite continued growth, Google has hinted at a few signs of weakness. One is
their huge capital spending to build datacenters and servers and bandwidth
capacity, dinging their cash flow. I thought the search business scaled with
much less investment. Maybe not.
And second, Google actually paid for traffic - $1 billion to Dell over 3 years
for a crummy toolbar on Dell PCs. The numbers may work, but it's kind of like
Hugh Grant paying for something he would get anyway. There may still be someone
in Sheboygen who doesn't know about Google. Is search now such a commodity that
Google needs to pay money to keep growing?
Perhaps that is what this deal is foreshadowing. YouTube is a company whose
amazing growth from zero to 100 million videos served per day is based on
copyright infringement, amateurish video (I get it, don't drink Diet Coke after
eating Mentos), their stomach to lose money on each video shown and a hobbled
together business model to charge record labels to show music videos (we now
know Paris Hilton can't sing).
If Google needed an easy to use technology to upload and then view videos
(which they kinda , sorta have with Google Video), they could have paid the
same $65 million that Sony paid for Grouper. Nope, we don't need your stinkin'
technology, Google is paying $1.65 billion (with a "b") or 1.3% of Google's
current value, for a media property. Plain and simple. But what does that even
mean?
Maybe it will just be an expensive sandbox to play in. Keep it separate from
Google (which they should have done with Google China), and give Chad Hurley
enough rope to either keep growing and get a decent shave or hang himself. If
the legal battles get ugly (and I agree with Mark Cuban, they will), they can
just shut it down one Friday afternoon. But maybe losses over the next three
years from YouTube, a wholly owned subsidiary of Google, will be less than the
$1 billion they are pissing away paying Dell for traffic. But despite all the
attempts and Yahoo's Terry Semels strategizing, real media on the Web is still
just a concept.
Who are the next media moguls and to whom do they have to sell their souls for
the priviledge? The $165 billion question left unanswered by this deal is: What
is media anymore? Can you just slap videos up on the Web and become a younger
and more vibrant Rupert Murdoch or Sumner Redstone?…
Read Andy’s Continued Thoughts:
http://www.andykessler.com/andy_kessler/2006/10/media_2uhoh_in_.html#more
|
Did you miss Telecosm '06? Or did you attend, and find yourself wishing you could experience
once again the musical thrill of a lifetime? Pay a visit to Jeff Stambovsky's
Telecosm Songbook!! You'll hear musical tributes to George Gilder and other
Telecosm luminaries of the past ten years, the people who made the future come
true. Listen now at www.telecosmsongs.blogspot.com. |
Friday Blogger Bonus / Slick Solution
Steve Forbes, “Fact and Comment” (Nov. 2006): In September Iraq's political
leaders agreed to post-pone until 2008 any moves to "carve up" the
country into autonomous states. The principal reason for the delay was the ever
divisive question of who would control the country's immense oil wealth. Most
of the oilfields fall in Kurdish and Shiite areas. The Sunnis are afraid that
regional autonomy will mean they will be bereft of their share of the black
gold.
This
setback underscores the need for us to forcefully push the so-called Alaska
solution. About a quarter of Alaska's oil and gas royalties goes into an entity
called the Permanent Fund, the assets of which are managed by investment
professionals. About half the revenue stream is distributed to the state's
citizens each year; the remainder is reinvested. This year each qualified
resident of Alaska is receiving $1,106.96 from the fund.
The
only way that Iraq can hold together--absent an oppressive, mass-murdering
regime à la Saddam Hussein's--is by setting up Swiss-style autonomous regions.
In Switzerland the German, French and Italian communities have lived peaceably
side by side for more than seven centuries, while in the rest of Europe the
three groups fought one another incessantly until the end of World War II.
Switzerland is really 23 countries under one flag--that's how many cantons
(autonomous districts) there are in that mountainous country. Plans to use such
a sensible approach in Iraq, though, always flounder on the oil question. An
Alaska model would neatly and equitably deal with that: Every Iraqi living in
the country would get a cut, regardless of where he or she resided.
The
Alaska approach has two powerful advantages. Virtually the entire Iraqi
population would have a stake in making sure insurgents didn't disrupt oil
production, and almost every Iraqi would have an incentive to have a bona fide
address at which to collect the checks. This would be a great boon to security.
When
the provisional government of Iraq was formed after the toppling of Saddam
Hussein, the U.S. approached its leaders about adopting an Alaska-like program
in Iraq. But, as with politicians everywhere, this group was leery of the idea
of not being in complete control of this source of money. They resisted the
idea. Given the situation in Iraq today, however, we should push hard and
persistently for the government to go the Alaska way. We should do so publicly
so that the Iraqi people begin to understand what's at stake.
Our
patience with Iraq is not infinite. The Iraqi government's recent statement
that it won't crack down on local militias, and its reluctance to clean out the
multiplying death squads infesting its police forces, are the latest examples
of a regime failing to acknowledge that we are not going to be there forever.
Adopting an Alaska solution would immeasurably strengthen Iraq's elected
government--and enormously increase the odds of our eventually pulling out of
Iraq with a sense of a mission accomplished.
Read Steve’s Complete Commentary:
http://networking.seekingalpha.com/article/19093
|
The Gildertech Blog, http://blog.gildertech.com/ | Logon now to see what’s new. |
Readings /
EZchip
Just Warming Up
http://www.forbes.com/finance/2006/10/31/ezchip-gilder-chips-pf-guru-in_cb_1031soapbox_inl.html
Can Technology Defeat Terrorism?
http://blog.gildertech.com/index.php?/archives/29-Can-Technology-Defeat-Terrorism.html
T-Mobile Plays 3G Catch-Up
http://www.forbes.com/technology/infrastructure/2006/10/06/t-mobile-3g-launch-tech-intel-cx_df_1006tmobile.html
Why Apple Won
http://www.forbes.com/digitalentertainment/2006/10/20/ipod-itunes-jobs-tech-media-cz_ec_1023valleyletter.html
Yangtze
Doodle Dandy http://www.forbes.com/global/2006/1113/124.html?partner=globalnews_newsletter
Kudlow: Cheney’s Optimism, And Mine
http://article.nationalreview.com/?q=ODMyMWU5NTY1MWNlNjgwYjZkYzk1MjJjYTVlYjZmM2Q=
The
Case Of The Missing $5.6 Trillion Surplus
http://article.nationalreview.com/?q=ZGEzOWJhNTc2ZTg5MDEyYzA4N2YwM2MzOWIwZWI1ZmE=
Changes
Seen For Chip Rankings In 2006
http://www.eetimes.com/news/latest/showArticle.jhtml?articleID=193501104
Welcoming
The Entrepreneurial Age?
http://www.aei.org/publications/pubID.25083,filter.all/pub_detail.asp
Stopping
The Government’s Property Grab
http://www.cato.org/pub_display.php?pub_id=6745
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