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Today I had the pleasure of hearing Walter Mossberg, personal Technology columnist of the Wall Street Journal, speak at the Consumer Technology event in San Jose. It would appear that if Walter were to manage an equity portfolio he would start by shorting Google and buying as much Apple as possible. He had three key points to ponder. First, the soon to be released Microsoft Zune (which he will review in this Thursday's Journal) is not so much an analysis in competitive products as it is in competitive process. Apple functions as an end to end producer. That is from conception to user, Apple owns the process. By comparison, the PC environment is component driven: Software=Microsoft, Chips=Intel and hardware=Dell. As computer usage grew in the 80's and 90's the component model clearly won, mainly because it had to grow faster that any one company could achieve. As a result, end-to-end companies, such as Apple, fell behind in market share. However, as consumers have matured, we have demanded higher quality and ease of use, something that is rather difficult in the component environment. But not for Apple. The IPod serves as a testament to this approach and was validated by Microsoft's Xbox, a product that was developed internally end to end. The same group was unleashed on the latest product, the Zune.

This lead the crowd to question Walter on his view of Apple's future (i.e. market share) and he pointed out the typical metric thrown about (Apple's less that 10% market share) is a bit skewed. If you remove corporate purchases of computers, or look at consumer purchases of lap tops, Apple's share is vastly higher, as much as 25%, a number that has doubled in the last year. This grass roots growth is likely to seep into the corporate environment where PC's really only have market share to lose and little or nothing to gain. - Ok - I get it!

Google - "you people (referencing silicon Valley VC's) tend to over-hype the biggest thing to make it even bigger." His evidence; myspace.com, a site that achieved celestial growth rates in users has nowhere to go but down (and already has from his point of view). His point is that no destination site is a sustainable model. The novelty will wear off at some point. Yes, Google is the best search engine out there and yes, they offer the best advertising environment to retailers. But, can they continue to offer the next service - such as video. His opinion, this is a big bet......

We will see Mr. Mossberg, we will see.......now I am going to go call my broker.....

Category(s): Valuation Thoughts
Posted by Tom Miller at 01:40 PM | Permalink | Comments (0) | TrackBacks (0)