19 November 2013

DropBox: Look Out Below

In a spiral galaxy near a solar system on a blue marble with slightly less carbon-dioxide than what we have today, there was a world of people buying stock that actually knew what they were buying. They would never have bought a company making lockers for 8 billion. Laughed at a company giving free bird-shaped sticky notes valued at 30 billion. Never considered a company selling sticks to poke people and bulletin boards to tell others how you are doing today for 100 billion. That beautiful place where people used logic in their investment choices is unheard of to many.

Yes, Facebook is not worth 100 billion. Twitter, which has nearly zero revenue stream, is not worth 3 billion, let alone 30 billion. And how the hell does a company that does nothing more than store files that we upload to them get valued at 8 billion?

Cloud services are, by definition, easily replaceable. The younger demographic of customers are fickle. If
you get sick of DropBox you can switch to Google Drive or Box in a couple of minutes. I am not saying these tech stocks are worthless. (Well, Twitter currently is, but I digress.) What I am saying is that the people buying them are not paying attention.

The first thing a real investor should look at is the P/E ratio to determine how their stock price compares to their actual earnings. Is the number between 0 and 10? Then they are bringing in earnings that nearly match their valuation and that is an ideal pick. Between 10 and 20 is an acceptable risk provided the company has a solid market. The higher the number goes the more unrealistic their stock price is compared to what they actually bring in. Is the P/E ratio blank? That means they are losing money and you need to ask whether you should risk your hard earned dollars on a company that cannot turn a profit.

We all need to get to know what a company sells or potentially could sell in the future. Determine their likelihood of achieving their future goals of expansion, which can give you a sense of how high their stock could go. Finally, you need to realistically evaluate how easily their service could be replaced.

Let's start with the music service called Pandora. Today it has a valuation of 5 billion. We all love streaming music, but they are losing money. Worse yet, their are a half dozen other major cloud music stations to pick from and none of them are making money, either. The audience is used to switch stations to listen to their favorite tunes, so what incentive do I have to stay with Pandora? Pandora is worth only a fraction of their current evaluation.

Facebook is used by nearly every person over 30 on the planet and is the go-to location for talking to "friends", though the definition of that word is up for debate. They make money by selling ads but their ratio is five times higher than the barely-acceptable 20 level. Facebook membership is stagnating in major markets today, they do not have a clear roadmap on how to increase advertising sales and, worst of all, the younger generation prefers to use Twitter. Again, Facebook is worth a fraction of their current evaluation.

Speaking of Twitter ... What the hell? It is an online text message service, folks, and one that has no current way to make any profit at all, let alone one that justifies a 30 billion or 40 billion evaluation. I understand that kids love it but they need to find a business model that brings in revenue before I would waste a single dollar on this stock.

So, if these are the basic steps a real investor would do and good investors would clearly stay away from these things, why is anyone buying them? It is another tech bubble caused partially by empty heads on TV that justify ridiculous evaluations and mutual funds that simply select a stock regardless of whether it has a business model that justifies the asking price.

Potentially all of these over-priced stocks can make you money because stock changes are very susceptible to lemming behavior. When people see Facebook going up they put it on their "buy" list, because clearly stocks only go one direction, which forces the price even higher. However, when you have a market going from 7,000 to 16,000 since Obama has been in office, it is clear that there is plenty of downward pressure building. So be careful and make certain you are investing in companies that have limited room to fall. It is good to look at the sky when projecting your own career but when you are investing you should always look out below.

24 March 2013

How many lifeboats are on the MS Titanic?

There was a day when consumers had nearly zero control of the technology market. Sure, there were Mac evangalistas, bouncing Amiga balls, and flocks of Linux penguins - but mostly there was a swarm of lemmings. When we purchased a computer it was almost always the Windows machines we used at the office. Those days are becoming distant history thanks to a 180 turn where the lemmings are finally forcing their favorite technology in the office, which may force Microsoft to do a similar turn to save their company.

No question, the folks in Redmond still control the server room. They are powering our hosts, databases, email communications, workstation operating systems, install mechanisms, web browser, policy control and even the primary office software. This domination is so complete that running any operating system other than Windows will limit your network support pool drastically, so it takes a brave soul to install Red Hat or OS X Server today. (Do those products even still exist? Who knows, right?)

Most will argue, accurately, that Google makes their money on one thing: Advertising. Microsoft's ATM is nearly as predictable with Windows and Office providing the bulk of their income. In fact, their utter domination of the corporate world and ability to enter new markets, like gaming and accessories, came thanks to just one piece of software: Windows.

Unfortunately for the thousands of employees of Steve Ballmer, Windows is dying and Microsoft is the one that dug the grave. They saw the iceberg coming so they built this entirely new touch-based, flat, boxy and somewhat eccentric "Metro" interface that they are going to force on every customer, on every piece of hardware regardless of whether it makes sense.

Buy a new Windows computer and you will be forced you to use Metro from the moment they start with no way to skip to a standard desktop. Xbox 360's are already using a version of Metro that is, arguably, slower and more difficult to use than they already maligned Sony PlayStation OS. The new Xbox 720 will supposedly be running an only somewhat-edited version of Windows 8. Surface tablets are Windows Metro as well, though most software, including the version of Office it comes with, run in the old desktop interface that is very anti-touch and fully confuses Microsoft's vision. Windows Phone is perhaps the ideal piece of hardware to use Metro since it is only a touch interface without keyboard, mouse or Kinect to get in the way and is the location Metro makes the most sense. Microsoft is so focused on making certain that their operating system continues to have a monopoly that I think even a Microsoft keyboard and mouse forces you to move flat rectangles around just to open the box they come in.

[The Windows UI is not called Metro anymore. Apparently some company in Europe that does design work already owned the trademark and Microsoft was unwilling to cough up the money to use a name that everyone still calls the tombstones we see when we turn on our Windows Phone. Compare that to Apple who just starts using the name iPhone despite the fact that Linksys already had an "iPhone" of their own but Steve Jobs ripped the name away from them. WTF, Microsoft? Did you buy your cojones under those tombstones?]

Microsoft refuses to release Microsoft Office for any platform other than Windows and OS X in their belief that somehow we will all eventually abandon our iPads, Kindles and Nexus devices to return to Windows. Clearly they have taken up residence in Steve Jobs' reality distortion field because Android is now sold on more consumer devices than Windows and iOS combined. Tossing a web-based version of Word to placate us is like tossing scraps into the neighbors chicken coup. Thanks but no thanks.

Steve Ballmer is apparently unaware that consumers are realizing we not only do not need Windows but we don't Microsoft Office, either. You can get countless word, spreadsheet and presentation apps for iOS and Android that all work beautifully on your non-Microsoft operating system. The world is quickly developing a tablet and smart phone only universe where our desktops are sent off to recycling.

Certain areas of the corporate world are clearly going to remain wholly in Redmond's camp. Their SQL Server database system is the ideal platform for most businesses. Windows Server will continue to dominate in the geek closets, provided they remove that stupid Metro interface from it. Microsoft Dynamics, Exchange Server, terminal server and Outlook seem wholly entrenched in corporations. However, consumers are not touching Microsoft code anymore which leaves business as their primary customer. Today.

Tomorrow is where things start to look really bad for Microsoft. They are talking non-stop about the "consumerization of I.T." which is their way of saying that the peasants have taken the technology strategic plan Microsoft held and burned it with their Kindle Fire. With end users pushing their favorite hardware and operating system to be their interface and the world moving to a cloud universe that Microsoft is only barely started to rise into, Ballmer has found himself at the helm of just another software company.

There is still time to fix the disaster on the Seattle east side.

When the information superhighway first started Netscape became the most important technology company on the planet and Microsoft's Windows was about to be decimated by the Navigator web browser. Gates not only made a competing product but gave away Internet Explorer for free and included it in every copy of Windows. Microsoft saw the same situation in the game console market where Sony and Nintendo owned every inch of it. They responded with an Xbox product that they sold below cost and, even against two very profitable companies, they were able to steal the market away.

In both of these examples Microsoft took a chance and lost money to win a market. They currently believe that Windows is still a monopoly that can win the tablet battle so they refuse to abandon their huge profit margins. Ballmer needs to wake up. Would anyone be using Internet Explorer if Microsoft had charged money for it? No, because Netscape was a much better product. Will anyone buy a Surface RT if it costs the same as an iPad? Have you seen the sales numbers? Will anyone upgrade to Windows 8 when it is a disjointed mess that is unusable in a corporate environment? Even Windows Phone, which is what Metro works best on, is not making a dent in the Android army.

Microsoft needs to sell the Surface at Kindle Fire prices if it truly wants to defeat the iPad. They need to give the Windows Phone OS away if they have any hope of unseating Android. They need to design Windows for the laptop and desktop that does not require re-training all employees on how to use a computer. And perhaps most important of all, Redmond needs to release Microsoft Office for every platform imaginable before we realize that we do not need Microsoft at all.

The possibility that consumers no longer need Microsoft combined with moving their non-Windows and non-Office products into the corporations is what makes Microsoft's situation so similar to the Titanic. If Microsoft is going to survive then they better start tossing their profit margin over the side to make the ship light enough to turn in time. Unfortunately, based on the direction they are going today their ship will start sinking any moment now.

17 February 2013

Chrome OS could change computing forever.

Back in the glory days of Netscape Navigator and the introduction of Java we debated the moment when the web would replace the computer operating system. Microsoft, unsurprisingly, had a very different vision. Thanks to their Java Virtual Machine and Internet Explorer they quickly brainwashed the concept from our gray-matter. iOS and Android's app stores further solidified the power of old fashioned compiled code, training us to download and update software instead of clicking a link since we all know a program is just plain better than a web site, right? Fortunately, Google never gave up on that web-only dream and we may be closer than ever to achieving it.

To get a glimpse into this new world just pick up a Google Chromebook. An Acer model runs a couple hundred or a Samsung MacBook Air-like design with two years of free 3G cellular can be had for one Benjamin more. You would expect with prices like this to have a Netbook quality crap product and in some ways you will be right. The Samsung model is under powered and the Acer product has Microsoft Surface Pro battery life. However, there is enough here to easily justify the purchase price as a secondary device or a primary for someone who lives in Gmail and web browsing. More critically, these products nicely outline how someone could conceivably live with nothing more than a web browser as their primary computer someday.

Gmail is available in both online and off-line versions so you can reply to messages when Comcast has cut you off due to your P2P activities. All of the expected Google products are at your fingertips - maps, voice, plus, news, docs, YouTube and so on. The major competitors are there, too, with almost every Chrome app available for free: SkyDrive, DropBox, Facebook, Twitter and all the rest. You have note taking (Evernote), image editing (Pixlr), video editing (WeVideo), basic publishing apps (Simplebooklet), web site editors (Page Rapid) and drawing utilities (AutoCAD). You can watch movies, read book, play music and store files locally. They include 100 gigs of storage on Google Drive to hold just about anything you want in the cloud. If you are looking for games my son, who is playing Crazy Rollercoaster at this moment, will tell you Chrome is one of the greatest game platforms ever after discovering all of his favorites and dozens of new beauties. Finally, thanks to the joys of Hyper-V you can open up applications or your whole desktop from the office to get "real work" done.

Now, the naysayers have plenty of valid points. You need Citrix or some remote desktop connection to use real work software, the games are mostly just conversions from the phone and tablet world, the productivity tools are light versions (at best), the hardware could be cheaper and the device is somewhat usless without an internet connection. All very true. However, none of those points change the fact that if I am going on holiday I would much rather take this than a Nexus 7 or an iPad. While tablets are great for consumption the laptop design with a real keyboard and a touchpad are ideal for getting work done and this Chromey thing with a 3G connection is better than any netbook or tablet I have used.

Thanks to the Nexus devices and Amazon Google has no need for a new low-priced tablet operating system, but it is easy to picture a Chrome tablet in Google's future. The design is ideal for a touch screen environment with large app icons and the clean Chrome design. In fact, were it not for Google dominating the handheld market with Android we would likely already see such a device today.

For suits the Chromebook and Chromebox are already compelling devices for anyone running a remote desktop environment. Chromebox makes an excellent option instead of a Thin-client for employees working from home or in the office, though I do think the price needs to drop to under two hundred bucks. A Chromebook is an excellent device to hand to each of your traveling staff to connect wherever they might be. In a pinch, Google Docs is a fine option for displaying and editing documents, so it is even realistic for them to open a PowerPoint presentation locally. In a pinch. The fact that Chrome devices often have limited local storage is a plus for security concerns since you do not want these documents on a device that can be stolen. Of course, the biggest plus is that these things are disposable-cheap.

Today Google's Chrome OS is mostly a vision for the future. Sure, schools are already picking these devices up by the boatload but most of us will find these to be purely a secondary or tertiary item due to the limitations. We need to separate ourselves a bit more from the Microsoft Office monopoly to make Google's document editing suite a more viable option. Internet connectivity needs to be everywhere for these devices which means you should not consider this without a cellular connection for the moments Wi-Fi is unavailable. The processor needs to get a bit faster and the battery life should surpass that of an iPad. Still, this product is the first truly viable Web-only operating system device that kept Bill Gates up at night while Clinton was staring at a blue dress. There are a lot of reasons it took this long to achieve, but we have Google to thank for not giving up on the dream.

06 January 2013

Are we making a new age of engineers?

There simply are not enough engineers riding through America's education system anymore. This country embodied greatness thanks to people who made things. Individuals who had a vision of something fantastic and refused to hear it could not be achieved. You could argue that our founding fathers started this engineering nonsense when they crafted our country and built freedom for every citizen. They engineered something that few had only dreamed of. Unfortunately, it is getting difficult to find a Benjamin Franklin, A.G. Bell or Steve Jobs in our land of the free.

I hate to say it but Americans have become a country of consumers. In ages past, our kids would try to make mechanical cars with tin cans and parts nicked from the junk yard. Now our kids are focused on earning money so they can go buy it from Toys R Us. In the past we might have sat around with our sibling and invented a new game with bottle caps and socks with holes in them, or perhaps we might have even programmed it on a Commodore 64 with a tape drive. Today they just spend a buck on iTunes to play Angry Birds. We have given up our computers with a built in programming language for a Kindle Fire so we can watch Netflix.

Obviously, there are exceptions. Just not enough of them. The end result is a class of America that wants to be bankers, business leaders or attorneys and not enough of them that want to build something new. But I think that will change. A new age of American engineers is just around the corner.

Our kids will soon be saving their allowance and working extra nanny nights so they can save up to buy a 3D printer. These little beauties will allow you to create .. Well. Just about anything, really. Need a new case for your smart phone? Print it. Want to replace a piece for your toy? Print it. Want to design your own board game with detailed war ships and alien flying saucers? You can design and print it.

These printers are still in their infancy, but the price is starting to reach the point where they are invading homes. My friends, Ryan and Colin, introduced me to a rental MakerBot joint on Capital Hill in Seattle where you can print nearly any object you want and avoid having to spend the hundreds for a printer. But make no mistake about it - in five years from now you will have friends who are sporting one of these devices in their home. Kids in elementary schools everywhere will be learning how to design objects to make their own creations.

The 3D printer is not merely a tool for making objects any more than a Commodore 64 is simply a computer to program your own Jumpman. These buggers may be the ultimate gateway drug to opening our minds to engineering possibilities. Once you start being able to quickly and easily design and create your own objects you start thinking of how to make all the pieces connect. Next you are creating more complicated pieces, more moving parts, more connections. Maybe they start designing a new type of communication tool, or perhaps they connect it to an Aruino, or perhaps they add a model rocket engine to it. Nearly whatever they think of they can print.

Some doubt this revolution is coming. They think this is just journalists stunned by the next cool piece of technology. They are probably right. For most of us. Still, I cannot help think that in the hands of the youngest members of our country that they will create a new world.

These creation boxes could give every kid in our country the opportunity to imagine something amazing. Once you make power like that available to the masses then it is tough for me to imagine having an engineering problem.

We might have a shortage of attorneys, though.