The Inquirer has posted a story regarding the sale of TG Publishing, publisher of Tom's Hardware Guide. I have replied to the rumor to try and put the lid on any subsequent guesswork and rumor mongering, and you can read it all here. Until we make our official announcement, everything else is speculation.
There is nothing more disconcerting than having an in-flight entertainment system go pop at 37,000 feet over the arctic. It happens a lot. Yes, it is a Windows CE based system. Yes, it really does go pop, and the lights do go out in the cabin. Yes, you think the plane has actually failed.
Your life flashes before you, and your mind hones in on all the tragedy in the world. This last time, my thoughts were all about Bubble 2.0. You may know it as Web 2.0, or I-Have-Website-Give-Me-Money 2.0. Among realists, there is a very clear notion that all it is going to take to burst Bubble 2.0 is a bad quarter by Google.
Now, a bad quarter for Google may not differ that much from a bad quarter by Microsoft. There will obscene amounts of profit, lots of talk of failed world conquerer ambitions, and a general sense that the gravy train is pulling into the station for a long stay. But, it is going to happen. The question is when, and to what extent will the Bubble 2.0 shock waves cause damage.
Now, I have never met anyone who can predict the future to any degree of accuracy, but there are some things that bear out in cliches: what goes up must come down, the calm before the storm, and blue screen of death at altitude means not good things.
The stars are aligned. There is way too much money going into meaningless social networking sites. User generated content tends to be of interest to the user's friends mostly, and talent is still a rare commodity. Too many Forbes and Fortune Magazine covers lauding your brilliance are a sure sign that you have lost your edge. Rich nerds and geeks finally getting girls is always a recipe for disaster in offices dominated by Nerf balls and free soda.
Anyone interested in setting up an office pool to predict the exact moment in time when the running dogs of capitalism suddenly realize what is going on?
If there was any doubt that CES has become a bloated, over the top, affair, much like the last days of Pompeii, or Comdex for that matter, you need read no further than this little ditty from our intrepid reporter, Rob Wright, in Las Vegas.
That's right: $400 for Internet access. Apparently, that's just the ante for the pot because, the actual results may be a crap shoot anyhow.
Quite clearly when a show becomes so overblown, and so greedy, it will either get sold to a Private Equity fund, or come crashing down to reality when the sponsors and participants realize that it is too much of too much. For the love of all that is holy, the Excalibur has rooms at close to $300 a night during CES. That's just not right.
Fortunately, I have but one day to be in Sin City, and that day should be curtailed as all my meetings get pushed by back by people failing to make it out of other meetings, find a cab, be in hock to a lap dancer, or all of the above. If you are not going to be there yourself, you can get your fix of all things CES at THG's CES microsite. You will also get a nice preview of elements of a site redesign in the works, but I am not supposed to say that.
This news story from TG Daily about AMD's post-ATI-merger rise in the semiconductor rankings should make Nvidia and Intel feel a little light-headed. It should also validate AMD's decision to buy ATI because, the rise in visibility alone should be justification enough.
Vista will keep Intel and AMD buzzing in 2007, but I don't think Intel can escape even more layoffs, and cost cutting in the coming year. It probably has to get leaner, and it probably has to keep squeezing margins to maintain its edge, and that's about all Intel can do right now, maintenance. AMD, on the other hand, is lean, and is coming up the rankings, not trying to perch on top. Who do you think has the better positioning?
A recent trip to Taiwan by one of my colleagues pointed out the severe drought in the mobo business, and rumors are swirling in Taipei about consolidation in the business. ASUS and Gigabyte have done it, and the 800 pound gorilla in the room, Foxconn, is easily poised to vacuum any remaining companies struggling to keep up with a world that wants notebooks more than desktops. You have to believe that AMD is well positioned in this situation, too. It finally has a combined CPU/GPU solution to tout in both the mainstream mobo market, and can scale it down for the mobile market. Intel may have had it all to itself, but AMD has nowhere to go but up in this market segment, as well. Heady days for AMD indeed; uncertainty for Intel.
So, what about Nvidia? Increasingly, its go it alone status is fraught with strategic problems. Sure, its acquisition of Portal Player was a smart move, but who is Nvidia competing with these days? It did well saying it was the next Intel, but what is it going to be the next of now? I'd like to know. How Nvidia defines itself remains an issue, but it is not an issue as long as Nvidia keeps executing as well as it does. I just don't think that it can keep avoiding the issue for very much longer.
But, Vista may give everyone leeway to avoid the hard decisions. Again, what if it doesn't? It's not hard to see that the response to Vista is underwhelming. Is everyone too buoyed by repetitive Windows syndrome, thinking that one more upgrade is going to drive the PC universe to yet greater heights? 2007 is going to be watershed year for these companies. I have a healthy dose of cynicism when it comes to the likely outcome of the expected Vista boost to the market. Intel, and perhaps Nvidia, are going to have to retrench.
The hours tick down to the imminent North American launch of the PS3. And with the launch comes a wave of hype:
And a lot of hot air it is. The most remarkable thing about Sony's PS3 is, in effect, subsidizing the move of so much computing power into the home at costs that boggle the mind. If Dell decided to give everyone a desktop computer for free, how would we react? The running dogs of capitalism would probably set down plans to place a siege on corporate headquarters, and send out assassins to the executive board.
Yet, this is exactly what Sony is doing right here. Even assuming consumer adoption at full pace, can Sony actually get the price of the damn PS3 down quickly enough to keep Stringer in a job, amiable, erudite, and tall as he is? It's hard to see how they will at this stage. The engineering expertise that built the PS3 has also burdened it with a lot of engineering that will be difficult to make efficient and consumerish. Will Nvidia really conspire with Sony to drive costs down? Hmmm.
Maybe the PS3 harkens back to traditional Japanese manufacturing practices of thinking beyond the initial years and looking at the long road ahead. Maybe Sony is trying to extend the life of this generation of consoles by cramming tomorrow's stuff into today's system and hoping that in two or three years time the price elasticity will start to really kick in and get them back to top spot.
If that is all there is to it then, you have to hand it to Sony for having the cojones to go down this route. After all, it will take two or three years for game developers to really start to milk everything the PS3 has to offer. It will take that time for the console to have enough traction on the software side to drive mass appeal. It will take that long to bring the price down to a level that is palatable to mass appeal.
However, let's not forget the PSP. Here is a product that was, and probably still is, ahead of its time, but boy is there a lack of decent content and gaming for those of us that actually like to use it. It is a wonderful piece of engineering, and a powerful system, but I feel embarrassed even bringing it up in this time of wussy iPod lovers, and Zune commentators.
The PSP is a sobering reminder of what can happen to good technology in the fickle consumer market. It is not a failure, but it is not setting the world on fire, either. It's all relative, I guess. But, Sony cannot afford to be second place in this game. It cannot settle for a good fight. It has to win.
I just don't think anyone has really paid attention to the amount of risk inherent in the PS3. Sure, we said the same thing about the original PS when it first came out. I remember the overpriced components, the expensive R&D, and the Sony-has-bet-the-farm mentality. It proved to be a gamble that paid off enormously by the time the PS2 came around. The PS2 mopped up the competition. I am not sure the PS3 can do that this time around and will we care if it is in a position to do so in three years time?
Nvidia's latest financial results have proven that the company does not need to buy into the merger talk that followed AMD's purchase of its major rival, ATI, recently. However, business is not all about the numbers, although they tell part of the story. It is quite clear that Nvidia can now position itself in almost any way that it chooses:
More than likely, Nvidia will act a little bit of all of the above and continue to adapt its message depending on its target audience. But, it is tough to see how the company can maintain its value proposition without the drama of confrontation. There was a lot of mileage in an Nvidia/ATI match up. Contention was for the same crown, and it made customer and user alike more interested in the outcome.
Nvidia has no one to beat up on directly, but now it has a lot more contention for its crown. Intel, and AMD are formidable competitors compared to ATI. Sure, Intel was always a competitor in the past, but Nvidia could brush it off as a player in a very specific untouchable area. In other words, Intel had to play Nvidia at its game, and ATI's game. Now, Nvidia has to play Intel' and AMD's game.
We will probably see major changes in the executive hierarchy at Nvidia over the coming year, and Nvidia 2.0 will depend on the personnel that Jen-Hsun Huang brings in to re-engineer the company for its new challenges. There is an awful lot riding on the company's next org chart, but I reckon that Nvidia versus The World is still doable. I am sure Mr. Huang thinks it is, too.
Today, Tom’s Hardware Guide turns ten years old. Over the
years, the site has gone from being a simple hobbyist site for hardware
enthusiasts to a media business that reaches out across the globe, appearing in 11 languages, on three continents, and reaching an audience of over 10
million unique visitors a month. It’s no small achievement, but the tech world
today bears little resemblance to that of a decade ago.
So, Intel did make some big layoffs, as we had heard from our sources some time ago. But, while the running dogs of capitalism may relish the cost cutting quotient, and may in fact reward the craven loss of jobs with a higher share price, they may fail to notice the real management crisis that faces Microsoft, and Intel, and you could even argue, Google, Yahoo, and any other tech titan: Billions of dollars in cash stockpiled in silos with little upside in sight.
Intel and Microsoft, almost monopolies in the great tech revolution of the late twentieth century, amassed their own country size GDPs, in cash, and frankly, did very little with it. They would have been better off putting the money into hedge funds then letting their management sit on it.
Sure, you could argue that corporate governance and the threat of the Justice Department made it, and makes it, difficult to do much with the cash, but it is not going into building new markets, or pursuing new ideas. Try naming one single successful buyout, merger, purchase, or investment that compares favorably with the achievements of both companies.
I'm still waiting.
Okay, so let's not knock management for not blowing a wad of cash, but irrational prudence on the part of both companies, and a mania to be good citizens of the stock market is going to hit the PC market hard because, if these two don't put bucks into research and development then, who will?
That is the frightening aspect of what is going on today: There is no long term vision for the industry. No Gordon Moore and his laws of abundant growth, and no Bill Gates and his promise of a PC in every hand. This is where my hat goes off to my amoral hero, Rupert Murdoch, a man who reinvents his company with every new turn of events. He did it when he single handedly broke through the price ceiling for rights to American and European football, and is doing it with MySpace today.
No one builds anything anymore. They just stick up ideas on a Web page and call it Web 2.0, and hope the cash rolls in, which it does more often than it should. Whether it is social networking, or video sharing, there really is not much substance to what sells these days. It used to be tough enough to make money on hardware, but now, it is anachronistic to think that anyone other than a handful of old industry types can still manage to stay in the game, and make it work.
It sounds like a joint-venture, but in the highly incestuous world of Taiwanese business affairs it is more of a merger. Asus is going to supply mobos and graphics cards under the Gigabyte brand, and will more than likely spin-off its own branded products in this category, as well. The joint venture represents a bulked up fighting force to take on the other two Tier 1 mobo makers, MSI and ECS, as well as the 800 pound gorilla in the room, Foxconn. TG Daily has it covered here. Digitimes has some further data here.
It is highly unlikely that this is the end of the deal for Taiwan. Just as I expect there to be more news along the ATI/AMD merger front in the chip arena, there is going to be more consolidation in the subsystem arena, too.
Ultimately that means that the enthusiast community will have to look harder for differentiated products, and in the battle for system supremacy, the average enthusiast is going to have to stick to the median line. On the other hand, we may see some interesting developments in the very niche areas of the market, and more competition for supremacy among gamers. I remember how DFI managed to create some market impetus for itself with its LAN Party line of mobos. Very niche.
Undoubtedly, the price of being different, or being a hard core gamer is going to go up relative to the mainstream because, custom manufacturing for a small audience costs money. But, I dare say that for the rest of the PC world, there should be even more price pressure coming to bear as economies of scale give vendors more breathing room on margins to be beat up on each other.
But, that's all pretty obvious. Industry consolidation is a standard part of a maturing industry. What is less obvious is how the PC platform is going to evolve under all these regime changes. It is very likely that the console wars, once they get going in earnest in 2007, will consume the gaming world, its users and producers alike. This leaves the cutting edge of the PC industry in a quandary because, I seriously doubt that Vista is going to impact system upgrades to any great degree.
Who knows that Vista is going to do at this stage. I am not even sure that the present management at Microsoft is even that happy about having to think about Windows for the consumer, let alone gamer. I am sure they would prefer consumers to just buy Xboxes and do everything through MSN.
Microsoft consumers rarely spend much money on software beyond an initial purchase, and they have long upgrade cycles. Steve Ballmer would rather own SAP than Nintendo. He'd rather sell to banks than Mr. and Mrs. Banks (that is awful as an analogy/pun, and I apologize, but it sounded cleverer in my head).
The PC industry has no leadership left. None to speak of, at least.
One other pressing issue is that the Taiwanese are increasingly looking to China and emerging markets for their growth, and that really has nothing to do with driving down innovation at the high-end into the mainstream. You are not going to sell premium enthusiast products into emerging markets.
The PC industry has no leadership.
So, it's not a case of end of days scenarios, but it certainly is the end of a cycle, a cycle where hardware dominated the feel good part of the business. Unless something dramatic happens in the next twenty four months, it is quite possible that we will start to see our new consolidated giants of the industry getting leaner and meaner. It will make the running dogs of capitalism happy, but what about the PC universe? Maturity is kind of boring. It's paying the mortgage and making sure the pension is intact. It isn't about taking risks and making big things happen. Some mature types still do make things happen, but it is hard to see who those types are going to be in the PC business.
I have been mulling this release from Ziff Davis since it hit the press. Other than the fact that most people in tech publishing know that Ziff Davis is in a hole from which only an act of great faith, coupled with extraordinary deep pockets, can pull them out, it's sad to think that PC Magazine, the company's flagship publication, has become the irrelevant mess it is.
For many of us that predate the Internet era in the PC business, PC Magazine was the gatekeeper to untold opportunity. I remember, as an eager marketer in the graphics card business in the late eighties and early nineties, how the mere whiff of the magazine's endorsement in a review could open up distribution channels, increase sales, and bring about total boardroom euphoria, all in the space of a few days.
A PC Magazine review, lukewarm even, was like hitting oil. Heck, a good full page ad in the magazine, right side facing, made your company look like it was worth a billion dollars. We used to them, they cost a small fortune, and we weren't worth anywhere near a billion dollars.
I also remember, how as a VP at another a graphics card company, having replaced a beloved former VP of Marketing, I was told by the regional sales manager for PC Magazine where I would find my horse's head the next day, or some such thing. I was being threatened by an ad guy, a friend of said former VP of Marketing, even though I was placing over half a million dollars of ads in the magazine.
That was the power of PC Magazine. The sales people felt comfortable enough to make you feel like spending money with them was a privilege. In those days, PC Magazine made or broke you, and its editors acted as if they were doing the work of a higher power. Up until the bursting of the Internet Bubble in 2001, as another groveller at the doors of the editors of PC Magazine, I would often find myself having to endure all kinds of ceremonial humiliations at the hands of journalism majors out of Columbia who thought that eCrush.com was the future of industry, and that technology was best served up free with a hundred million dollars of VC funding.
So, yeah, I have a little schadenfreude, but it is also the passing of an era that was pretty extraordinary. Actually, for me, PC Magazine died a long time ago. It died the day I stopped reading any print magazines because, I was finding more of the kind of stuff that interested me online. PC Magazine has little influence on the truly influential in technology these days, and merely stands as a reminder of a different, perhaps greater, time for the PC business.
I can't imagine who will buy any of Ziff Davis' properties at any significant valuation. They have been decimated organizationally to cut costs, and tarted up for sale. The company should have been threatening CNET, but it has lacked a cohesive vision.
Yeah, I know, schadenfreude there, again, but in my defense, I had to eat so much crap at the hands of Ziff Davis' editors that, well, you can't blame me a little pettiness. If they'd been a little nicer, and a little more friendly, and enthusiastic, they might have actually stayed relevant, but they thought they knew it all, and obviously, they didn't.
There's that damn schadendfreude, again. Man, they should have been a little nicer to people on the way up because, there are not many people who are going to be willing to slow the force of impact for them on the way down.
Oh, well, there's always PC World........
