Intel, Please No More Acquisitions

Intel's stock price hit a new 52 week low today, closing at $18.18. This new low happened less than a week after Intel announced an almost $8B acquisition of security software company McAfee. I was thinking about this today as I was driving down the 101 freeway in Santa Clara and passed by McAfee and Intel's headquarters.








Although McAfee and Intel are only located less than a mile apart, they are worlds apart as companies. Not only is one primarily a software and subscription based services company and the other almost exclusively a hardware company, but the key technologies for each company are different and seemingly mostly unrelated.

I will leave it for a future blog on the history of over $20B of failed acquisitions that Intel has made and later liquidated for cents on the dollar over the last 10 years. Now, there is a new news that Intel is considering acquiring Infinieon's wireless business. Based on the market's reaction to the McAfee announcement and Intel's track record of acquisitions, as an Intel shareholder, I humbly ask Intel, please no more acquisitions.

iPad Usage Report

Mashable summarized a report by Resolve Market Research on initial characteristics of iPad buyers. Some interesting results:

- The second largest demographic group purchasing the iPad is 45+ (after 18-45). This older demographic is largely new to purchasing Apple products.
- 37% of customers intending to purchase an iPad are new customers to Apple (no iPod, iPhone or Mac legacy).
- The two devices least likely to be purchased after an iPad is purchased are eBook Readers and portable gaming devices implying that the iPad can cannibalize the market for Amazon's Kindle and Nintendo DS and Sony PSP.
- Most people still feel that owning an iPad is a discretionary, luxury purchase.

2007 UMPC's: The Good, the Bad and the Ugly

On the eve of CES 2008, it seems appropriate to look back on developments in Ultra Mobile PC's in 2007. First we had the UMPC category. Then it was renamed as "UMD" (Ultra Mobile Device, not to be confused with WMD's, Weapons of Mass Destruction). Finally, it was renamed as "MID" or Mobile Internet Device. Other than a lot of three letter acronyms, what does this really signify?

To start, this indicates that the UMPC/UMD/MID category is a segment in search of a market niche. The features, functionality, and implementation of the first several generations of UMPC's have been less than overwhelming to consumers, so the marketers are hard at work trying to redefine the segment, the market or both.

In it's latest incarnation, the 'MID" has transitioned from the Windows-based UMPC used as miniature PC to a Linux-based device which is either fixed function or built as a dedicated device for a particular usage.

The Good: Although the iPhone and its sibling the iPod Touch were not classified as MID's by Apple, it has the key features which were originally targeted by the UMPC/UMD/MID segment, namely anywhere Internet access using both WWAN (EDGE for the iPhone) and WiFi (for both the iPhone and iPod Touch). These devices render full fidelity web pages using the Safari browser and the embedded OS X. While one can argue that Flash plugin for animation is not supported, this is more of a strategic choice by Apple to promote Quicktime rather than a technical limitation of the iPhone/iPod Touch. Further, Apple has even opened up the devices to third party developers after initially closing off the devices to these developers.

Another product which deserves mention is the Nokia N800 and the newly introduced N810. The N800, shown at CES 2007 and shipping in volume in January, showed how a small, light device running Linux, priced at $399 could do most of functions of the UMPC while being half the size and weight of any shipping self identified "UMPC". The N810 added a keyboard to the outstanding N800, and increased the price to $480.

The Bad: The majority of the UMPC's introduced in 2007 fall into this category. All were too large to be pocketable, too heavy, too limited in battery life to fulfil the UMPC promise. The poster child of bad UMPC's is the Samsung Q1 Ultra. The second generation of Q1 was introduced last year with a split keyboard that seem to kludged on the case.

The Ugly: The Oqo Model 2 is a beautifully looking device to be sure. But its price, from $1,500 (since lowered to $1,300) to over $2,000 is "ugly" and unfriendly to consumers. The Model 2 changed out the underpowered, and overly hot Transmeta processor for a Via processor and added WWAN radio. The Oqo is still the smallest and best designed of the crop of UMPC's but it's pricing indicates its target segment is business vertical markets, not consumers.

So, I'm looking forward to some new announcements at CES next week that shows there is still life left in this segment.

Ultra Mobile Computer for Children

One of the ultra mobile PC's that I've been working on is a device designed to be used by children. This device, which was shown at the Intel Developer Forum in September 2006, has been ruggedized to withstand daily use by children carrying it in their backpacks to and from school.

Some of the features found in this device are:

• High resolution WSVGA (1024 x 600) display with touch
  screen
• Integrated mouse control
• VGA video out port for connection to projectors in the classroom
• Full QWERTY keyboard
• Padded cover which can be customized with different colors and fabrics
• Long battery life

The vision behind this device is to provide personally assigned computer to each student enabling 1:1 computing model. The student can use the device in the classroom where the teacher will use networked applications to deliver multimedia, interactive content directly to the students at their design, allow students to interact (questions, quizes, etc) and monitor the students' activities.

What Do Zero Switching Costs Mean?

I recently read an interesting article about the impact of switching costs on IT and consumer buyer behavior. Switching costs are the economic and non-economic costs of switching from one thing to its alternative. For example, the cancellation fee charged by mobile phone carriers are an economic cost to switching carriers before your contract has expired. This is clearly an effort by carriers to reduce their subscriber "churn". Alternatively, carriers will want to protect their investment in a subscriber's subsidized handset.

There are also a variety of non-economic switching costs which influence buyer behavior. For example, re-learning how to use a device can be a switching barrier. This is often cited by corporate IT departments in their delay to transition to new operating systems such as Windows Vista. Another non-economic switching cost is an investment in related infrastructure. For example, software written for Sun's Solaris operating system will not run under Microsoft Windows or IBM's AIX operating system, stranding those hardware assets in a transition. Similarly, a consumer switching from standard definition DVD's to Blueray high definition DVD's will not be able to play back a completing HD-DVD format (except for some dual format schemes which been introduced).

In general, switching costs favor the incumbent player and are a barrier to entry for new players into the segment. For example, anyone with a large library of music purchased from iTunes cannot play back this music on non-Apple MP3 players because Apple's AAC digital rights management software is only found on iPods. Other reasons why switching costs favor the incumbent include behavioral inertia, stranded assets, risk aversion, and lack of complementary products. So, any new product entering an established segment must demonstrate a clear and obvious user benefit in order to overcome these switching costs.

Many incumbent players use switching costs as a way of maintaining their market share (think of cable companies, etc). What happens in a world of zero switching costs? This trend is starting to happen in Internet software both in the enterprise space where "software as a service (SaaS)" is an alternative to "shrink-wrapped" licensed software. A more immediate example is in on-line consumer services such as YouTube, MySpace, etc where subscribers have a choice of of competing on-line services. How do such services both retain their existing customers and gain new ones?

This is a new paradigm for marketing professionals to address.

What's Next for Moore's Law and its Impact to CE Devices

Recent announcements from Intel and IBM about new breakthroughs in silicon fabrication technologies have poised the question, how does this affect the CE space?

First, a brief summary on Moore's Law. Gordon Moore, a co-founder of Intel, observed the trend that transistor density was doubling every 24 months. He postulated that this trend would continue in the future. This is not a "natural" law like the First Law of Thermodynamics in that it is based on various technology improvements rather than physical phenomena. Nevertheless, the "law" has continued to hold true due to many breakthroughs in semiconductor design and manufacturing.

As a result having twice as many transistors to utilize every 18 or 24 months, designers can either add more features to their die or keep the transistor count constant and reduce the die size by half, and thereby reduce the manufacturing cost, or do a combination of both. The latter accounts for the unparalleled price reductions seen in semiconductors. The trend for the former was to add more complex features to the microarchicture of the processor such as out-of-order execution found in the Pentium Pro processor, hardware multithreading and larger on-die caches. Now, the trend has been to add multiple processor cores to each die to increase the on-chip parallelism at a thread level rather than at the instruction level.

Here are my thoughts and personal opinions on the impact to consumer electronics:

1. Extra transistor budget will be used for more integrated System-on-a-Chip (SoC) designs and eventually multicore processors. More highly integrated devices will reduce size, cost and power consumption of the product. Many consumer electronics devices today are not constrained by processing power but the trend toward processing high definition video content requires about 8x the bandwidth and storage as standard 480i video.

2. Some breakthroughs announced on reducing transistor leakage current and supply voltage will translate into lower power and longer battery life devices. This is a key area in improving the utility of these devices for consumers.

3. Improved functionality and utility of the devices enabled by semiconductor improvements. For example, large solid state disk drives using Flash memory instead of magnetic disk drives for portable media players such as Apple's Video iPod. Or ubiquitous Internet access embedded into the device using WiFi, 3G, or WiMAX radio access.

Just as semiconductor technologies have enabled today's mobile phones, digital cameras, and personal computers, new categories of consumer devices will be enabled by these developments in the future. It's up to us to figure out how to make them.

The New Soul of a New Machine

While I was on vacation a few weeks ago in Panorama, British Columbia, I had a chance to re-read a favorite book, Tracy Kidder's Pulitzer Prize winning The Soul of a New Machine. Originally published in 1981, it describes the engineers who developed Data General's Eclipse MV/8000, a 32-bit minicomputer. I had originally read this book in the summer of 1983. I had completed the sophomore year in the engineering program at Harvey Mudd College and was working for the summer at TRW's Space Systems Group when a co-worker recommended the book.

I was completed enthralled by the Kidder's description engineer's passion in creating the "Eagle" computer and resolved to change to redirect my studies to computer engineering. I've been working on marketing, developing, and selling computers ever since.

What I was wondering was, what is the equivalent of the Soul of a New Machine today? The superminicompter segment that Kidder was chronicling in the book is no longer around today, replaced with lower cost, microprocessor based servers on the low and midrange segments and mainframe computers (still around!) at the high end. While there are still a few new microprocessor designs around such as Intel's Itanium processor, Sun's Niagra design and IBM's Power line of processors, for the most part, developing new computers is kind of like assembling a complex Lego set with parts from various vendors, albeit much more involved.

Is today's Soul of a New Machine a hardware/software solution product like the Apple iPod, Nintendo Wii or Playstation 3? Or is it some types of Internet-based Web 2.0 applications?

What do you think is the today's Soul of a New Machine? Post your ideas here.

Ultra Mobile PC's and Ultra Mobile Devices at CES

I've finally gotten around to writing about an area which I'm working working on, developing ultra mobile products. These are small portable devices which add ubiquitious Internet access and other functionality to consumer electronics products.

Here are some links to coverage of Ultra Mobile devices from CES:

Engadget has a good summary of Ultra Mobile PC's at CES.

Here are three ultra mobile devices which I am currently leading development teams for:

This device is a next generation Ultra Mobile PC which was first unveiled in Intel CEO Paul Otellini's keynote speech at the Fall Intel Developer Forum, San Francisco during September 2006. This design incorporates a swiveling display to reveal a thumb keyboard below it. It is designed to provide consumers a portable way to take the Internet along with them wherever they may go.

A second design is designed to be used by middle school students ages 11-14 as lightweight, rugged portable learning PC to be used in the classroom, home and in-between. It incorpates a number of features to improve the surviability of the device while being carried around. One design innovation is the padded fabric cover which serves as a protective cover, a hinge for the display and keyboard pieces and a stand. This device should not to be confused with Intel's Classmate PC project which is meant for developing markets.

This third design is a concept of an ultra mobile device designed for car navigation and entertainment but which can be removed from its car dock and used a portable Internet terminal.

I'll continue to add more comments about these and other devices as they get closer to introduction.

The Lesson of Super VHS

Many people won't remember Super VHS, an improved version of VHS which enabled somewhat higher video resolution using special video tapes. During the 1980's, I had delayed buying a video recorder and hence skipped the VHS vs. Beta decision. Around 1989, I finally gave in and purchased my first video recorder. Of course it needed to be VHS compatible because Sony's Beta format had ceased to be market leader. But a new enhancement had entered in the market, "Super" VHS. Because this was my first VCR and I wanted to be "forward compatible" with the rental market and because I wanted the improved resolution that S-VHS offered, I purchased a high-end JVC model for about $700 (a bit of money for a VCR, even back then).

The purchase came with an offer for one free movie in S-VHS format and from the limited catalog, I chose "Blade Runner." Little did I realize then that the S-VHS catalog would not be growing. In fact, that was the only S-VHS pre-recorded movie that I ever owned. (I did purchase S-VHS blank tapes and made some over-the-air recordings).

So what relevence does this story have today and how as marketers of consumer electronics did we learn from it? Very little, it appears. The consumer electronics market has been littered with dead-end technologies and devices that early adopters purchased but few others did. Remember other failed technologies? DAT (Digital Audio Tape)? Sony's MiniDisc? Dolby "S"? We could go on.... The reasons for these failures are numerous and could be the subject of a PhD thesis. Incomplete complementary eco-system. Lack of content. Limitations in licensing to partners. Rival technologies. Questionable customer value proposition. Overly complex products. Failure to inter-operate with the consumer's existing devices. And more...

What is the story today? Bluray vs. HD-DVD. Sirus vs. XM. HD-Radio. Home-networking and the "Digital Home". Xbox 360 vs. Wii vs. Playstation 3. Cable vs. Satellite vs. IPTV vs. Internet download video vs. NetFlix vs. Blockbuster. I could go on...

What lessons have I learned from this?
Lesson #1. It's not the technology/features/whizzy stuff (Stupid!)

• Don't confuse cool technology (number of polygons rendered per second, etc) with actual usefulness of the device. The two are often independent.

Lession #2. Timing is key.

• Waiting to see if the technology sticks past the early adopter purchases will weed out marginal ideas. For technology marketers, see "Crossing the Chasm" by Geoffry Moore for an extensive discussion of technology adoption strategies.

Lession #3. Sticky technologies have a robust eco-system.

• Be wary of technologies promoted by a single company (or a false front organization shilling for a single company). We all know the mantra against "proprietary" technologies but it's true that single company promoted technologies have much higher barriers to acceptance (how may UMD (Sony's video mini-disk format for the Playstation Portable) are avialable today which are not from Sony's Columbia label?)

2007 - The Year of Navigation

More extended commentary from CES. 2007 will be the year of navigation. This was clear from the plethora of navigation devices at CES from a variety of new entrants. The cost of GPS receivers modules has enabled much lower cost GPS receivers.

Entry level GPS receivers will be available for under $300 in retail.

Uniden, mostly known for cordless phones, announced three new personal navigation devices including the Maptrax 402 and 352.

Sony showed a geo tagger (GPS-CS1) which logs geographic position for 190 hours and then adds geographic coordinates to your photos. It matches the time codes from the photos to the logged position (sampled very 10 seconds) and works with most cameras (MSRP: about $150).

LG showed a device for the Korean market which combines a GPS receiver with a T-DMB digital TV receiver for those who get lost easily and need entertainment while locating their destination.

Kenwood showed an in-dash mounted double DIN navigation unit with a 6.95" display, TMC traffic data from XM or Clearchannel, Garmin navigation hardware, and DVD playback.

Blaupunkt and Kenwood announced a joint venture to develop PND's.

Korean company iRiver announced a WiFi enabled GPS receiver.

Navigon announced that it will offer free real-time traffic data using Clearchannel's real-time traffic service.

TeleNav announced a cellphone based navigation service.
Various Asian manufacturers including Aigo, Malata, and MSI showed low cost systems.

Web Coverage of CES

News:
This Week in Consumer Electronics (TWICE) - http://www.twice.com/
CNet - www.cnet.com
EE Times - www.eetimes.com/conf/ces
EE Times (video reports from CES) - http://www.eetimes.com/news/latest/showArticle.jhtml;jsessionid=ZHZIJAKDCP2REQSNDLSCKHA?articleID=196801939
Macworld Magazine (yes, they covered CES) - www.macworld.com
Newsweek - http://mytech.talk.newsweek.com/
San Jose Mercury News - http://www.mercurynews.com/mld/mercurynews/business/special_packages/ces/
The Register (CES in 5 minutes) - http://www.reghardware.co.uk/2007/01/12/ces_in_five_mins/
The Register Hardware - http://www.reghardware.co.uk/
Wired - http://www.wired.com/
PC Magazine - http://www.pcmag.com/prestitial/0,,,00.asp?success_page=%2Fcategory2%2F0%2C1874%2C2034652%2C00.asp
Infoweek - http://www.infoworld.com/archives/t.jsp?N=s&V=84945


Blogs:
10 Apples Blog - http://10apples.com/wp/2007/01/11/ponderings-on-ces/
Engadget - www.engadget.com
What is New (UMPC focused) - http://www.whatisnew.com/default.aspx
ValleyWag - http://www.valleywag.com/
San Jose Mercury News - http://www.mercextra.com/blogs/ces/
San Jose Mercury News (Dean Takahashi) - http://www.mercextra.com/blogs/takahashi/
New York Times Blogs - http://bits.blogs.nytimes.com/
EE Times Consumer Blog - http://www.eetimes.com/blog/news/archives/consumer/index.html?loc=consumer
Wired Blog (Ugly gadgets of CES) - http://blog.wired.com/wiredphotos15/
Anandtech - http://www.anandtech.com/
ExtremeTech - http://www.extremetech.com/
I'll be adding new sources to this list as I uncover them.

Fear and Loathing in Las Vegas - CES and Disruptive Innovation

From Las Vegas, NV - Everyone who's been to CES (Consumer Electronics Show, www.cesweb.org) after Comdex collapsed will agree that it is a zoo. 140,000 people makes for huge lines for everything. Yesterday, while taking a cab from the Venetian hotel to the Las Vegas convention center (about 2 miles - it took 20 minutes in traffic), I started to talking with the cab driver. Ahmed said that he was originally from Iran and immigrated to the U.S. in 1972, "when everything was better" (now he said, "everything is bad") and went to college in Kentucky. Later, the owned four video rental stores in the Salinas, California area. He closed up his stores five years ago after Blockbuster stores started opening up in the area and moved to Las Vegas. Now, he drives a cab two days a week and travels. He mentioned that two of the Blockbuster stores near him have closed recently , no doubt due to the popularity of purchasing DVD's from big box retailers, renting from NetFlix and now downloading movies through services such as iTunes.

Existing technologies such as two-way digital cable (pay-per-view) and new technologies such as IPTV (ie, AT&T's U-Verse service), Microsoft Windows Media Center, Microsoft's XBox 360, MovieBeam, as well as download services like iTunes, CinemaNow and MovieLink are all vying to replace Blockbuster and they are already having an affect. Every time, a new technology replaces the old regime, someone is affected whether it is owners of small video rental stores or the guys who work in the Blockbuster stores. Of course, new technologies also provide new opportunities to those precient or fortunate enough to be at the right place at the right time. But, let's not overlook the impact on those who are on the wrong side of technology.

I'll be posting my observations from CES in the next weeks.

Product Review - HP Pavilion dt6000z Entertainment Notebook PC

In another of my IT duties over the Christmas holidays, I helped my brother-in-law set up the new HP Pavilion dt6000z notebook that he had purchased for his wife. Although the main use for this system is to run CAD software, he picked the Pavilion line which was on special at Circuit City before Christmas.



Key Features:

• Intel Core 2 Duo (T5200) processor, 1.6GHz, 2MB L2 cache, 2 cores
• 1 GB DDR DRAM
• 15.4" WXGA wide screen display (1280 x 800)
• 120GB 5400 rpm SATA disk drive
• Windows XP Home Media Center Edition, with upgrade to Windows Vista Home when available.
• HP LightScribe DVD 8x Dual Layer DVD+R/RW writer
  

Nice Features:

• 1.3MP web camera
• Remote control for DVD playback, fits into the ExpressCard slot for storage
• Touch sensitive media control keys

Pluses:

• The Intel Core 2 Duo processor which 2 cores was very responsive. I had no trouble running a antivirus scan and DVD playback software at the same time.
• The 15.4" wide screen display is bright and great for viewing movies.
  
• The HP QuickPlay software launches the DVD player without running Windows for those times when you just want to watch a movie without any other apps.
  

Minuses:

• Does not include system restore disks. Included software to make your own system restore DVD's took over an hour to make.
• Does not include Microsoft Office (only the trial version)
• Includes lots of trial software and offers for subscriptions. Removing all of this unwanted software took several hours and freed several gigabytes of disk space.
• HP configures the disk drive into a C: and D: partitions. The D: partition (11GB) contains restore versions of system drivers. I'd rather this was included as a DVD and free up the 11GB.
  

Divergence vs. Convergence

In the San Jose Mercury News on December 29, 2006 http://www.mercurynews.com/mld/mercurynews/business/technology/personal_technology/16343174.htm, Dean Takahashi discusses how personalization, not convergence, is a key driver in many consumer electronics products. Convergence of consumer electronics products (ie., TV+Internet, Phone+Internet+Camera+MP3 Player, etc) has been given in the "better, faster, cheaper" world of the next hot device but Takahashi quotes MIT professor Henry Jenkins (www.henryjenkins.org) in saying that the consumer's desire to adapt devices and services to their own tastes and preferences are the real drivers of 21st Century consumer electronics. According to Jenkins, consumers want to be able to express their creativity with these products and are seeking products and services with multiple, open interfaces which allow customization. As examples, he sites MySpace, TI's DSP's which supports multiple codecs, Microsoft's X-Box 360 which allows users to save custom music playlists and incorporate their own music soundtracks in the games, and of course, YouTube.

Fundamentally, I agree with Jenkin's premise that convergence for the sake of convergence is counterproductive and consumers will see through the limited value propositions that these devices offer. The most recent example of this was the Samsung digital camera with integrated MP3 player. Stitching multiple, and often unrelated devices, together does not increase the utility of any of the devices and often results in a combined device with is inferior to the best-in-breed individual devices.

Another trend is if it doesn't add to the BOM (bill of materials), include it as a feature. As an example, web browsers, certainly a useful feature, are appearing in lots of devices in which web browsing is not a desirable usage model. For example, why does the Sony Playstation 3 http://www.us.playstation.com/PSP?ref=http%3A//www.sony.com/index.php have a web browser built in? There is no keyboard on this gaming device, which makes web browsing an exercise in frustration. Or, the Sony Mylo http://www.sonystyle.com/is-bin/INTERSHOP.enfinity/eCS/Store/en/-/USD/SY_BrowseCatalog-Start?CategoryName=cpu_PersonalCommunicators&CP=sony_hm_nav_elec_myloshop&ref=http%3A//www.sony.com/index.php which also has a web browser built in. The Mylo does have a keyboard but the display is so small, that viewing the full web page requires constant scrolling left and right, not just up and down. These are devices which are fine devices for their intended uses of game playing and instant messaging but because adding the web browser feature didn't add much in additional cost, it was included.

Introduction and Scope

My goals in authoring this blog are to discuss and debate trends in consumer electronics, web 2.0-based internet applications and enterprise applications. I'm currently involved in developing several consumer electronics devices. Previously, I have worked in product marketing and business development for semiconductors, enterprise servers, and telecommunications products for 14 years. I hold a MBA in marketing from UCLA's Anderson Graduate School of Management and master's and bachelor's degrees in electrical engineering from Harvey Mudd College.

If you are interested in discussing these areas, please post your comments. You can also contact me at allthingsdigital at sbcglobal dot net.