Tuesday, October 04, 2005


It is as if Sun Microsystems has cried Wolf too many times. The blogosphere has pooh poohed the latest announcement about Google and Sun teaming up; a big mistake.

As a small business owner, I am ready to stop buying computers loaded with office suites. Nowadays, the cost of the software is more than the cost of the computer. There is no reason that any small business should spend hours networking machines, fighting off viruses and spam, making back-up copies, downloading upgrades or any of the many other chores currently required.

When Google saves my blog, it always saves 3 to 6 copies. If I need to find a copy and one server is down, another directs me to the next closest copy.

To date, MSFT has had a strangle hold on office software. Google IBM and many others have been prying the hold loose. Google is in the right place at the right time to finish the job. Google is not going to try to do it alone. Google is willing to share. Sun Microsystems has a nice suite of office software which has largely been out of sight and out of mind. It is about to be very present to millions.

My family has purchased shares in SUNW. The company survived the dot.com bubble. The "second leg" build-out of the web is about to occur. There are going to be big winners and big losers. In the same way that buggy whip makers needed to switch to auto parts makers in the 1920's, phone companies need to switch to media companies now. It is not an easy transition. Most of the whip makers went out of business.

Google and Yahoo should be thought of as the Coca Cola and Pepsi of the internet world. Can you name the third largest cola company? MSFT and AOL together would have a chance to become one of the "big three". Google now has a market cap about as large as Verizon. Verizon has the assets, Google has the momentum. Can Verizon convert to the new age?

MSFThas the money to build an Google clone. So far, Qualcomm is one of few to see the significance of owning the backbone to the internet. Sprint has signed-on to the Qualcomm system. Many a company hates to pay Qualcomm royalties. Google offers a lot of companies the chance to "partner" at "no charge".

Jim Brinkley, one of my heroes, helped Chip Mason build Legg Mason from a small firm to one the top companies on the street. Jim believes the low cost producer wins.

Google is the low cost producer. Until another firm at least tries to adopt the model, Googleis going to stay way out in front. It is going to take the merger of some major competitors and major reorganization to catch Google.

Competitors will continue to use the courts to slow Google down. I prefer to join rather than to fight. My family members have increased their holdings in Google and reduced their ownership in Yahoo, EBAY and in several telecommunications plays. We enjoy using Vonage as our VoIP provider but we are not excited about the companies business model.

Lucent,Nortel, Juniper and other equipment companies are going to supply the build-out of the "new web". Earthlink just won the contract to build-out Philadelphia. Jack Fields, a wise old investment broker, has never liked to purchase businesses in high growth areas where the competition is fierce. I agree, but when a business has a clear advantage, I like owning the advantage.

SUN. has an established product that is competitive with MSFT. It now has a distribution partner that is the low cost distributor. MSFT has almost all the market share. Only half the people have broadband connections. In 5 to 8 years 90% of the people will have broadband. Many of these will never buy word processing software. Many of those who currently own a copy of MSFT Office will not ever buy another copy.

Again, I am not saying that MSFT goes out of business. I am simply saying it is going to lose market share. In the past couple of years, MSFT has lost maybe 7% share in the browser market; it still owns the market. In 5 to 8 years, I believe it is possible that SUN will have 25% of the office software market!


Anonymous said...

Shop at your favorite stores 24 hours a day. Why go to the mall when you can shop online and avoid the traffic