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The Week in Geek – Oct. 27, 2006

Straight Dope on the iPod’s Birth
Apple has sold more than 67.6 million iPods since it introduced the device five years ago, giving it a 77% market share and crafting the decade’s greatest tech success. Wired profiles the birth of the iPod, including the prominent role of a BC Alum. ‘The idea for the scroll wheel was suggested by Apple’s head of marketing [and Boston College alumnus], Phil Schiller, who in an early meeting said quite definitively, “The wheel is the right user interface for this product.” Schiller also suggested that menus should scroll faster the longer the wheel is turned, a stroke of genius that distinguishes the iPod from the agony of competing players’. Apple posted another blowout quarter with profits up 27%. The quarter’s Mac shipments are up 30% to 1.61 million (my MacBook Pro being one of them). 8.73 iPods shipped last quarter, up 35% from last year. Sales of Mac laptops are booming, pushing the firm to a 12% share in the category – a stunning jump that is double the firm’s take just 6 months ago.

Unlocking the iPod
Elegant design brought users to iPod, slick marketing kept it cool, and the hammer-lock of iTunes/iPod switching costs continue to cement share dominance. But now “DVD Jon” Johansen, the guy who at age 15 wrote the DeCSS DVD descrambling hack, threatens to open up the iPod via a reverse engineering of Apple’s proprietary FairPlay format. With a set of new hacks, other firms will be allowed to provide licensed content that plays on iPod, and protected iTunes Music Store tunes can be ported to other players. The DRM stays, ‘wrapped’ in a software shell, so DVD Jon suggests it’ll be legal. His four person firm, DoubleTwist, is looking to commercialize the code, but it’s not clear if (or where) the hack will hold up in court. There have been attempts to hack Apple before (the ill-fated Real Harmony among them), but none has a serious following and many clearly break the law. Johansen’s high profile in the geek community gets press & attention. His blog, “So Sue Me,” features dessert recipes along with news about technology and arguments about copyright law. When DoubleTwist signed its first (unidentified) client, he made an apple pie to celebrate. Apple hasn’t sued anyone who has hacked FairPlay and despite the media hype it may not need to. How many headlines have included the words “iPod killer”? Google the phrase and you’ll get nearly a million hits. But nothing has come even remotely close – not the efforts of Sony, Samsung, or Microsoft. Design should be easy to ape, but it’s been five years and no one has put even the slightest dent in Apple’s music success.

The Information Factories
A ‘Must-Read’ from George Gilder. In class I’ve been showing the ‘Amazon’ graph of Moore’s Law dwarfed by storage capacity increases, dwarfed again by bandwidth surges. During the last 15 years the cost effectiveness for hard drives has grown 15 times faster than processor power. In the last decade backbone traffic has risen 20,000 fold. And with fiber now running to my curb I can jack in at light speed. Geeks call the ubiquitous availability of storage & computing power ‘the cloud’ and in this world the desktop truly can become RAZR-thin. The corporate strength, browser-based computing of Salesforce.com is just the start.

But it terms of ultimate control of this space, the two-kids-in-a-garage opportunity is over. The game is now about scale and there are really only two firms that can buy admission to the race – Google and Microsoft. And this is scale like the world has never seen. Google’s playing to power not just 100 million Google queries a day (with the money-gushing AdWords and AdSense products) – the Googleplex also serves scheduling, video, transactions, e-mail, and productivity software, with a cloud-based hard drive for the masses almost certainly on the way. This scale costs big bucks to power. Gilder suggests the 5 biggest search engines suck down roughly enough juice to power metro Vegas on the hottest day of the year. Even third-tier Ask.com ran out of power in its east-coast facility before it ran out of server space. To meet demand, Google is building a super-secret 30 acre facility in The Dalles, OR where power costs 1/5th what it would in the Valley. Google’s computing scale is shrouded in secrecy, but Wired offers some estimates: 450,000 servers on the low end, 200 petabytes of disk space (enough to hold dozens of copies of the Net), 4 petabytes of RAM, and a collective bandwidth of 3 petabits/second.

As scary-big as the Googleplex is, Microsoft is upping the arms race ante, spending $2 on infrastructure for every buck Google throws down. If Microsoft doesn’t migrate Windows & Office to the cloud fast it risks losing customers to a Google alternative. With $10 billion in Google cash vs. $35 billion from Redmond, it’s a free-spending death match for the monopoly frontier of the future. Microsoft says that it “added a Google” last year to support the 260 million Hotmail users, along with 240 million for MSN Messenger, and 320 million for Live.com/MSN. Microsoft’s power consumption is up 10 fold in 3 years & should rise another 10x in the next half-decade.

Tech circles are starting to buzz that Sun (yes, Sun) has the best boxes to meet demand. By meshing low-power multi-core processors directly to drives angled to maximize airflow, & placing fans on cooling-angled motherboards, Sun co-founder & CTO Andy Bechtolscheim has created super-fast power-misers using commodity parts (including AMD chips). With these boxes, Google could replicate it’s 200 petabytes of hard disk space in less than one data center row & consume less than 10 megawatts of power – about as much as a typical US household. An FYI: As a Sun founder, the guy who ponied up some of the initial Google finance money, and an early investor in Microsoft, Bechtolscheim is certainly one of the greatest (or luckiest) tech visionaries of our time. The piece ends with a second-to-last paragraph quote from TechTrek fave Andy Kessler. I’ll be taking Eagles to Microsoft, Google, and Sun this fall to get a first-hand look at the combat for the cloud.

Rebuilding Microsoft
Another winner article from Wired: Ray Ozzie is the next Bill Gates. As heir-apparent to the MS tech-side when Bill steps down as Chief Software Architect, Ozzie, the creator of Lotus Notes, inherits a firm struggling to navigate tectonic tech changes. Microsoft in 2006 will be a classic business case study. Morale in Redmond is rock-bottom and the firm needs multi-billion dollar markets to move its share price. It’s targeting a “Big Seven” that include smartphones, music players, photo management, portals, social networking, video, and search. The world once worried that Microsoft would take over entertainment, the television, and the Internet, but that hasn’t happened (yet). Still, Microsoft built a robust server biz in the late 90s, and Windows & Office mint $1.5 billion a month. Plus the firm’s recent track record shows Net chops. MSN turned a profit after 7 years and 60% of Xbox 360 users fork over an additional $70/year for the online experience of Xbox Live. With new offerings, Windows users can now buy Office collaboration for $30 a pop. And Ozzie’s group has introduced some novel freeware for the cloud like MS LiveWriter (which I’ve used to write the last several WiGs) and Live Clipboard – a groovy tool that allows easy, format-retaining copy & paste among online services & desktop apps. Most shocking for Redmond watchers – the latter was released under the open source Creative Commons license, with Redmond encouraging others to take the code & enhance it for the benefit of all. More reason to think Microsoft is about to upswing: Vista’s launch next will release massive pent-up demand. ’06 looks bleak, ’07 looks much better than the press has stated, but Ozzie’s gotta figure out how to plot Microsoft’s success in the world beyond. OB and change management types will find the article’s look at Microsoft’s culture & reward systems fascinating.

A First Look at Windows Vista
On the heals of Microsoft’s sneak peak at Windows Vista & Office ’07 offered at this year’s BC TechDay, Technology Review offers look at the beta. Windows users will find a slick new interface, great new search features, and increased usability. Major improvements and most all Windows die-hards will eventually upgrade, but most reviewers maintain it’s still behind Apple, and the Mac crowd expects the new OS X Leopard next year. I’ll take a copy of both & run them on my MacBook Pro. Parallels, are you listening?

Google: Can’t Stop This Train
As profitable as Apple is, Google is a freakish money minting juggernaut. Last year the firm posted about $1.5 billion in profit. Last quarter’s take? Almost half of that in just 3 months – nearly three quarters of a billion. The 8% uptick in the stock’s share price after the earnings release created $10 billion in wealth, making Google the world’s third most valuable tech firm. It’s now past IBM, but behind Microsoft & Cisco. Yahoo Inc., which runs the Internet’s second-largest advertising network afterGoogle, has been hurt by slowing revenue growth most of this year — a problem that contributed to a 38 percent drop in its third-quarter profit. Meanwhile Googlers continue to innovate in Mountain View, this week offering a vertical search engine product that will allow others to create custom, targeted search engines that focus on specific domains.

Amazon Turns a Smart Q3
Amazon’s sales were up 24%, beating expectations, but profits were down 37% due to heavy tech investment. The Street buys Bezos’ plan to invest in tech to boost sales & seek new markets. Analysts expect a Christmas blowout with this year finally seeing migration to AMZN for traffic outside the traditional media (books, music, DVDs) biz. Expect electronics to be hot (already 30% of sales). Amazon’s flat screen prices are tasty, and they offer ‘white glove’ delivery. The holiday season will also see Amazon face off with Toys R Us after a NJ court allowed Toys to break its agreement with Amazon. Toys claims Amazon violated a pact that gave Toys R Us a category exclusive on Amazon. Despite the split, initial stats suggest that Amazon hasn’t seen any downtick in toy sales now that the partnership is over (Amazon is appealing the ruling).

Coming Soon to a Small Screen Near You
Apple has sold more than 1.5 billion songs online, along with 45 million TV episodes, and now over $1 million in movies the first week the iTunes movie store was open. But Amazon, Wal-Mart, NetFlix, Comcast, and the studios (among many others) see a future in video downloads, too. Time compares the various video download offerings. Comcast is also showing broadband-fueled numbers above analyst expectations. The boom is deep and wide with real profits for the giants.

Starbucks Cafinates it’s China Growth Plan
One of our most fun GTTW visits is at Starbucks HQ in Seattle. But China may soon be the firm’s most important global market. Starbucks is buying out its China partner Beijing Mei Da Coffee to take control of 60 retail shops in Beijing & Tianjin. The chain on the mainland serves coffee, plus chocolate muffins, and a few local twists that include a duck’s breast sandwich. There are 430 shops for all of Greater China and business is booming.

Looking for a job in silicon valley
As we prep for TechTrek Guy Kawasaki’s advice on getting a job in Silicon Valley is a must read.

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