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The Week in Geek – Feb. 3, 2007

The Apple of Your Ear
For who missed the iPhone launch, Time offers an excellent analysis of what’s known about the device, with a solid wrap-up of pros/cons. While WiFi synching and true 3G (beyond EDGE 2.5) would create a perfect package, the June-slated iPhone still seems like a home run. Check out video of Phil Schiller on the CBS Evening News. The close-ups show a live demo that’s so future-forward it looks like a sci-fi movie mock-up. The company deserves all the credit for pushing the mobile envelope far beyond what we’ve ever seen in any other device. While ‘Swiss Army’ gadgets usually compromise on all functions, the iPhone seems to actually improve each one – it’s a better iPod, a much better phone, and a genre-defining mobile web device.

Commentary: In 1997 Wired famously ran a ‘Pray’ cover (right) accompanying a story with 101 ideas to save Apple (much of the advice, in retrospect, was terrible). Later the same year Michael Dell infamously quipped that Apple management should ‘shut [the firm] down and given the money back to shareholders‘. At that time there wasn’t a single credible voice in the business press or research community making a case to bet with Apple and against Dell. And as such, Jobs’ Apple rescue will go down as one of the most stunning and unexpected turnarounds in business history. A lot has been written recently about Jobs’ value to Apple, but much of this ignores an equally important element of the Apple resurrection: Jobs has built a brilliant team & a firm that is ready to outlast him. Apple has a deep bench of the very best in the industry. The self-effacing Jonathan Ive is acknowledged by the strong-egoed design community as the finest industrial designer of our time. Phil Schiller is the best product marketer on the planet. Ron Johnson is a retail god with an astonishing track record of success. And Eddie Cue has led stunning applications efforts across the product line. And many, many more. While Jobs built the team, these execs are there for the idea of Apple. Each and every one of them passionately believes that their products are changing the world. This is a company with a phenomenally deep talent bench and shockingly low corporate turnover despite the superstar power of each of these players. The celebrity CEO culture has sold short what is perhaps Jobs’ most significant contribution – turning Apple Inc. into a firm built to last – one that isn’t reliant on a single person to endure.

Rollins Out: Dell Returns as CEO
Lots went wrong with Dell these past two years. Terrible customer service, uninspiring style, exploding Sony battaries, a botched foray into services (not at all a Dell competency). The NYTimes points out that Dell (a firm that didn’t even have a Chief Marketing Officer as of last Fall) missed the real growth opportunity. The consumer market makes up only about 15% of Dell’s business, but consumer sales, especially of notebooks grew well over 50% in ’06. As a result, HP re-took the top spot among PC manufacturers. While Dell’s desktop margins have long dominated over the competition, almost never-reported is the fact that Dell has someone else manufacture notebooks – eliminating any vertical-integration benefits that were so vital to the firm’s growth. This counter-strategic move commoditized the manufacturing function of a growth-engine product, undercutting the lifeblood of the firm’s competitive advantage.

Google Keeps Growing
Google earned over $1 billion in its latest quarter – easily trouncing analysts’ estimates. Revenue grew year over year by nearly 70%. The firm claims the deals it cut last year (eBay, MySpace, and the YouTube acquisition among the largest) are goosing revenue. And forget a rival in a garage presenting a challenge. Google spent nearly $2 billion in capital expenditures in 2006 to grow its operations. That kind of scale slams the door on me-too operations. It’s now Google’s game to lose, with Microsoft perhaps the only credible rival.

How Yahoo Blew It
A December WiG commentary pointed out that Yahoo’s failure to match Google reflected inexcusably bad management (see 2nd paragraph in ‘Can Yahoo Match Google’). Wired concurs with a detailed screed on Yahoo’s rapid downfall. In 2002 Google’s revenue was just $240 million a year. Yahoo’s was about $837 million. Yahoo couldn’t stomach a $5 billion Google purchase (a merger of equals with Yahoo sporting a post-bubble deflated market cap). But oh for Monday morning ‘shoulda couldas’. Google now controls 70% of the fastest growing market in advertising and continues to post freaky good profits (see above) while Yahoo contracts. That year Yahoo decided it would buy Overture – a firm that dominated search-related advertising with revenue two times Google’s. By the time the deal was actually announced in 2003, the two companies were neck and neck. Two years later, Google’s revenue was 2.5 times Overture’s. There was nothing in Google’s portfolio that Yahoo couldn’t match – but the firm is only now coming out with a respectable rival to Google’s ad serving technology.

Is Amazon Giving Away the Store?
The firm sold nearly $4 billion in goods during the holiday quarter – easily topping the Street’s expectations of $3.77 billion. That’s a 34% increase from a year earlier. Margins are tighter, but the firm is innovating at a Google-esque pace, with more hits to show for it than the Mountain View gang (call Google a one-trick-pony, but it’s an awfully good trick). Look at the Yahoo story above & one can make a pretty strong case in favor of Amazon plowing profits into innovation & targeted experiments. And hiring smart guys like BC honors alum Paul Springer (who treated Grad TechTrek to a great inside-look at the firm) no doubt helps!

KKR’s Nice Bet on Sun
As the Grad TechTrek class prepped for their meeting with Scott McNealy, one of the hot debate topics was “Should Sun go private?” Sure it’s a big, cash-rich pill for any private equity swashbucklers to swallow, but there’s a good argument that Sun may be just the kind of firm to take off the ticker. Sun has been punished by the Wall Street earnings meat grinder while it has struggled to get genuinely innovative products into the channel. A turn-around looks increasingly likely in time. So our MBAs look pretty sharp now that buyout giants KKR have decided to sink nearly 3/4 of a billion in private equity coin into the firm McNealy founded. To be fair, the deal isn’t targeted at taking the firm private (yet), and the structure of KKR’s investment is as close to a safe bet as you can get in private equity. But if either firm is looking for some sharp MBAs, I know where they can find ’em!

In Search of . . . Better Ways to Search
SearchMash.com is a groovy little search engine where results for videos, images, wikipedia, and blogs are available in expandable lists off to the right. It seems to do Google one better, although a little digging would reveal that SearchMash is a separately branded Google experiment site. Like Ask’s experiements with AskX.com and Yahoo’s work with AllTheWeb and Altavista, SuperMash allows the search giant to experiment with new features. According to the WSJ, Google’s SearchMash swaps new features in and out every few weeks, and has experimented with blending in spell-check adjusted results. Yahoo’s livesearch pulls up query results before the user is finished typing and was first launched on AlltheWeb.com (it’s profiled with other innovations at firm’s next.yahoo.com testbed). The oddest of the experimental bunch is the MsDewey.com site by Microsoft, where search results are accompanied by an over-the-top actress who snaps snarky voice responses at the lonely dweebs this is designed to appeal to.

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