- IN THIS ISSUE:
- * Phone.com - Why Are Mice Dangerous to Dinosaurs?
- * Playing with Today’s Market Cap Figures
- * Nokia in Alliance with Macromedia for WAP Development
- * Priceline Announces “Name Your Price” Phone Service
- * QoS and Loyalty - Some Feedback from Readers
- * Innovative Business Models
- * Improvement Opportunities at Ericsson
Ericsson is convincing the stock market and the stock price is up at $47 from $32 a month ago. Now it would be very important to start planning how we support this favorable trend by aggressive marketing. Like in any rapid changes, Wall Street analysts are now wondering whether they fully understand the reasons for the strengthening of Ericsson. Their ears are wide open. We can give them our message now, even the message they would have ignored two months ago.
- PHONE.COM - WHY ARE MICE DANGEROUS TO DINOSAURS?
What’s that little hole in my egg? Brontus, did you see it there yesterday? Why is Phone.com potentially dangerous to Ericsson? I will try to explain why I think market capitalisation must be taken seriously.
First of all, look at what has happened in the media industry: a new media company Yahoo has now comparable market cap to Disney, both around $50 billion. This has happened in the last four years, when Yahoo has been built up. Phone.com was still in 1998 looking for external investment - then as Unwired Planet. A carefully engineered IPO has brought its market cap up to $8.7 bn today, up from roughly $1 bn at the time of its IPO in June. During the fiscal year ending in July 1999, the revenues of Phone.com were around $16 million and the loss more than $20 million!
The only way Phone.com can survive is to build brand, product and service portfolio, distribution channels and customer base through acquisitions. These acquired assets will then (hopefully) translate into real business. The point here is that the company is able to pay for its acquisitions with overvalued shares, value that in a way has no alternative value. Investment banks have been engaged by smaller technology companies to look for an exit strategy for them. Those banks rank Phone.com as a top candidate whenever there is a match - they can pay the highest price with their overvalued stock. Two conclusions:
1) This way Phone.com get to pick and choose the best niche players with the smartest innovations, proven by early contracts (such as Airflash, a location-based technology company).
2) One can say that Phone.com has the largest and cheapest business development department in the telecom industry at its disposal - the combined resources and efforts of leading investment banks.
If both the investment banks and Phone.com play their cards right and if Ericsson does not counter-attack, Phone.com will reach the size of Ericsson in market cap before 2002.
PLAYING WITH TODAY’S MARKET CAP FIGURES
Playing a bit more with the market cap figures brings into the daylight some interesting findings. - Had Ericsson’s stock price not started rising on Oct 22, Qualcomm and Ericsson would now have the same market cap… Juniper today is 30 percent bigger than 3Com… Nortel has silently surpassed Ericsson, despite our recent positive development ($100 bn vs. $92 bn)… Metricom is rising again, due to expectations embedded in its launch and the absence of the GPRS market message (market cap at $1.2 bn, today up 25 %)… To my knowledge the best investment this fall would have been Puma Technology (synchronization software), the stock rose from $5 on Aug 17 to $41 on Nov 8…
NOKIA IN ALLIANCE WITH MACROMEDIA
Nokia and Macromedia announced an agreement to develop the first visual Wireless Markup Language (WML) authoring solution for mobile devices. Developers will now be able to easily create content for Nokia Wireless Application Protocol (WAP) handsets using WML objects for Dreamweaver, the professional Web authoring environment. Producing WML with Dreamweaver simplifies the development process and means a wider range of Internet content will soon be available on mobile devices.
This is exactly what I suggested Ericsson to do in the summer 1998. Macromedia was in financial trouble and I thought we could have jumpstarted our developer efforts. The company has a strong tradition in innovation, having developed technologies such as Shockwave and Flash and made them industry standards. Also, their developer network is huge, probably way over 10,000.
Ericsson need now to look into different ways to jumpstart our presence in the Internet industry worldwide. The Ericsson Developer Program has a huge challenge to establish Ericsson as a brand which leading innovators identify as the preferred partner. That means more money and more top management support. We should not fall into the trap of doing it “incrementally” because of “lack of resources”. From the marketing perspective we need to leapfrog Nokia, a “me too” is equal to throwing money out of the window. We have all the ingredients to do this, by the way.
PRICELINE ANNOUNCES “NAME YOUR PRICE” PHONE SERVICE
Telecom services will be the next business for Priceline.com. The company struck a three-year deal with Net2Phone
under which it pays to be the first Priceline telecom provider. Beginning in Q1 2000, Priceline consumers will be able to name their price on blocks of long-distance minutes. (PRESS RELEASE).
Another company, DemandLine.com has applied the purchase-pooling business model for its auction service. The target seems to be SMEs who can pool their purchasing needs for e.g. long distance and subject them to an auction. It is only a matter of time when the wireless market will be hit by this as well. (http://www.demandline.com/)
How about my earlier idea to partner with Walker Digital, the founder of Priceline, to patent business models related to mobile Internet? See http://www.walkerdigital.com.
QoS AND LOYALTY - SOME FEEDBACK FROM READERS
I got some feedback to the article in last week’s newsletter where I discussed the potential relationship between loyalty and quality of service. Here is some particularly interesting input from Adam Holt: “Your comments reminded me of a recent meeting with a company called Arrowpoint, who are making an impressive hardware based Web switch (it switches based on content in the HTTP header). They described to me a scenario where their product is being used to support customer loyalty. The web merchant issues regular purchasers with a bronze, silver, or gold cookie depending on their level of spend. Arrowpoint’s web switch can trap that cookie on future visits and ensures that user gets the right level of QoS. Interestingly they said that the inverse of this is used by “adult entertainment” sites where a better QoS is delivered to end-users that have not yet payed any subscription fee!”
INNOVATIVE BUSINESS MODELS
Kurant Corporation is selling StoreSense packaged ISP solutions to ISPs. ISPs can then offer this as a monthly service together with Kurant to small businesses and individuals on a revenue share basis. I find this enabling of individuals to become entrepreneurs very interesting. It may evolve into one of the most important changes in society in the next ten years…
IMPROVEMENT OPPORTUNITIES AT ERICSSON
Wow! The IETF voted last week NOT to help governments with wiretapping efforts. Had it wanted to, the group would have found it easy to help Big Brother. It could just tweak the standard Internet protocols to facilitate wiretaps. Given the IETF has this level of (moral) power, maybe Ericsson management should start getting familiar with what our guys do there and set strategic goals for the Ericsson participation, something I proposed in 1995… http://www.wired.com/news/politics/0,1283,32455,00.html
What would be “location-dependent smelling accessories on a terminal”? Take a look at the “idea collection” of the IPR people at ERA. There are some neat ideas on how to improve our products, mainly phones. I suggest you all send your ideas to Per Ljungqvist who is running the site. Half of the material is now in Swedish but maybe Per will find time to translate it. A great initiative! Go to the intranet site: http://ni.ericsson.se/inside/gpm/innovation/ideas99.htm
QUICK TAKES - Palm Reach portal service launched under a name Room 33. Read here why the strange name… TimeDomain got $5m financing from Siemens, is there wireless technology going to fly?… PeanutPress.com publishes books for handheld computers, working with HandSpring… CoolCall IP telephony network got its first round financing, $2.6 million. It’s partnership-based business model looks interesting… RF Software develops software that enables Web users to create their own Internet radio stations. Recently acquired by Scour.net… EuroWireless is a new news site and industry portal for the European wireless industry… Spinway.com provides solutions for companies to offer private-label free ISP services. Clearly a company to watch… ZKey is an online PIM company which seems to have ready plans for WAP. A possible partner… Octopus.com, which is developing products to aid Web navigation and content searching, confirmed reports that it closed a $11.4-million first round. Relevant for WAP?… The LINUX shop Transmeta is developing non-Intel chips for handhelds, hopefully we are listening… SignalSoft Corporation announced Content Alliance, an international program to standardize location-based content to match operators’ networks. Lucent and Siemens are partnering with SS, e-mode project should take notes… - (To view the embedded hyperlinks, view this section online at http://webacademy.ericsson.se.)
- SELECTED THOUGHTFUL READING - Here’s another indication that the era of media convergence has arrived: Television viewers think more highly of Internet service America Online than they do of ABC, CBS, NBC and Fox, according to a study to be released Thursday… Multi-level marketing, empowering the entrepreneur in yourself - take a look at this aspect of the American society which will be very important for the growth of the Internet here: Tap Root System… Universal translators will reportedly be big at Comdex next week. We are still talking about standalone translation engines - how about a 3G application where a supercomputer at the operator end is doing the translation?… Boo.com, the Swedish retailer startups specialized in cheating its contractors such as Ericsson, finally launched. A pretty cool site, though… Börje Ohlman (ERA) has written an interesting report on his participation at the Next Generation Networks 99 conference (LINK)… - (go to http://webacademy.ericsson.se for links to stories)
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This is a weekly newsletter describing the non-confidential part of my work during the past week and how I see market evolution affecting Ericsson (as interpreted my me in my role working for LME/DMA in San Francisco as a business developer with a focus on Internet applications and enablers). The report will be published every Monday. For subscriptions go to http://webacademy.ericsson.se/elists.
