Sunny Denver

Saturday we had our first snow of the year in Golden.  It was just enough snow to have a great snowy soccer game, but by the afternoon it was a nice sunny fall day.

After the storm passed, my family and I headed up Lookout Mountain Road to check out the snow, and on the way down I captured a quick shot of Downtown Denver illuminated by the sun peaking through the clouds, while the rest of the area was still in the shade.

Even on cloudy days, it is always sunny in Denver.

The End of the Independent Device Maker

Sony, Panasonic, Motorola, Nokia, Samsung, HTC. All big names in the consumer electronics market. All struggling to find relevance in a newly connected world.

Enter Apple, and Amazon?

Apple begin the revolution with the iPod, and iTunes. Vertical Integration. They added the iPhone, and soon after added an App Store to iTunes. And then the iPad.  And importantly (in the long run), the Apple TV.

Amazon joined the revolution along the way with the Kindle tied to their ebook store.  It really is 'an iPod for books'. And guess what, people still read.

Amazon has been busy building up their ecosystem. They've gone from selling paper books to becoming the market leader at selling virtual hosting services (EC2).  They've added cloud storage, and streaming video.

Today Amazon announced new Kindles, including a new 'tablet' Kindle, the Kindle Fire.  The Fire aims to bring the web, native apps, music, video, and books to the palm of your hand, all brought to you by Amazon's 'Cloud Services'.

The Kindle Fire and the iPad make interesting competitors, but that isn't really the point here. (Short Version, they can both win).  The point is, no one else can compete.

Barnes and Noble has some vertical integration with their Nook Reader, but they do not have anywhere near the ecosystem to compete with Amazon.  They are doomed to be an also-ran in this space, and will eventually lose.

Sony, Samsung, HTC, RIM, HP, Motorola.  None of these companies can deliver a product with this level of integration, this level of 'it just works'.  Apple has realized the power of this for a long time.  Amazon is a believer as well.

Does Google realize this?  Is that why they bought Motorola Mobility?  While there have been various reports about the justifications and plans for the acquisition, it is clear in my mind that their best long term play is to INTEGRATE with Motorola very closely.  Regardless of whether they keep Android Open Source, they should focus on Motorola producing 'the one true Android' devices.  But that isn't all.  Google needs to figure out how to deliver the rich set of media offered by Apple and Amazon as well.  Seamlessly.  I'm certainly not counting them out, but they have a lot of work to do.

What about Microsoft?  Well, aside from the fact that they are probably making more from selling Android phones then Windows phones (based on their Android licensing deals), they are still an interesting play.  Their movement into the gaming space (XBox) has achieved market share, if not financial success.  Their efforts with the Zune and their music services have built up some ecosystem.  I think they need focus, and to break from 'Windows'.  (Windows Phone 7, really?)  But I wouldn't count them out.  Yet.

However, if you are Samsung, Nokia, HTC, what can you do?  I'd focus on the parts business.

Who else is in the cross-hairs?  Netflix.  Amazon is building a solid competitor to their video streaming service, and with the device integration (Kindle Fire) and set top box integration, they are serious competition.

The pendulum is swinging back to vertical integration.  Nothing lasts forever, and I'm sure the pendulum will swing back some day, but I think we have a long road of vertically integrated devices ahead of us.

USA Pro Cycling Challenge 2011

USA Pro Cycling Challenge brought pro cycling to Colorado, including Golden.  I headed out to take in the race and capture a few pictures.  You can see all of my pictures here.

This was my first time shooting a cycling race, and I learned a lot about what works and what doesn't. I'm already looking forward to next year's race.

For more pictures, see the official gallery.

Racers go past 'in neutral' as they approach the rolling start.

Racers climb Lookout Mountain as the helicopter looks on.

The Stage 6 start line, just past the 'Welcome to Golden' arch on Washington.

Racers head out of downtown Golden on 13th Street on their way past Coors to Denver.

The winner, Levi Leipheimer, races past in the Yellow jersey.

Team Skil passes the 'Historic Downtown Golden' archway.

My Thoughts on Groupon

There is much hubbub around the internet yesterday and today about Groupon's announced IPO.  With their public S-1 we now have a window into their business, plans, and competitive concerns.

DHH has come out bearish on Groupon, both on twitter, and then summarized in a tumbler post.  DHH is relatively bearish on any business that requires funding, as he has successfully built (or helped build) a business, and an ecosystem, without splashy VC investments or IPOs.  He has some valid points, but many people will dismiss them based on the known bias of the source.

I read through much of the S-1 myself, and have have had two prior experiences consulting with companies with similar models.  Both involved selling x dollars for roughly x/2 dollars to be used at a given merchant.

On the face of it, the model should be very profitable.  You are essentially selling air (no inventory, no shipping, no fulfillment, etc).  You provide value by being an aggregator first, and by tailoring the presentation second.
  • Groupon is an aggregator as it has 83 Million subscribers (as of March 31, 2011), and 15.8 Million customers (cumulative as of March 31, 2011).  They obviously have a following. 
  • As they move from the deal a day model to targeted offerings, they are improving their ability to taylor the presentation.  Given our technology base today, their abilities here should only improve.
Selling air should be a great business right? You should have great margins, and since you just run a website, you should be raking in the cash!

Well, they are not.  While they have what would appear to be solid gross margins (40%+ in the first quarters of 2010 and 2011), they are still running at a loss.  Their big problem appears to be twofold.  Their cost to acquire a customer, and their cost to acquire a merchant.  Neither of these costs are part of the 'cost of revenue'.

For the 1st Quarter of 2011, here are the highlights:
(All #s in Millions)
Revenue: $644
Cost of Revenue: $374
Gross Profit: $270 (41%)

At this point, everything looks great.  This gross margin has been steady through growth (~45% in 1st Quarter 2010 on much smaller revenue (Q1 2010 was only 6% of the revenue of Q1 2011).

However, the two big scary numbers are:
Marketing: $208
Selling, General and Administrative: $178

These two costs alone consume all the margin and then sum, leaving a $116M loss before other operating costs.

What do these costs mean?

Cost of Revenue:
Cost of revenue primarily consists of the amounts paid to and accrued for our merchants associated with the sale of Groupons.
Therefore, this margin should always be steady unless they restructure their deals with the merchants.

Marketing: Pretty straight forward.  They 'buy traffic' via online adds and some offline adds.

Selling, General and Administrative:
Selling, general and administrative expense primarily consists of wages and benefits (including stock-based compensation), credit card processing fees, consulting and professional fees, depreciation and amortization and technology-related costs. Approximately 50% of our employees were part of our salesforce as of March 31, 2011, and their compensation represented a significant portion of our selling, general and administrative expenses. Our salesforce is critical to growing and maintaining our merchant base and is the main source for driving new Groupon offers. We expect that our salesforce headcount will continue to grow over time as we continue to expand our business into new markets, but that our sales and marketing expense will decrease as a percentage of revenue.
Essentially, convincing merchants to make offers, and the costs associated with the transactions.  50% of their employees are focused on convincing merchants to make offers.

I believe the success or failure of Groupon hinges on one question:  Do these costs sale lineally, or will they decrease (as a percentage of revenue) as they scale.  IE, once you acquire a customer, do you need to continue marketing to them?  Once you acquire a merchant, will they continue to provide regular offerings?

I don't know the answer to these questions.  Groupon fans will say they that they are 'scale up' costs and will decrease as a percentage of revenue overtime. Maybe.

I am not a personal fan of Groupon offers (although my wife is, which may really be the reason that I'm not!).  To me, they mostly involve convincing me to buy things I would not have otherwise purchased, or purchase them at stores I would not have otherwise shopped at. In the end, this has to be true.  Otherwise, the merchants that use Groupon are simply throwing money away.  Remember, if you pay $10 for $20 of merchandise/service, the merchant is only getting $5 for that $20.  Therefore, they must be getting 'follow on' value, either through additional purchases by you, or indirect marketing (purchases by others because you talked about it, etc.).  Because of this, I don't believe that the merchants will be highly sticky.  IE, I think the costs to sell offers will continue to be high, as merchants continue to churn through the system. 

On the other hand, I doubt there will be a huge churn in the subscribers.  They already have 83 Million, which is an impressive number.  But they only have 15 Million customers (still a big number, but less than 20% of subscribers).  Also note, the Subscribers are 'as of' March 31, 2011 while the customers are aggregate.  It would be interesting to see the number of repeat customers, and the subscriber churn.  Searches for 'turnover' and 'repeat' in the S-1 yielded no results.

With the current IPO market, I'm sure they will get a nice initial IPO pop.  People are starved for public tech companies, and there are very few new ones available at this point.  But will they become the next, or the next  Only time will tell.

I wish Groupon well.  As a former Chicagoan, and a friend of people who work with or for them, I hope they can prove out that their customer/merchant acquisition costs will reduce and become a profit powerhouse.  And we'll see how act 2 (Groupon NOW) and act 3 (?) play out.

Now in the Mac App Store...

My first commercial Apple OS X application, Playlist Export, is now live in the Mac App Store.  You can see the listing here (web summary).  Buy it now!

The application, Playlist Export, is a rewrite of my long time Open Source project iTunes Export as a native Cocoa application.  Since switching to an iPhone and MacBook Pro about 18 months ago, I've become increasingly interested in iOS/OSX development.  I was also interested in getting some first hand experience with the Apple App Store.

For those new to iTunes Export/Playlist Export, it is an application that allows you to export playlists from iTunes in a variety of formats with full control over how the playlist is created (file encodings, etc) and how the music files are copied (supports different directory structures, modifying paths, etc).

iTunes Export itself has lived across several implementations.  The initial implementation was a native Windows implementation (written in C#/.Net).  I received regular requests for a solution on OSX, so I eventually rewrote it as an Adobe Air (Flex) application for cross platform support.  With the release of a native OS X application, it probably makes sense to revert iTunes back to a native Windows application.  However, it isn't really very high on my todo list.

The initial sales of Playlist Export have been positive (I had VERY LOW expectation).  I released at at the lowest price point ($0.99 USD), so each sale doesn't bring me much revenue, but I wanted to give an opportunity for my beta testers and other followers to grab it cheap.  I plan on raising the price over time until I find the right tradeoff between price and units sold.  I'm curious to see where the price will end up.

I appreciate the donations many of you have made over time to iTunes Export.  If you have donated in the past and would like a free copy of Playlist Export, drop me an email at

Home Technology: Occupancy/Vacancy Lighting

With my recent move into a new home, I have the opportunity to install all sorts of cool technology.

With DirecTV's new Whole House Video solution, I didn't need to utilize my previous whole house audio/video solution, so I needed a new challenge.

The 'Problem'
I needed a new toy to install, and luckily for me my wife provided a great excuse.  You see, like many women, she is deathly afraid of light switches.  Or at least turning them off.  She's never explained it in so many words, I've just come to this conclusion based on the number of lights that are left on around the house for no apparent reason.

So I had my problem: find a way to keep the lights from being left on all day.  Option 1, convince my wife to turn them off.  I have many years of evidence demonstrating that this approach is ineffective.  Option 2, technology!

I researched different options, and it appears that Lutron and Leviton are the primary players in the residential Occupancy/Vacancy sensor space.  With the advent of CFL bulbs, I also wanted a switch that could control both traditional incandescent, as well as florescent and CFL bulbs.  Why do these types of bulbs need a specific version?  The short version is that traditional versions use the 'load' of the traditional bulb in their circuit.  The florescent/CFL bulbs do not provide the right load, yielding unreliable results (flickering lights or failure to turn on).  The newer versions instead require you to wire your switch to ground (Common), alleviating the need for the bulb to provide the correct 'load'.

Based on my research, I chose to use Lutron switches.  I wanted both traditional switches, dimmer switches, and a 3 way switch, all with an occupancy/vacancy sensor.

Occupancy or Vacancy?
These switches consist of a toggle button, and a sensor.  The button is used to manually operate the light, while the sensor determines whether there is anyone in the room.

Occupancy switches turn on when you enter the room, and turn off when you leave.  Vacancy switches require you to turn on manually, but will turn off automatically when you leave.  Both can always be operated manually as well.

Some switches only do Occupancy or only do Vacancy, while some are programmable.  The switches I chose are programmable.

The Switches
I used three different models from Lutron:

  • Traditional Switch: Lutron MS-OPS5AM
  • Dimmer Switch: MS-OP600M
  • Accessory Switch (for 3-way): MA-AS 

I bought some from from Union Lighting, and some from SmartHome.  Union Lighting was slightly cheaper, but drop-shipped directly from Lutron, who was back ordered.  So it took a couple weeks, but they arrived just fine straight from the manufacturer.  SmartHome shipped from their own warehouse and came in about a week.

Both switches sold for between $35 and $40, while the accessory switch was between $25 and $30.

The installation is pretty straight forward IF you have a ground wire in your light-switch junction boxes. Since my current home is newer, I had a common wire in every junction box.

The wring is pretty straight forward.  Unlike traditional switches, you need to know which is the line (source) and which is the load (light fixture).  Visual inspection in each of my junction boxes illustrated this easily (the line was always tied into a wiring nut with several combined wires while the load always ran directly out).

Wiring in the common (ground) wire required an extra 4-6" length of electrical wire, which is not included.  I had a few scraps in the basement from previous projects that I was able to use.

The 3-way install was a little more complicated.  It took some careful reading of the instructions, and unlike traditional switches, the runner wires (that run between the two switches) must be on the same connector on each switch.  I missed this my first time around and it took me a while to figure out.

In most of the cases, the biggest challenge was adding a new wire to the combined bundles already in the box getting the wire nut back on, and then fitting the wires and the rather large new switch into the box.

I installed a mix of occupancy and vacancy switches.  In small/utility rooms (washrooms, closets, laundry room, garage) the occupancy switches work great.  I love being able to walk into a closet, or through the garage carrying something without worrying about the lights.

I used the vacancy switches in the master bathroom, where I didn't want them to turn on automatically all the time, but where they often got left on all day.

I have been very pleased with the lights.  They've worked really well, and I love never getting home to find a light has been left on all day.  But I really enjoy having the lights turn on automatically in the rooms configured with occupancy lights.  It seems like a small thing, but it makes every day activities easier.  It's wonderful to not have to worry about slapping the light switch as you walk through or into a room with your arms full.

The switches are not cheap, and I don't plan on installing them in any of the 'main' rooms in the house (Kitchen, Family Room, Dining Room, etc.) but I think they are a great addition to bathrooms, utility rooms, and walk-in closets.

Golden Fire Summary

While the fire is not out, the Evacuation Warning for my neighborhood has been lifted, and Golden has enjoyed clear skies for the last 36 hours.  So while the fire isn't over, its direct impact on me is. I wanted to capture my thoughts and experiences while they were still fresh...

The fire, known as the #goldenfire on Twitter, or the Indian Gulch fire in the media, was first visible during the morning of Sunday, March 20th.  I first noticed it late Sunday morning while near Lookout Mountain.  The fire was not far from our home, so we headed home quickly to see what was happening.  Upon arrival we were greeted by two messages on our answering machine.  The first message notified us to evacuate immediately!  The second message (approximately 30 minutes later) notified us that we should simply prepare to evacuate, but that evacuation was not necessary at this time.  We were glad we were not home to get the first call!

Smoke from the fire was clearly visible from our house, so I grabbed my camera bag and headed outside.  This was the view just outside my house:

I continued around the block, and in addition to seeing many of my neighbors, I was greeted by the view of a helicopter refilling its water bucket from a small pond just behind a neighbor's home.

There was a small contingent of Golden Firefighters supervising the operation and keeping us from getting too close.  However, they did allow us to get quite close, and I was able to get several pictures of the helicopter in action:

Throughout the afternoon, the fire kept threatening to come over the ridge and down the hill towards our homes. Here are a few pictures I took from our neighborhood:

The helicopter was dropping most of the water on the other side of the ridge, but I did catch a shots of the helicopter in action:

Sunday was a very tense day. I spent most of the day watching the helicopter work, and meeting many of my new neighbors. Throughout the day, all of my information about the fire came from the Police, Firefighters, and Park Rangers on site, and Twitter. Twitter deserves some special mention.

My first tweet about the fire didn't contain the #goldenfire hash tag. But after searching twitter for 'Golden Fire', I found that the #goldenfire hash tag was being used, and started adding it to my tweets. After a little while I took a break and uploaded some of the pictures I took and posted them both on twitter and on SmugMug. Many of my twitter updates (tweets) were quickly repeated (re-tweeted) by others in an effort to share the experiences I captured.

Twitter quickly became my go-to resource for updates on the fire.  Special mention also needs to go to Misty Montano, who is the Digital Content Manager @ 9News. She created a Storify page on the fire, aggregating many different social media sources to create a summary view of many different news sources. Thanks for your efforts Misty!

Sunday evening, the fire still seemed to be right on top of us. I set out to see what I could see, and was able to capture this picture from just around the corner from my house:

I think this image really illustrated the fear that many residents felt as the fire loomed over our neighborhood. It must have struck a nerve, as the version I posted on twitter has over 6,000 views in the 4 days since I posted it.

The helicopter did a great job of draining the pond Sunday afternoon, and the Golden FD used a pump truck to refill the pond Sunday evening and throughout the day Monday to enable the helicopter to continue to operations.

Sunday evening was a stressful night. The smell of smoke permeated our house, and we were concerned we would get a call in the middle of the night instructing us to leave. Fortunately, that was not the case.

I stayed home from work Monday, with the expectation that we would need to leave some time during the day. I spent much of the day walking through the neighborhood, taking pictures, and talking with my neighbors.

Monday brought out news crews, and many more Firefighters. Here is a picture of a news conference:

After the news conference, the news crews stuck around to get some reactions from local residents:

Monday afternoon the winds began to pick up, and hampered both helicopter operations as well as press conferences:

Fire crews were also visible from our neighborhood on the ridge between us and the fire. Here is a picture of a Fire Fighter keeping watch on the ridge:

As the winds picked up, the smoke began to engulf the Northern part of Golden. This view from my neighborhood looking Northwest shows just a part of the huge smoke cloud.

Monday evening I drove around Golden to better understand the scope of the fire. The first picture is from Mount Zion to the South of the fire. You can see the burned out valley, with a few remaining open fires in the valley and a significant amount of smoke in the sky above.

The second picture, from North of the fire, shows more active fires.

By Monday night there was hope that life may go on, as I posted on twitter: "All is quiet in Mntn Ridge tonight. Everyone going about their lives. Winds still blowing, a few news and fire trucks around. #goldenfire"

It was still tough to sleep Monday night. We still believed that evacuation was extremely likely. But Tuesday morning came, and I headed back to work in an effort to be optimistic and hopeful that we could return to normalcy. However, high winds Tuesday afternoon, as well as pictures of Firefighters digging trenches behind the houses in our neighborhood, sent me home early. Luckily, this proved unnecessary. But high winds Tuesday night were a big concern. I posted: "Stopped on mt Zion for a picture. So windy I can't get my door open. Car is rocking back and forth. Getting seasick! #goldenfire"

Wednesday morning, after an afternoon and night of high winds without the fire getting significantly closer to us, brought some confidence that things may be improving. Life began to return to normal, and I was able to go for a run in Golden without choking on smoke. I posted "Hard to tell the #goldenfire is still burning from mountain ridge, other than the helicopters and planes flying overhead."

Conditions continued to improve Thursday, culminating in the cancellation of the 'prepare to evacuate' order at approximately 5:30 on Thursday evening (tonight).

The response to this fire was impressive on many fronts. All of the Firefighters did a great job fighting the fire, the Police were on scene making sure everyone stayed calm and kept their distance, as well as the Jefferson County Sheriff and Jefferson County Open Space Park Rangers. There were also many folks working behind the scenes, including the Golden Public Works, who ensured that the Golden FD could continuously refill a pond while maintaining water pressure throughout the town.

Social Media, particularly Twitter, was a great resource. I was able to share what I observed, and learn what others in and around my community were seeing. The information on Twitter was generally accurate, and usually more timely than other resources. I was even able to scoop the major news organizations (by about 3 minutes) on the first evacuations.  I found Twitter useful before, but this week I found it critical.  There is no other resource available today to share experiences and information about an event like this.  And its already impressive penetration rate increased, as I noticed several people opening new accounts (family members included) to follow the news.  My friends throughout the country were able to follow the situation and send notes of encouragement.  Thanks to everyone that checked in with me!

Special thanks goes out to the City of Golden, specifically our Mayor and Councilman. They made great use of Twitter, as well as checking in with us in person. Thanks @jacobzsmith and @GoldenBilFish! Golden even streamed their special City Council meeting tonight online (as they do with all their City Council meetings). Progressive Government!

Here is Jacob Smith, our Mayor (in the green shirt on the left), checking in on the situation Sunday afternoon:

You can see all of my pictures in these two photo galleries:
Golden Fire
Golden Fire Day 2

While I'm proud of the pictures I took, there were some really great pictures taken by Jeff Warner, one of my new neighbors that I met this week. Here are the links to his pictures:
Indian Gulch Wildfire Heli Ops
Indian Gulch Wildfire at Night
Indian Gulch Fire Day 2
Indian Gulch Fire Night 3
Indian Gulch Wildfire Day 4

There were many other people posting pictures, and the local news organizations were able to capture some impressive shots, but it was my neighbors and the updates on Twitter that dominated my attention.

Our neighborhood is thankful to everyone who helped out, and signs thanking the Firefighters could be found throughout our neighborhood Thursday evening:

Looking back, it was an event that had a very significant emotional impact on me, while (thankfully) having no lasting effects.  It can be tough to handle the stress of a situation that you cannot impact, and I found the constant low-grade stress exhausting.

I also found it instructive on how much more significant local events are.  In the days before the fire, I was obsessed with the Earthquake, Tsunami, and Nuclear problems in Japan.  From Sunday morning through Wednesday night, Japan completely dropped off my radar.  But in the end, my 'crisis' was trivial compared to the devastation they face, which only further illustrates how lucky I feel.

Thanks again to everyone who has helped (and continues to help) fight this fire, and others throughout Colorado and the United States.  Thank you for keeping us safe!

Golden Fire Day 2

I've started a separate gallery for today's pictures, check them out here.

Golden Fire Highlights

This morning I took a second look at some of the pictures I took yesterday.  I've updated the original photos here and added a new one.  As part of cleaning up the pictures, I identified a few of my favorites:

Golden Fire

A large fire is burning in Golden today.  My neighborhood is under the threat of an evacuation.  While the fire has not moved closer today, tomorrow is an unknown with possibly higher winds.

I took quite a few pictures today.  You can see them all here.  Follow me on twitter for real time updates.

May be tough to get to sleep tonight...

Java Email Server Gets a New Home

Nearly 10 years ago I created a fork of the CSRMail project, with the permission and encouragement of Calvin Smith, the project's founder.  The new fork was called Java Email Server.

Java Email Server (JES) started as a 'scratch the itch' project.  I wanted to run an email server on my home Windows computer to host a few different email domains.  I found the available options overly confusing or expensive, so I developed a solution to meet my needs.

The initial goal of JES was to solve my problem, and that problem was: "I want an easy to setup email server to host a few small domains".  Over time, I have worked with the community to add features and fix (many) bugs, while working to keep JES a simple and easy to use solution.

JES has also been an interesting learning experience as a developer.  It is a project I've worked on for 10 years now, a period that has seen my experience and capabilities change significantly.  The code base is often a useful exercise in humility.  I appreciate all the contributions the community has made over the years, not only to JES, but to my skills as a developer.

The JES community has contributed other projects, including a JES Plugin for Eclipse.  JES has found a home in production systems, and as a tool for many development teams, assisting the testing process of systems that interact with email servers.  With 50,000 downloads of the binary versions of the 1.x branch over the years, JES has reached a lot of users.

JES even spawned my first commercial software offering, Simple Mail Processor.  It provides an API to process incoming SMTP messages, useful in systems that need to act programmatically on incoming email.

Over the years, many contributors have come and gone.  But for the past few years, one developer has picked up the ball and really run with it. Andreas Kyrmegalos developed the 2.0 branch of JES, bringing it into the modern era with the addition of many much-needed features (like SSL)!

I have decided to hand over control of the JES project to Andreas.  I'm confident he will do a great job, as he has been doing for the last few years.  And more importantly, with me out of the way, he will be able to bring releases, features, and bug fixes out much more quickly.  The project will remain hosted at SourceForge, but the main HTML page will also be hosted at SourceForge instead of on my site.

My site will continue to host the original 1.x branch releases and documentation, but all current (2.x and beyond) releases, documentation, and discussion will take place on the SourceForge project page.

I wish Andreas and the JES community the best and hope that the project continues to thrive.

I'm still happy to help any JES 1.x users with issues or critical bug fixes, but the 1.x branch is firmly in maintenance mode and no new development will be occurring on it.  Since JES 2.0 now requires JDK 1.5, the 1.x branch also continues to serve as the JES solution for older JDKs.

Why Microsoft is Jealous of Apple

Microsoft has been struggling to find a new line of revenue that will 'move the needle' for more than a decade.  Their stock price has gone down 8% relative to 10 years ago.  As a comparison:

  • AAPL (Apple): +3,701
  • AMZN (Amazon) : +903%
  • GM (General Motors): +8%
  • PG (Proctor and Gamble): +87%
Source (1/21/2010)

Not only have technology companies wildly outperformed Microsoft so have large US stalwarts like GM and Proctor and Gamble.  GM even pulled that off despite bankruptcy protection!  Microsoft is struggling for Growth.

Microsoft's revenue by division in the latest reported quarter (Q2 2011 - Ending 9/30/2010):
  • Windows and Windows Live: $4.76B
  • Server & Tools: $3.96B
  • Business: $5.126B
  • Online services: $0.527B
  • Entertainment & Devices: $1.8B

The vast majority of Microsoft's income comes from the same place it has for years: Windows, Windows Server, and Office/Exchange.

There is little growth potential for these businesses (at least in the Western world) as they are nearly a monopoly in the Windows and Office/Exchange business lines.  And these lines of business are under new attacks on several fronts.

Windows: Mac OSX, Netbooks, iPads, Android Tablets (soon), and Chrome OS (soon) are or soon will be increasing their market share.  While it is not one to one, the growth in this area will diminish the Windows market share.

Office/Exchange: The advent of hosted solutions, primarily from Google in the form of Google Apps (Email + Office) enables smaller (and now medium size to large) companies to utilize Google as an alternative to the Office/Exchange monopoly.

Microsoft has focused on new fronts, such as Search (Bing), Mobile (Windows Phone 7), and Gaming (XBox) to provide growth (or backfill slowing growth).  But when you look at the current picture, less than 15% of its revenue comes from outside of the three major cash cows.

The picture looks even worse when you contrast it with Apple.  In Apples most recent quarter (one after the above MS quarter), Apple reported $2.79B in revenue from the iPad.  The iPad, less than a year old, has already surpassed the revenue of all of Microsoft's new endeavors.
(Apple revenue source)

So Microsoft, in a decade of attempting to find new revenue, has come up with less revenue than Apple has in the 3rd quarter of a new product that was nearly universally shrugged off by the tech reporters.

Microsoft needs to launch an iPad sized product every other year to regain anything near its previous growth.  Apple has done that for nearly the entire decade.  Microsoft has maybe done it once, with the XBox 360, after many years of investment.

This is why I think MSFT will still be a $30 stock in a decade, while Apple will have another decade of 4 digit percent growth.


Photography has been a hobby of mine for the past few years.  I decided to post some of my favorite shots on my website.  You can view them here. The header image for the site was also created from one of these images.

Here are a few samples: