About Me 0119: Making Money Internet

MSFT Rising With Markets
The markets are staging a wild rally as lower yields in Italy and strong housing numbers are producing a major snap back from yesterday. Shares of MSFT are up, although less than the rest of the tech market. Upcoming catalysts include Windows 8 next year; entrance into the tablet market; Windows Phone 7 / Mango rollout and adoption with hardware partner Nokia; strides against current market leaders in cloud computing; making money in the online business, including integration of Skype and improving the search / display business; and continued evolution of Kinect and next generation Xbox. The stock currently trades at 6.9x Enterprise Value / TTM Free Cash Flow.

To Compete In The Cloud, Microsoft Will Have To Sacrifice Margin (Bloomberg)
Microsoft’s push into cloud computing will help the company compete, but it also will hurt profit margins. The company’s cloud software lets corporate customers pay a subscription to manage data with software stored and run on Microsoft’s servers. The cost of which means the company may miss profit estimates for fiscal 2012 according to Goldman Sachs analyst Heather Bellini. That said, no financial data has been released on how Microsoft is doing in the space. If the company really wants to convince the world that it's serious about cloud, it should tell the world how those products are doing.

Bing Gains Search Share At The Expense Of Partner Yahoo! (comScore)
Bing has managed to gain enough market share that it's basically tied for the number-two position in U.S. core search. Unfortunately, those gains have come from its partner Yahoo, rather than its competitor Google. The bigger search picture is still the same, however. Google dominates with more than 65% share, and the Microsoft-Yahoo deal hasn't really dented that. At least it didn't gain any share this month, unlike the previous two.

Chrome Dethrones Internet Explorer As The Most Used Browser (ComputerWorld)
Google Chrome continues its incredible rise, finally overtaking Microsoft's Internet Explorer as the most-used version of a browser, according to a study done by StatCounter. This only applies to Chrome 15 overtaking Internet Explorer 8. If you lump all versions of all browsers together, Internet Explorer still has the greatest marketshare: Chrome 15 (24%), Internet Explorer 8 (22.9%) and Firefox 8 (14%).

Based On DCF Valuation, Microsoft Is Highly Undervalued (Seeking Alpha)
Based on discounted cash-flow methodology (which you can derive and justify any valuation you want), Microsoft is significantly undervalued. Fair value is $39 per share, a significant increase over current levels. Microsoft has an excellent combination of strong free cash flow generation and low financial leverage. Free cash flow margin should average about 29.4% in coming years. Total debt-to-EBITDA was 0.4 last year, while debt-to-book capitalization stood at 17.3%. And the firm sports a very nice dividend yield of 3%+.

Brisbourne is not a naysayer. He does indeed believe in the potential for future applications on a next-generation wireless network layer for M2M, enhancing the capacity for the types of real-world applications that KORE Telematics provides - which, by the way, include cross-country shipping vehicle tracking, mobile payment processing, and industrial equipment monitoring. What he tells us, in this first of a three-part discussion (in which, fair warning, I do share my personal opinion), is that there are certain real-world applications where the Internet analogy does not, and should not, apply.

Alex Brisbourne: It's fair to say there's all sorts of terminology out in the marketplace. "Internet of Things" seems to have caught on a little, and as a result, has got many fathers with regard to who really invented the phrase - [who hail from the realms of] embedded devices, traditional devices, and obviously traditional M2M. But really when we come down to it - whether we're operating at business level or consumer level, whether it's a centralized app, whether it's sitting on a portable device or on a back-end server - we're really doing nothing more than facilitating remote data access, and then turning that into actionable information in some sort of application. So increasingly, we're seeing that the excitement is ultimately [about] how remote data collection is becoming part of mainstream business expectation over the next three, four, five, maybe ten years, as businesses look to differentiate more - clearly to save costs - by becoming more efficient.

I think up until now, a lot of what's happened in M2M has been about saving money. But I think the next generation is all about making money, in terms of inventing new services. Clearly, no matter how sexy the application is, you can't connect [devices] without reliable and broadly-based connectivity. So I think the maturation of cellular, and to a certain extent, satellite networks, to be able to play a part in this - cost-efficiently, easily deployed, and with a reasonably high degree of reliability - will be the thing that gets [M2M] onto everybody's radar screen over the past two to three years... despite the fact that we [KORE] have been doing it for almost ten, I suppose, and watched some of the growing pains that organizations have had to endure.

Scott M. Fulton, III, ReadWriteWeb: Well, you have to credit Google and IBM to some extent, even though they're really not as involved in the business as you are, with trying to popularize the concept and get it into the public conscience. For you and me trying to evangelize folks on this topic through the '80s and '90s, it was like rolling logs uphill. What they've managed to do is popularize the concept by giving it a kind of science fiction theme.

About Me 0119

Monday, December 26, 2011

Making Money Internet

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