World’s most valuable company on August 20, 2012

As the day dawned and stock markets opened, Apple shares went up by $16 to $647 and made it the most valuable company worth $623 Billion. It beat its next rival Exxon Mobile. Towards the end of 1999, Microsoft was worth  $616B, but its value now is $257B, less than half of Apple’s value. Who could have imagined this ten years ago? Apple was derided as the company that paints PC’s (multiple color workstations) for a living.

I have written before on Apple’s rapid growth and success. After Steve Jobs returned to Apple the second time, he revived the sinking ship and then started new categories that became market leaders. The new MacBook Air started a new trend in light-weight, sleek design with its ultra-fast operating system. No longer one has to wait minutes for the system to boot up. Then came the iPod that turned the music business upside down. Then followed the new leader in smartphone – iPhone which saw huge success year after year, contributing almost half of the revenue. Then Jobs introduced the iPad, the first tablet with touch interface. In spite of critics who doubted its success, it defied gravity in terms of sales and profit.

Apple started its stores to sell its own products. When a board member objected saying, “Brick and Mortar stores are bad business”, Steve Jobs replied, “we are not talking of brick and mortar. It will be glass and steel”. The Apple stores became a runaway success. It’s all about user experience and aesthetics in design. Customers are willing to pay higher price to get that experience. Apple’s products stay high in price and yield big margins for the company. Also, Steve lead a sixth category in animation technology via Pixar. He bought the company from George Lucas for $10M and sold it years later to Disney for $7B.

Apple deserves to be the most valuable company, due to its innovation, design, and superior products. It also has a tremendous leadership team which was shaped by Steve Jobs before hos death. Today he would have been so proud to see his company become the number one in value.

Yahoo – the CEO drama continues

Four CEOs in five years! Yahoo was a symbol of innovation and success in its first few years of life. Founded by two Stanford Ph.D. students (Yang and Filo), Yahoo defined the Internet era of communities and sharing. It still has an enviable community using various services like email, finance, news, etc. It has lost much advertising dollars to Google. Terry Semel came from Hollywood and wanted to make it a media company. That did not work. Terry flew in every week on a private jet from LA to San Francisco and was driven in a limo to work every day. His compensation was way higher than many other CEOs at similar valley companies. Jerry Yang returned as CEO for the second time and botched up a lucrative offer from Microsoft. Yang was no Steve Jobs on his second return to the company he founded. He turned down the Microsoft offer to buy Yahoo at $47 per share (current share is $15.50). There was indeed an “identity” crisis at Yahoo.

Then came Carol Bartz and she talked tough and tried to straighten out the confusion, but results did not show any positive impact. She was let go last year, after being fired over phone from the board chairman. Then the board picked Scott Thompson, a well-reputed executive from Paypal (eBay) to head the company just a few months ago. He started reducing redundancy and bring clarity to Yahoo’s core business. He let go 2000 employees recently. Several top skills left the company. As he was settling in, came the news that his resume had information on his degree that is not right. Most likely that error existed for a while, but one disgruntled investor questioned his integrity and the board on not doing due diligence before hiring him as CEO. Yahoo and Scott did a poor job responding to this and the result was his departure yesterday.

With all the business problems at Yahoo and its anaemic growth, a strong leader is needed to refocus the company on what it is best at – innovating new solutions for keeping the community loyal. After all, Yahoo gave many technologies such as Hadoop and HDFS in managing Big data. Without a strong execution-oriented CEO,  it will fade away like many dot-com era companies.

It is hard to believe that Yahoo was once valued at $100B (current valuation $18.9B).

Big Data

The phrase “Big Data” is thrown around a lot these days. What exactly is referred to by this phrase? When I was part of IBM’s DB2 development team, the largest size limit of a DB2 Table was 64 Gigabytes (GB) and I thought who on earth can use this size of a database. Thirty years later, that number looks so small. Now you can buy a 1 Terabyte external drive for less than $100.

Let us start with a level set on the unit of storage. In multiples of 1000, we go from Byte – Kilobyte (KB) – Megabyte (MB) – Gigabyte (GB) – Terabyte (TB) – Petabyte (PB) – Exabyte (EB) – Zettabyte (ZB) – Yottabyte (YB). The last one YB is 10 to the power of 24. A typed page is 2KB. The entire book collection at the US Library of Congress is 15TB. The amount of data processed in one hour at Google is 1PB. The total amount of information in existence is around 1.27ZB. Now you get some context to these numbers.

When we say Big Data, we enter the petabyte space (1000 Terabytes). There is talk of “personal petabyte” to store all your audio, video, and pictures. The cost has come down from $2M in 2002 to $2K in 2012 – real Moore’s law in disk storage technology here. This is not the stuff for current commercial database products such as DB2 or Oracle or SQLServer. Such RDBMS’s handle maximum of 10 to 100 Terabyte sizes. Anything bigger would cause serious performance nightmares. These large databases are mostly in the decision support and data warehousing applications. Walmart is known to have its main retail transaction data warehouse at 100 plus terabytes in a Teradata DBMS system.

Most of the growth in data is in “files”, not in DBMS. Now we see huge volumes of data in social networking sites like Facebook. At the beginning of 2010, Facebook was handling more than 4TB per day (compressed). Now that it has gone to 750M users, that number is at least 50% more. The new Zuck’s (Zuckerberg) law is , “Shared contents double every 24 months”. The question is how to deal with such volumes.

Google pioneered the algorithm called MapReduce to process massive amounts of data via parallel processing through hundreds of thousands of commodity servers. A simple Google query you type, probably touches 700 to 1000 servers to yield that half-second response time. MapReduce was made an open source under the Apache umbrella and was released as Hadoop (by Doug Cutting, former Xerox Parc, Apple, now at Cloudera). Hadoop has a file store called HDFS besides the MapReduce computational process. Hadoop therefore is a “flexible and available architecture for large scale computation and data processing on a network of commodity servers”. What is Redhat to Linux is Cloudera (new VC funded company) to Hadoop.

While Hadoop is becoming a defacto standard for big data, it’s pedigree is batch. For near-real-time analytics, better answers are needed. Yahoo, for example, has a real time analytics project called S4. Several other innovations are happening in this area of realtime or near realtime analytics. Visualization is another hot area for big data.

Big Data offers many opportunities for innovation in next few years.

Happy New Year

As we begin the second decade of the second millennium, the ray of positive hope in the tech sector is starting to shine brighter. The stock market has seen a decent rise in the tech stocks during 2010. Just see Apple, Oracle, Cisco, Google, and several others.

The most interesting barometer of success at private internet companies like Twitter, Zynga, and of course Facebook, is the valuation and recent inflow of investments. Twitter had an infusion of $200m, mostly from Kleiner Perkins ($150m) just before the year-end at a hefty valuation ($10B?). Then we heard that Goldman Sachs and the Russian investment house Sky Digital just put in $500m in Facebook at an unheard of valuation of $50B. Goldman Sachs wants to offer its most-valued clients to invest in Facebook (at a minimum of $2m a piece), with the hope that when it goes for IPO (most likely in 2012), the investment will sky-rocket, much like what happened to Google back in 2005. Goldman Sachs wants to raise $1.5B from this investment. The current valuation of Facebook makes Mark Zuckerberg worth $14B, at the ripe age of 26. Incredible, isn’t it?

Where does that leave a company like Microsoft of yester-years? It’s stock has not moved in years and there does not seem to be any exciting new stuff coming. They have missed the Tablet market (specially after the high velocity success of the iPad), and they have no presence in the mobile market, the two big winners being iPhone and Android. Their revenue still depends on the Windows and Office products, with Sharepoint doing well for enterprise. Ray Ozzie, the chief technologist is gone. So all his attempts on cloud computing will be left with no leader pushing it at the top. Apparently investors don’t see high value in the future, given the poor movement of their stock price.

Oracle, on the other hand, seems to march forward with better results giving their stock a good run in 2010. They won a court battle against SAP getting a compensation of $1.3B plus  interest. That would be a nice add-on to revenue. They are into full “cloud-in-a-box” game with Exalogic Server line. Mark Hurd is leading the charge of bringing hardware-software blend into market success.

So this decade will be interesting to watch. Exactly ten years back, the landscape was quite different. New successes like Netscape and  AOL have gone or become irrelevant. Sun, the rising star in the dot.com exuberance is also gone. Yahoo the big leader then,  is stumbling along and there is a rumor of replacing Carol Bartz. Many dot.com era companies have become history. As they say, the tech landscape goes through a metamorphosis every ten years. Back in 2000, there was no Facebook, YouTube, Twitter, Zynga, or Groupon. I am sure we will see many changes ten years from now. But we have a good start in 2011 with much excitement happening in the software tech sector. Innovation is back and there is no lack of investment dollars. So no complains.

Happy new year!

 

Musings on a hot summer Friday

The summer heat is here finally, temperature likely to hit 100 in south bay today, July 16th, a Friday. The stock market behaves as erratically as ever, going south at every little hint of an economic slowdown.

Steve Jobs finally owns up the antenna issue for iPhone4. I got mine on the first day after standing in line for hours (pre-ordered). Someone suggested that I get the case to protect the glass from touching any surface, as the new phone is flat compared to the 2G or 3G with a curved backside. So I did put on the side covers and guess what! I had no problems of dropped calls, my fingers never touched the left side antenna spot. But I am going to get that refund for the cover I paid for.

Google had their earnings yesterday and the search business saw reduced growth. Google has always been a “one trick pony” and all their attempts at diversification has failed so far in terms of revenue growth. The hope is lying on the new mobile phone platform Android. They are more threatened by Facebook and Twitter. I also learnt that the second most used search engine is guess who – Twitter. Users there, like the real-time search that has relevance as opposed to the classical “page-ranking” scheme from many years ago that Google pioneered. A bunch of static pages with wide variety of results is no longer viewed as exciting. Microsoft’s Bing is also gaining market share at the expense of Yahoo.

Then there is the news of Larry Ellison’s failure to take ownership of the Warriors basketball team which plays at the Oracle arena in Oakland (Oracle paid $30m for the name for ten years). The sale price for the Warriors was a record $450m in NBA’s history.

Fortune names ten top names in technology with Steve Jobs at number one. But Mary Meeker? Hello! When did “reporting progress” become  more interesting than “making progress”? There is Jim Bryer of Accel Partners and Zuckerberg of Facebook in the list.

Some folks think we are starting another boom time in Silicon Valley with new rising stars such as Twitter, Zynga, etc. The unemployment scene is still dismal. I liked Andy Grove’s view of the unemployment situation and his recommendations of bringing back factory work to the US. He recommends “job-centric” leadership to bring back jobs here.

Finally, the World cup soccer season is over and it was good to see Spain win the trophy for the first time.

Midsummer Musings – Yahoo

We are in mid-july of 2008. As the Silicon valley sun gets unusually hot, the temperature at Yahoo is rising fast with Carl Icahn and Microsoft renewing their attacks and new acquistion-plans. The August 1 board meeting is fast approaching and Icahn would like shareholders to vote for a full replacement of the  Yahoo board. With a brand new board under Icahn’s chairmanship, future negotiations with Microsoft would become easier. That’s the theory.

Over the weekend, I met couple of Yahoo employees in a social context and its hard not to bring up what’s going on. The remarks from inside is to really see that Yahoo stays as an independent company with its great community and brand undiluted. Yahoo pioneered the notion of a community, way before Google (which does not have a community like Yahoo, but lots of adsense-paying clients) or Microsoft. To fight Google’s rapid progress to the cloud computing world, Microsoft is desperate to find a way and it thinks Yahoo brand can help it.

I think if Yahoo can have a leader such as Mark Hurd at HP ( no nonsense, heads down, operationally savvy) to steer its future, it can still become a greater company with its talents and core technologies.

We will watch how this soap opera ends up at the August 1 board meeting.