venerdì 5 ottobre 2012

Google vs. Microsoft

Google (Nasdaq: GOOG) envy should be sweeping across the technology world. Fourteen years after it was founded, the $38 billion Web search engine giant and online advertising company is still acting like a startup, and although rival Apple Inc. (Nasdaq: AAPL) is the world's biggest enterprise by market value, Google is actually the one that's pushing what I call real vs. incremental innovation.
Apple's iPhone 5 built on the company's legacy of highly successful smartphones and sold out in its first weekend. That was not really surprising; it's become a pattern with Apple and the mystique is wearing thin. Plus, few people see the iPhone 5 as revolutionary. The company's more recent products have mostly been very successful, but not one of them can be said to have indeed broken any new grounds -- from the iPod to the iPhone and the iPad, they've all been evolutionary developments on existing products.
Google's strategy has been somewhat similar (for example, the Android operating system and the purchase of Motorola Mobility) but the company has stuff in the works that point to its willingness to devote significant R&D resources to next-generation products and ideas. There are parallels to the Google story at Microsoft Corp. (Nasdaq: MSFT), which is also in online advertising, operating systems, tablets, and via its partnership with Nokia, in mobile handsets. Their business models are almost similar, but more on this below.
"Google's mission is to organize the world's information and make it universally accessible and useful," according to a statement on its Website, but in reality it recognizes no investment boundaries and has financed projects far removed from its core Web search business. It funded the driverless car, which has now received legislative support in three US states, including California, where governor Jerry Brown recently signed a bill authorizing the use of the vehicles following the establishment of specific rules and regulations. Naturally, Brown signed the legislation at Google's headquarters.
Google has even niftier products in development. The company's "smart glasses," featuring a head-mounted camera and display have wowed celebrities and fascinated ordinary consumers attracted by the idea of using voice command to take pictures, record video, pull up information, and display and control all these simply by tilting the head up or down. The Google smart glasses are not in production yet but prototypes have been seen in public and a few lucky folks have been able to test them.
If Google rolls out commercial versions of the smart glasses in 2014 as promised, many consumers will want them. The queue at retail outlets on its debut might be even longer than any of the extraordinarily long ones we've seen each time Apple launched an iPhone. That's why I believe Google is one of the companies best positioned to take on Apple, because it has clearly shown willingness and ability to compete strongly for market share in its traditional online advertising, mobile operating system and handset markets even while breaking away from the pack by investing in non-traditional markets. Watch the video below for a demonstration of Google smart glasses.

So, here's my prediction for 2013 and beyond. Apple will continue to rule in the tablet PC market but it will be less dominant in smartphones and may even lose market share here. Its story is also getting stale: revenue, profits, and stock price soared again this year and it released a ho hum iPhone, which everybody naturally wants, but what else is new and exciting about Apple? Unless it does something extraordinary -- introduce a completely new product or surprise us with a major improvement on an existing device -- the more exciting story of 2013 won't be about Apple. I suspect we'll all be more interested in the growing rivalry between two software-giants-turned hardware manufacturers: Google and Microsoft.
Google and Microsoft started out as software companies before branching into hardware. They are direct rivals seeking unorthodox ways to diversify operations and remain vibrant. They've also got legacy products spinning off huge cash they can tap for acquisitions and R&D, and have been willing to step outside their immediate markets to try new things. Inevitably, they have clashed in online advertising and operating systems, and will butt heads in tablets, mobile, and other futuristic products. That's a story worth watching.