HP + Autonomy is Unlikely

There was an active Enterprise Irregulars discussion on HP the last couple of days, which then caused me consider how HP could pull it off.

I don’t see how HP can do the deal for $10b in cash when that is all the cash they have and it’s looking like their debt is going to get downgraded, which will drive up their borrowing costs. Their stock took a 20% hit today so doing a deal in stock just got more expensive, a lot more expensive.

The more I look at it the more I come away less concerned about whether or not they should but rather if they can even get a deal done. Given the confidence issue there are a lot of big holders (27% of the stock is held by 10 funds) who are going to be very critical of any plan that Apotheker puts forward.

So it seems where they are is that a buyer for the PC business, which itself is estimated to reflect 13% of the stock valuation or about $6.4b at current valuation, will need to emerge in order for the Autonomy deal to go forward. In this economy who thinks that is a high probability scenario?

If the deal does proceed given the turmoil that HP finds itself in right now, it’s probably a bigger statement of uncertainty about Autonomy than any statement on HP.

Read My Lips: We Are Not Walking Away from WebOS

Today comes news leaked from an internal HP all hands meeting that the company is not abandoning WebOS, 15 months after acquiring it for $1.2 billion. This is how we get all our news about HP these days, leaked memos and meeting soundbites.

Watch for two main arguments being presented, the first by the tech pundit community and the second by HP itself in an effort to salvage whatever dignity remains after spending a lot of money on an acquisition that many people, including myself, said makes sense but then completely failing on the follow through.

First the tech pundits, who are centering on the IP is the main asset argument. In light of Googola that’s all we have been talking about for 2 weeks, right? So this simply has to be a no brainer for why WebOS is worth buckets of money… well maybe buckets of loose change.

It may well be that the remnants of Palm are sold off as a patent library but I have an impossibly hard time believing they will salvage even a symbolic victory from this. Estimates put HP’s acquired patent library at about 1,700 and for the sake of argument we can assume that they are predominately in the smartphone arena given Palm’s history.

Let’s say that 25% of those patents are coming up on end of life and another 25% are highly specific to Palm’s early devices and no longer relevant. So we’ll discount it by half and using Google per-per-patent benchmark of $550k per patent we arrive at a valuation of $467m, which is really dependent upon there being some competitive bidding for the assets otherwise it’s a complete fire sale. Not chump change but certainly a black eye for HP considering how much they paid for Palm last year, and then supported it through where we are today.

We also hear talk of licensing the WebOS… really? HP expects us to believe that HTC and Samsung are going to license an OS for which there is little app support, runs on hardware they don’t use (Qualcomm), is directly competitive with their other partners, predominately Android and Microsoft, and for which no hardware market success has been demonstrated? That’s the strategy?

I’m going to go out on the limb and just say right now that we have seen the last of WebOS (and when they go on clearance at Best Buy I am going to be in line to get one!).

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Lessons in Marketing – HP TouchPad

Today comes news about disappointing HP TouchPad sales numbers and I am not surprised given the weak marketing they have exhibited for this product. Like RIM’s failed PlayBook the HP devices suffers from a marketing initiative that fails to connect with what consumers want in a tablet.

HP and RIM both seem to believe that selling a device on the merits of technical dimensions matters to consumers… like multitasking and “plays Flash”. Who gives a shit?

Consumers want apps, fashion, and a tablet that is perceived as fun. The TouchPad is none of these and on the app front their efforts are particularly weak with no app store and a claim of “thousands of apps” yet the ones they feature are less than inspiring. For example, their social networking category has Facebook, WordPress, and two SMS apps… SMS and WordPress as social networking? Really? No Twitter?

If they don’t have a large app catalog then so be it but don’t focus on it as a feature which only serves to demonstrate the deficiency. Go all in on HTML5 and feature web apps that negate the need for downloadable apps but even then stay away from the technical discussion that consumers really don’t care about.

What is especially irritating about the TouchPad is that it actually looks like a really slick tablet and with aggressive pricing, a carrier strategy, and a less sucky marketing campaign they could probably do pretty well with it.

Google Going All In on Mobile

The tech media, and general media as well, is all a flutter about Google acquiring Motorola Mobility (note that this is one part of Motorola, the other being their Solutions group which is 2x the size of Mobility in terms of revenue).

Henry Blodgett thinks it will end as a disaster for Google and my good friend Larry Dignan provides 6 reasons why it makes sense.

I’m with Larry… this is about IP and what Google is doing is acquiring a massive IP war chest that they can use as currency for access to other people’s IP as well as protect their hardware partners with. If I’m HTC and Samsung this will ultimately be a good thing because the IP equivalent of the Allied Powers has just been formed.

Sure the hardware business is very different than software but Microsoft has proven they can co-exist so why can’t Google pull it off? Channel conflict will exist and the onus is on Google to demonstrate to key partners that they are not favoring Motorola but at the end of the day it’s not like these companies were competing on the basis of access to Android features, their competitive position is solely a function of their hardware and integration innovations.

In the end, I like this acquisition for Google and now all attention shifts to Microsoft and RIM.

 

HTML5 – A Wonder Drug

I was reading up on some of the commentary surrounding Amazon’s release of an HTML5 reader, one of the best comes from Constellation’s Charles Brett:

Amazon’s announcement of its Kindle Cloud Reader, based around HTML 5, is a wonder of irony. Apple has successfully been taking 30% of purchases made via anything bought through an app that was installed through the iTunes Store. In parallel it has denigrated Adobe’s Flash (albeit with some justice) as being insufficient for purpose while establishing a pro-HTML5 position as the ‘best’ way to move forwards. Many have been irritated by this ‘Apple knows best’ approach – but that is hardly new.

Looking beyond the immediate benefit for publishers of iOS apps as a result of Apple’s steep 30% cut of the action, HTML5 brings real and sustained benefits to anyone providing a consumer or business application.

  1. A single presentation layer that delivers mobile and web experiences… in other words, unification of the codebase which greatly simplifies application development and the capability to deliver a highly tuned user experience which is great for consumers.
  2. The “real estate” problem is satisfied through evolution of the “home screen web app” feature in iOS that will surely show up in Android. The two primary benefits of a downloadable app are the platform specific UX and the placement of an icon on the mobile desktop… HTML5 delivers the former while mobile platform enhancements are delivering the latter.
  3. The benefits for subscription businesses are evident, you don’t have to give Apple or anyone else their 30 pieces of silver, but for applications like Get Satisfaction that are a network of sites (we host over 60k communities) HTML5 is really the only practical way to deliver a mobile experience… otherwise we would face the impossible task of publishing thousand of mobile apps to support communities that demand a mobile experience.
  4. Hardware acceleration for media playback without having a wrapper plugin as a requirement.
  5. A bunch of other stuff opens up, like geolocation and local data storage, plus the code is cleaner because div codes are replaced with new structural elements and the spec has improved semantics which improves the ability for machine access.

There are disadvantages but most of those are a function of the language being a spec subject to ongoing development, and for media publishers the lack of a DRM framework imposes additional burden and media licensing issues forces compression in many formats to support multiple browsers.

I guess we should thank Apple for forcing the Flash vs. HTML5 issue and then imposing a punitive licensing scheme on their app store… both of which have conspired to catapult HTML5 into the foreground for developments of applications which have web and mobile experiences.

Google Voice Gets a Global Spam Filter

I seem to have missed the news last month that Google added a global spam filter to Google Voice but thanks to the well placed reminders in the app I discovered it today.

GVoice has had a spam capability for some time now and the way it works is really straightforward… you can mark any call or SMS message as spam and future calls or texts will go in your spam filter. You can also go hardcore and block a number, in which case the caller hears a “not in service” message.

The new global spam capability goes a step further by taking the calls and txts marked as spam and collecting them in a global database, which the Voice service then uses as it’s own form of a Do Not Call list. Google is crowdsourcing their list through the everyday activity that their users are already doing.

In effect Google has done what the government has spent millions of taxpayer dollars doing ineffectively with the Do Not Call list…

The End of the Beginning

Today Get Satisfaction announced that we have successfully closed a new round of financing, led by Bruce Cleveland at InterWest Partners. It’s a validating moment for all the hard work that the team has undertaken, particularly in the last year and a half.

Despite the fundraising process being a major MBO for me over the last 3 months, I find myself surprisingly “not in the moment” in terms of celebration. I think this is a result of realizing that closing the financing is not an end point but a starting point, and when you are at the stage we are in the expectations on us are focused exclusively on execution and competitive position. There simply isn’t a lot of time to celebrate what we did yesterday.

In other words, we’re past the point where figuring things out is a primary focus… and to the credit of our entire team this is why we had such a smooth fundraising process that closed in a reasonably short period of time. We have developed the business to a point where we know what we are selling, how our customers derive ROI, and we have a strong perspective on the market today and tomorrow along with where we fit.

We are no longer a startup… this most recent round of financing affirmed that we have crossed over to growth stage. This is a great accomplishment and represents an enormous collective effort by every single person in this company, and the company is a lot bigger, approximately 40 people up from 12 at this time last year.

From here on out we need to continue executing as well as we have been, establish an externally accepted competitive profile in a defined market, land-and-expand in our major customer accounts while we also continue driving customer growth on our zero-touch web channel, develop more distribution channels, deliver on a significant product roadmap for this year and next, and lastly, continue building a world class team.

“Now this is not the end. It is not even the beginning of the end. But it is, perhaps, the end of the beginning.”
Sir Winston ChurchillSpeech in November 1942

 

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SaaS 101: 15 Day Trials Suck

If you are starting a SaaS business and will offer a trial period for your application, be aware that the length of your trial period has real consequences that go beyond trial-to-paid conversation rates.

Here’s the issue, every trial in your account database will have 3 states:

  • Created in prior calendar month, converted in current calendar month.
  • Created in current calendar month, converted in current calendar month.
  • Created in current calendar month, will convert in next calendar month.

To contrast, a system built around a 30 day trial period has two states:

  • Created in prior calendar month, convert in current calendar month.
  • Created in current calendar month, convert in next calendar month.

Got that? 15 day trials create complex calendar math that needs to be built into every function that touches the trial process, like revenue forecasts, churn calculation, trial conversion %, etc.

This is not totally foolproof because of that pesky 28 day February so from a programmatic perspective you still have to build logic into the rules but from an operational business standpoint the 30 day trial period greatly reduces the complexity of forecasting around the day to day trial performance.