Web Economy Predicted to Double by 2016

According a recent study by Boston Consulting Group and web giant Google, the web economy of the G20 should double by 2016.

That means the current $2.3tn will likely hit $4.2tn in a few years time and due mostly to the rapid rise of mobile internet access.

Some statistics from the study:

  • in four years 3 billion people will be using the internet, (nearly 50% of the world’s population).
  • every year about 200 million people go online for the very first time
  • traditional internet access via a desktop PC will seriously decline
  • by 2016 about 80% of all internet users will access the web using a mobile phone (due to cheaper smartphones)

The ‘new’ internet

In 2010, the internet economy of the G20 group of leading nations was worth $2.3tn, which is impressive but still only about 4.1% of the total size of all G20 economies. The research done by the Boston Consulting Group lists some characteristics of the “new internet” in 2016 as follows:

  • web access will be mainstream and the standard
  • the majority of web users will live in emerging markets (China is expected to have 800 million people using the internet by 2016)
  • about 80% of all internet access will be from the mobile
  • the internet will go more social allowing customers and companies to engage with each other
  • there will be a substantial rise of the “internet of things” – all kinds of devices from sensors to cars to radiators will be connected to the web
  • Technology giant IBM estimates that by 2015, one trillion devices will be internet-connected.

The winners

Of course, Google who supported the research, will most likely be one of the companies set to gain most from the rapid growth of the internet. Patrick Pichette, Google’s chief financial officer, was quoted, ”Understanding the economic potential of the web should be an urgent priority for leaders…”

The report also suggests a few of the other likely winners apart from Google.  The research points to Amazon, Apple, Facebook, Google, Baidu and Tencent in China and Yandex in Russia as ”internet ecosystems” that will try to tie users in to their customised part of the internet.

Read the full articleWeb economy in G20 set to double by 2016, Google says by Tim Weber, Business editor, BBC News website

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iPhones subsidy hits Verizon in Q4 2011

According to some of the numbers coming out of fourth quarter last year, it might look like telecommunications giant Verizon has hit some hard times. The largest wireless provider in the US reported a $2.02 billion loss in Q4 2011. However, Verizon attributes slumping margins to discounted iPhone sales and is staking its earnings on data services and a long term strategy.

Despite losses experienced throughout the period it was actually a period of surging revenues as their subscriber base saw significant increases. This is mostly due to increased iPhone sales over the holiday and customers wanting to distance themselves from the AT&T/T-Mobile fiasco. The company actually signed up 1.2 million wireless users, but posted losses spurred by increased expenses such as a hefty dose of pension costs. But the real culprit stems from the fact that Verizon actually sells the iPhone handset at a loss to encourage customers to buy two-year contracts. As a result, increased iPhone subscribers lessened Verizon’s profits, because Verizon absorbed most of the iPhone’s handset cost.

Verizon sees this as a “pay-now-profit-later” strategy and expects data sales and revenue from smartphone contracts to negate the costs it endures subsidizing handsets. The start-up costs for these contracts increases if users choose iPhones, but the profit margin will be ample as long as customers use data and complete their contracts.

Verizon anticipates a leap in data usage, illustrated by its decision to beef up its 4G service. The company is optimistic consumers will use increasing amounts of data, which will amp up data costs and give the company higher profit margins in the future.

According to forbes.com “Verizon’s future looks bright, despite its lackluster quarterly report. Still, the number of subscribers the company gained this year is expected to translate to larger profits in coming years.” (see Verizon Plans to Profit Off Data, Takes Hit from IPhone)

In regards this long-term business strategy, Matt Klassen of thetelecomblog.com is not so optimistic, “subsidy fees for particular phones will never be recouped because subscribers won’t use them long enough. In fact, due to the endless string of Apple upgrades carriers may never see that fiscal rebound, and it’ll be interesting to see what happens with the iPhone when they figure that out.”

If a mobile giant like Verizon – a company who has experienced surprising growth in a mobile market where some 99 percent of the available customer base is already locked into some sort of wireless contract – has to struggle this hard to absorb the subsidy costs of the iPhone then it explains why so few mobile service providers will go near Apple (even though they might really want to). When AT&T first experienced the subsidy burden three years ago it promised to rebound over time and that profit margins would return (but they haven’t).

It will be interesting to see the outcome here and certainly makes you wonder why any company would carry iPhone in the first place.

See “Verizon takes a hit from the iPhone” by Matt Klassen, and “Verizon Plans to Profit Off Data, Takes Hit from IPhone” at forbes.com

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Tech Mergers Strong in 2012

After a relatively quiet year in M&A, sources such as Ernst & Young LLP’s Transaction Advisory Services, are forecasting a strong year for technology M&A.

E&Y notes that the tech sector is just completing a relatively quiet year in terms of deal numbers. There was a slight decrease in the number of domestic deals with 1,325 deals done by the end of November and the total U.S. volume slipping to $79.4 billion.

Due to increased demand in the digital consumer field in 2012, E&Y is predicting that strategic deals will get made as US companies seek to integrate mobile, wireless and cloud technologies, and create new business frameworks. A desire to gain from the current low valuations and a liquid market for patents held by tech companies is also expected to have an affect.

The Transformative Cycle

According to Jeff Liu, E&Y Capital Advisors’ U.S. group head for technology M&A and capital and debt advisory “We are entering a transformative cycle for technology propelled by mobility, the evolution of cloud computing and the explosion of data.” Liu firmly believes, “2012 will be a strong year for technology M&A as these disruptive technologies spur significant strategic deal-making activity among technology companies and PE firms looking to generate returns.”

He adds, “We expect private equity funds, with their deep pockets, to be active in the technology M&A market, and to look at non-traditional LBO opportunities. Notably, we’re seeing sponsors participate in more growth-oriented transactions like the acquisition of Go Daddy by KKR, Silver Lake and TCV. Finally, after a year where the IPO market has been relatively quiet, the recent deals by Groupon and LinkedIn, and the anticipated deals by Zynga and Facebook, may re-open the offering window, giving some private companies the opportunity to go public as an alternative exit.”

Liu notes, though, that “it appears that only large, well-branded companies are tapping the IPO window now, so some deals in registration may need to look to M&A alternatives.”

from U.S. Tech M&A Could Swell in 2012″by Roy Harris

AT&T merger set for March 2012

In the face of much scepticism late last year that the AT&T/T-Mobile merger was dead, (see Techcrunch’s “The AT&T/T-Mobile Merger Is Dead” from December 19th, 2011 and Masable’s “5 Reasons the AT&T, T-Mobile Merger Is as Good as Dead” from November 29th, 2011) Cecilia Kang’s most recent review is positive that things are on track for a March approval.

Cecilia is quoted as saying, “AT&T says it’s still on track to get its merger with T-Mobile approved by March 2012, even as state utilities, business partners and consumer interest groups express concern about the deal.

In a meeting with reporters in Washington, AT&T General Counsel Wayne Watts said the company has provided a second round of information requested by the Justice Department. He said meetings with the Federal Communications Commission are also going as scheduled.”

Wayne Watts also said “The number one question I get from investors is can we get (the deal) done…I think we can.”

from AT&T says merger on track for March 2012 approval by Cecilia Kang

Related story:

AT&T ramps up lobbying ahead of merger review

M&A highlights for 2011

For reference, here is an overview of the deals done last year.

  • The most active acquirers within the Software Industry through Q3 2011 were EMC Corporation and Google Inc. with 10 acquisitions each.
  • Vista Equity Partners was the most active financial acquirer during Q3 2011 with 5 acquisitions: Thomson Reuters Trade and Risk Management Business, Sage Healthcare Inc., CompuLaw LLC, Client Profiles, Inc. and CyberShift, Inc.
  • The largest transaction for the third quarter as well as the 1st 3 Quarters of 2011 was the acquisition of Autonomy Corporation plc by HP for $10.28 billion and represents a 10.8x revenue multiple and a 24.5x EBITDA multiple.
  • Total transaction volume in Q3 2011 for Software companies decreased by 11% over Q2 2011, from 366 to 324 transactions.
  • Total transaction value in Q3 2011 for Software companies decreased by 22% over Q2 2011, from $29.9 billion to $23.4 billion.
  • Median EBITDA multiples in Q3 2011 remained largely unchanged from the last quarter, at 13.6x.
  • Median revenue multiples in Q3 2011 remained nearly the same, at 2.3x times revenue.
  • http://wraltechwire.com/business/tech_wire/news/blogpost/10482140/

from “Technology and Digital Media Mergers – Update” by Aaron Solganick

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2012 Tech Predictions

2011 was a banner year in technology.  As we look ahead to 2012, I can’ t help but think about Nostradamus or classic Mayan accounts of catastrophe and the coming of the apocalypse.  But doomsday theories aside, what’s in store for technology in 2012?

Here is a roundup of some of the tech predictions for 2012.

Digital predictions for 2012

Product and Software

  • CD and DVD based software and game sales will continue to decline as it is clearly all about digital app distribution via online app stores
  • Apple will release a super slim edge-to-edge screen iPad 3, the long awaited iPhone 5 and an Apple TV.
  • Amazon will introduce a completely redesigned Kindle Fire.
  • Microsoft Windows 8 will arrive by the end of the year

Voice Recognition

  • Voice recognition is going to be a big trend in 2012. The iPhone 4S’ Siri has brought voice recognition technology to a mainstream audience, and other manufacturers will be keen to capitalize on the buzz. Amy-Mae Elliott

Mobile

  • Smart phones will start to see quad core processors along with higher resolution displays, and more smart phones will start to see NFC chips. Mobile payments will start to become recognizable, and more people will understand what it is.

Frictionless Sharing

Television

  • The coming year will also see much more focus on redefining the TV experience as Apple releases a TV set, which will seamlessly integrate the Internet.
  • Smart TVs and TV apps, for example Hulu or Netflix, will start to become more popular. – Keith Kaplan

Gaming

  • Motion gaming is sort of the ire of all hardcore gamers but in 2012 game companies will continue to push the limits of their gesture-based peripherals.
  • Of course, mobile/social gaming and gamification will continue their steady plot to conquer the gaming world but expect big moves in motion gaming and motion-capture. – Zachary Sniderman

Social Media

  • Social media powerhouses like Facebook and Twitter will grow less in user acquisition and more in user engagement by implementing new features to keep users on the site longer. As Google+ continues to add more features, better integrate with other Google products and become more business-friendly, it will be a contender for best social network. – Meghan Peters
  • Facebook and Twitter will continue their rapid growth, especially outside of the U.S. Inside the U.S., Google+ will break 100 million users and look significantly different than it does right now. – Lance Ulanoff

Business Acquisitions

  • In 2012, Amazon will secure its place as the digital hub in a good portion of U.S. households by buying Netflix.  - Todd Wasserman
  • RIM will announce a significant leadership change. It may also get acquired before the end of 2013. – Lance Ulanoff

Read the full story by Christine Erickson of mashable.com

Gadgets that will change the world in the next few years

2012 is the year of Windows Phone, 3D printing, and fitness technology.

  • Autom and Fitbit – weight-loss systems like Autom and pedometers like FitBit are the future of fitness. You can’t change what you can’t measure, and these devices let you measure just about everything.
  • Nokia Lumia 710 – Nokia is looking to take back the low end – the $50 Lumia 710 requires a two year contract, but the key number isn’t “2-year contract:” it’s $50.
  • Makerbot – this small Brooklyn-based company is working on better ways to get 3D printing to the masses.
  • Kindle Fire – the device is Amazon incarnate, an all singing, all dancing tablet for readers that will become, for many, the primary way to consume streaming video.
  • PSP Vita – the next generation console to roll, inexorably, towards our living room.

Read the full story at www.techcrunch.com

Five tech predictions for 2012

1. Social media will lose its sizzle.

Social media usage has already begun to slow for upstarts such as FourSquare and stalwarts such as Facebook alike. Just as location-based applications became a “feature” rather than the “big thing,” social media will live on and become an integral part of what we do. The party’s over for investors and start-ups in this space. The big growth is behind us.

2. The bubble will pop for the current crop of tech IPOs.

LinkedIn and Zynga will probably lose more than half their value.  Groupon will probably lose most of its value as well because of the inability of the company to actually make a real operating profit that doesn’t require odd accounting gyrations.
Facebook will be the IPO of the year — but likely at a lower valuation than is being speculated.

3. An explosion of the tablet market driven by sub-$100 tablets.

The Kindle Fire made waves with its $199 tablet, but we will probably see a new generation of Android-powered tablets that are priced at $100 or below. Once these devices get in the $100 range, carriers may subsidize them as a way to get customers to buy data plans — just like they have done for years with smartphones.

There are many new markets that will embrace these devices. And they enable a quantum leap for education systems, communications and information sharing in the developing world. India’s $35 tablet is already a reality.

4. Voice recognition goes mainstream.

With SIRI, Steve Jobs did his magic once again. SIRI is light-years better at handling complex requests than anything on a smartphone to date — and is getting better with each software update. Apple will embed this technology in new devices such as the Apple TV, in future versions of iPads and iMacs.

5. “Cloudburst” shakes the tech industry.

Cloud computing is advancing faster than our ability to secure systems. Companies are rapidly moving their most critical data and information from file cabinets and secured servers to shared servers on the Web. Cloud computing provides significant cost savings and operational advantages. But it also unleashes a Pandora’s box of security concerns.

One major security breach could throw cold water over the entire industry and slow down the corporate adoption that is expected to drive cloud growth this year and for many years to come.

Read the full article by Vivek Wadhwa on washingtonpost.com

2012 Tech predictions from IDG editors around the world

Simon Jary, publishing director, IDG U.K.

More blurring of the lines between laptops, tablets and smartphones, and between consumer and enterprise tech.

Maryfran Johnson, editor-in-chief, CIO Magazine and Events

Ever greater attention to big data and how companies can use analytics tools to mine the data for customer insights, business opportunities, or cost savings.

Bob Brown, online executive news editor, Network World

With Tim Cook in charge Apple explicitly goes for the enterprise market.

Fredrik Agrén, publishing director, IDG Sweden

We’re going to see a change of TV habits as the next big thing of 2012 will surely be the smart TV.

Brian Carlson, editor-in-chief, CIO.com

Apple loses its sheen. Its revenue will not go anywhere but up for the time being, but its status of bleeding-edge vendor will start to degrade in the hearts and minds of the educated tech consumer.

Daniel de Blas, director, IDG TechStyle, Macworld España, and iPhoneWorld

The total disappearance of optical discs like DVDs or Blu-ray and the decline of regular hard disks in favor of solid-state memory. We will see a great popularization of cloud services for consumers and applications that work with data that are not on the device.

Ken Mingis, managing editor for news, Computerworld

Managing mobile devices is going to be an increasingly important part of what IT deals with in 2012. It’s only a matter of time before some big-name company loses important corporate data because of failure to secure these personal devices.

Galen Gruman, executive editor, InfoWorld

Seismic shift in the makeup of the industry’s leaders – HP, Dell, Cisco, and certainly RIM greatly reduced in stature and importance. Apple will still provide the key inspiration for our collective future, but Microsoft will be the bigger driver of it actually happening in terms of volume and reach.

Jason Snell, editorial director, Macworld

More companies will attempt to do what Amazon.com has done and use Android as a basis for products but not involve Google.

Radan Dolejs, editor-in-chief, Computerworld Czech Republic

The most visible trend for the year 2012 will be mobility which will drive productivity in the enterprise. Price will be the key for the year 2012.

Matt Egan, editor, PC Advisor, IDG U.K.

Next year is all about Windows 8 – in the mobile and tablet space, we should have a three-way shootout among iOS, Android, and Windows.

Eric Knorr, editor-in-chief, InfoWorld

The private cloud is going to pick up momentum. IT is under enormous pressure to increase agility and effectiveness—by adopting technologies and techniques pioneered by public cloud service providers.

Elizabeth Heichler, editor-in-chief, IDG News Service

Many unresolved fights over intellectual property in the technology industry will play out in the coming year.

T.C. Seow, editor, CIO Asia

More powerful tablet devices will replace desktops and laptops for email, social computing, communications, and knowledge sharing.

Pedro Fonseca, editor-in-chief, and João Nóbrega, editor, Computerworld Portugal

BYOS (bring your own security). The security of devices and networks will be a great challenge next year.

Ed Albro, editor, PCWorld

Privacy finally comes to the forefront of our discussions of technology. The time seems ripe for the public to really start considering whether they’re comfortable with Mark Zuckerberg or Larry Page as Big Brother.

Antti Oksanen, publishing partner, Talentum

The rise of “the third ecosystem” in the mobile space – Microsoft and Nokia together may just be able to seize the opportunity with the new Windows Phone platform.

Read the full story on Macworld.com

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2011 Tech Review Part I – Looking back on a memorable year

As we begin 2012, we look back on a memorable year to say the least. Here is a roundup of technology in 2011 – 11 of the year’s top stories, a look at some numbers, and a brief review of tech stocks in 2011.

Top 11 tech stories that made 2011 especially memorable

Technology in 2011 saw epic battles, a host of new products, and some major corporate screw-ups, but mobile and social media was the driving force behind most of the significant changes. Below is a list of 11 events in tech that made 2011 especially memorable.

1. Steve Jobs Passes Away

2. Google Goes Social

3. Kindle Lights A Fire

  • Amazon entered the tablet race this year with the Kindle Fire, a media tablet based on Android that serves as a window into all the digital media Amazon is trying to sell us—books, movies, music, apps.

4. Year Of The Pivot

  • The one thing startup founders learn very quickly is that failure is okay as long as they learn from it. With the cost to create a product lower than ever before, lean startups can afford to try again.

5. Netflix Screw-up

  • Netflix tried to speed up its transition from a DVD rentals business to streaming online video and suffered as stock went from $300 to $70. Viewers are spending more time watching Netflix movies streamed over the Internet, but the company still has a lot of work to do to repair its once-shiny brand image.

6. Tech IPOs Come Back (Sort Of)

  • After several years of almost no activity, 2011 was a big year for tech IPOs - LinkedInPandoraGrouponYandex, Zynga, and Chinese Internet IPOs like Tudou and Renren.
  • now all eyes are on Facebook, which is planning to IPO in 2012.

7. The Private Billion-Dollar Club Gets Bigger

  • One reason tech IPOs aren’t performing so well is that much of growth in value is now captured before the IPO by private investors.

8. Google Buys Motorola, Microsoft Buys Skype, And Other Big Deals

9. The Patent Wars Get Ugly

10. Android And Apple Win The Mobile Internet

  • Apple and Android emerged as the two superpowers of the mobile Internet (with 76 percent combined mobile OS share in the U.S.)

11. Social Media Fuels Social Protests

  • Whether it was the Arab Spring or Occupy Wall Street, social protest movements around the world were fueled and self-organized by social media like Twitter and Facebook.
  • These realtime technologies make it much easier to start revolutions, but they don’t make it any easier to finish them.

Read the full tech review at techcrunch.com by Erick Schonfeld

2011′s biggest technology stories, by the numbers

The effects of Japan’s nuclear disaster

  • Due to the disaster at Tokyo Electric Power’s Fukushima Daiichi nuclear power plant, which scored a 7 out of 7 on the International Atomic Energy Agency’s International Nuclear and Radiological Events Scale, many nations reacted by scaling back their nuclear ambitions.
  • According to the Japanese government, decommissioning the plant will take 30 to 40 years, and cost an estimated $15 billion.
  • Germany announces that by 2022, all 17 of its nuclear reactors will be shut down. Reactors which generated 133 billion kilowatt-hours in 2010, or 28.4 percent of the country’s electricity.
  • As of December 2011, there are still 433 operating nuclear power plants in the world. The United States has the most, with 104.

(See A Worldwide Nuclear Slowdown Continues and What Will A Nuclear-Free Germany Cost?, by Peter Fairley, and Small Nukes Get Boost, by Kevin Bullis.)

Growth in the solar industry

  • The average price of crystalline silicon solar panels fell from $1.90/watt to $1.35/watt from January to November 2011, according to GTM Research.
  • GTM Research estimates that more than 20,563 megawatts of solar power were installed globally in 2011 (13,553 megawatts in Europe, 2,083 in North America, 3,938 in Asia,710 in Australia, and 279 megawatts in the rest of the world).
  • That is 2,960 more than were installed last year, and brings the total global solar capacity to 59,152 megawatts.

(See The Chinese Solar Machine, by Kevin Bullis, and Can We Build Tomorrow’s Breakthroughs? by David Rotman.)

Data Deluge – amount of data we create, replicate, and store in gadgets and the cloud is growing at a staggering rate.

  • According to IDC, the total “digital universe,” grew to 1.8 zettabytes in 2011 (a zettabyte is a trillion gigabytes) in 500 quadrillion files.
  • IDC says the total size has grown by a factor of nine over the past five years.
  • in August, researchers at IBM unveiled the largest harddrive ever, capable of holding 120 petabytes (a petabyte is a million gigabytes)

(See IBM Builds Biggest Data Drive Ever, by Tom Simonite, and The Cloud Imperative, by Simson Garfinkel.)

Google second shot at social networking still dwarfed by Facebook

  • June 28, Google released Google+ which is a lot more like Facebook than its failed first attempt, Buzz
  • two weeks later sign-ups hit the 10 million mark
  • By October, total sign-ups stood at 40 million. Active use of Google+ is still dwarfed by Facebook’s claim of 800 million

(See Tom Simonite’s Q & A with Bradley Horowitz, the man building Google+, and How Google+ Will Balkanize Your Social Life, by Paul Boutin.)

After release, General Motors and Nissan’s electric models fall short

  • December 1, General Motors had sold 6,468 Volts, well short of its goal of 10,000.
  • Nissan, meanwhile, claims it has reached its 2010 global sales goal of 20,000 Leafs.

(See Will Electric Vehicles Finally Succeed?, by Peter Fairley, and A Wish List for the Next GM Volt, by Kevin Bullis.)

Read the full technology review by MIT at technologyreview.com

2011 Tech Stocks Review

  • Microsoft Corp. MSFT +0.04% was down 3 points on the year from its January highs.
  • Intel Corp. INTC +0.04% , is up on the year
  • The emerging giant is ARM Holdings ARMH -0.01% which should have long since been bought by Intel or merged with Advanced Micro Devices Inc. AMD -0.74% .
  • The big winner in the sector was Apple Inc. AAPL -0.01%
  • Dell Inc. DELL -0.88% is a bit up on the year
  • Support chip companies have not done well – Marvell Technology Group MRVL -0.58% is the perfect example of this as is Broadcom Corp. BRCM +0.34% .
  • LinkedIn Corp. LNKD +0.46%

Read the full tech stocks review by John C. Dvorak at marketwatch.com

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2011 Tech Review Part III – the best and worst year for Apple

Reflecting back on 2011 – it could easily be described as the best and worst year for Apple. This past year saw Apple both become the world’s most valuable company and lose it’s founder and visionary Steve Jobs.  The passing of Steve Jobs was a huge story that will continue to resonate around the world for years to come.  But even without that sad news, 2011 was an extraordinarily memorable year for Apple.

Here is a brief month-to-month roundup of the year for Apple.

January

February

March

April

May

June

  • June 6, Apple held their WWDC keynote. OS X Lion, iOS 5, and iCloud were the main areas of focus.
  • June 7, Steve Jobs (still on medical leave) went to Cupertino City Hall to pitch Apple’s plan for a massive new headquarters in the city — one that looked like a spaceship.
  • Apple’s stock continued its run. By June 13, Apple was worth more than Microsoft, HP, and Dell —combined.

July

August

September

  • “iPhone 5″ rumors hit a fever-pitch

October

November

  • Five years after it was released, Apple recalled the first generation iPod nano.
  • November 14, iTunes Match officially finally launched — it had been promised by October.

December

  • Talk starts to pick up again that Tim Cook is open to the idea of Apple issuing a dividend to shareholders as their cash supply approaches $100 billion.
  • Apple announced 100 million downloads from the Mac App Store in less than a year.
  • The iPad 3 unveiling is rumored to be weeks away…

Read the full roundup on Techcrunch here.

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