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Technology Round Up - February 18, 2011
There have been many noteworthy developments in the technology space recently. Some of these will likely have a material impact on the companies in the sector and the markets they serve.
Microsoft’s Bing Gains (Some) Ground on Google
Microsoft’s (MSFT - Free Microsoft Stock Report) Bing search engine gained market share in the United States last month, while market leader Google (GOOG) lost one percentage point, according to ComScore Inc. Now that Bing has been fully integrated with Yahoo! (YHOO), its January search accounted for over 29% of the domestic market. Furthermore, a study by Experian Hitwise found that a greater percentage of Bing search queries ended with the user clicking on a result, suggesting superior performance. Nevertheless, Google clearly remains dominant for the time being, with a 65.6% share of the market. Microsoft has added search features, increased marketing efforts for Bing, and has formed an agreement with Yahoo! to attract more users. The two companies are trying to capture a larger piece of search advertising. The domestic search advertising market will likely grow to $13.6 billion this year, up from $12.4 billion in 2010.
Apple (AAPL) is reportedly working on a smaller, less expensive version of the iPhone, which would not have a service contract. Such a product could make the company’s offerings more competitive with devices running Google’s Android operating system, and help Apple gain ground in developing markets where it has been traditionally weak and Nokia (NOK) has been strong. The new phone could be launched in the middle of the year. We expect the smartphone market to continue to grow at a rapid clip in the current year. Meanwhile,
Apple’s second-generation iPad tablet device is reportedly in production. The updated version is expected to be thinner and lighter. It should also have more memory and a faster processor. In addition, it is expected to have a front-facing camera. This new device will likely be introduced in the coming months.
Nokia’s Partnership with Microsoft
Nokia has agreed to use Microsoft’s Windows as the main platform for its smartphones. This marks an attempt by Nokia to try to reverse its loss of market share in the smartphone arena. Indeed, Nokia’s share of the fast-growing market has fallen dramatically since Apple began shipping its iPhone in June of 2007. Microsoft’s mobile software offerings have also struggled since that time. As part of the new plan, Nokia and Microsoft will combine assets and jointly develop and market mobile products. This will allow them to challenge rivals Apple and Google in the smartphone market. However, success is far from certain. Nokia is terminating the company’s main Symbian platform, a move that should hurt sales of existing devices in the short-to-medium term. Moreover, the partnership with Microsoft will take time for Nokia to implement and deliver the new phones. Indeed, 2011 and 2012 should prove to be transition years for Nokia. This should give its competitors time to further innovate and/or grab additional market share. Investors appear somewhat skeptical, as Nokia’s share price slid on news of the deal.
Another Acquisition for Google?
Google is reportedly in late-stage talks to acquire video Web site Next New Networks. Next New Networks creates its own shows, and procures content through partnerships with other web-video creators. Google is looking to procure expertise in accumulating professional content for its video Web site, YouTube. A deal would also put YouTube in the position of overseeing creators of digital content, along with aggregating videos created by others. It would be the latest effort to maintain a steady stream of videos to keep viewers on its site for longer periods of time. This would allow it to better compete with rivals Hulu and Netflix (NFLX). Large Internet players have been courting media companies for quite some time, seeking a supply of content to satisfy users’ interests in a wide variety of topics.
Amazon.com vs. Netflix?
Amazon.com (AMZN) will reportedly be introducing an unlimited video streaming service for its Amazon Prime customers. Amazon Prime members currently pay a fixed annual fee ($79 at this time) for free two-day shipping for most offerings. At Amazon’s current $79 rate, an unlimited video streaming service would undercut Netflix’s own offering. Moreover, the addition of unlimited video streaming would almost certainly attract more customers to the company’s online shopping platform, helping it gain ground on retail competitors, such as eBay (EBAY) and Best Buy (BBY). Nevertheless, readers would be wise to remember that Netflix has gone to great lengths to procure content for its Internet streaming service. Provided Amazon chooses to offer this service, it remains to be seen whether the company could procure sufficient content to rival Netflix’s offerings.
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.