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Technology Round Up - October 31, 2010
There have been many noteworthy developments in the technology space recently. Some of these will likely change the way important industry players do business, and have a material impact on the markets they serve.
Facebook vs. Google?
Leading social-networking service Facebook has a new social search engine that may challenge Google (GOOG). Facebook originally launched its Open Graph protocol in April. With its “like” and “recommend” buttons, this social search engine is one based on preferences rather than links. All web pages that use the network’s open graph plug-ins show up in the engine’s search results in the same way traditional Facebook pages do. Over one million external web sites have integrated these features with their own pages. A search engine based on preferences is undeniably very useful for certain searches. For example, if a user is searching for a restaurant or a popular new album, knowing what others recommend can prove very valuable. This kind of search will likely grow in popularity going forward. Nevertheless, it remains to be seen whether this will pose a significant challenge to Google’s search dominance. To address this burgeoning trend, Google has worked to incorporate social elements to its own search engine.
Facebook appears to be seeking an initial public offering. The company’s implied valuation has increased beyond $30 billion in recent months, based on secondary market transactions. The stock has traded over $75 per share, as eager private investors have sought a stake in the company prior to its public offering. The company, which is backed by venture capital and investment firms, will likely remain unlisted until at least 2012. Still, employees and investors are allowed to sell their stock, and many are doing so for liquidity and asset allocation reasons. Nevertheless, it remains difficult to assess the true value of the stock, as available shares are scarce and prices are computed without detailed knowledge of financial results.
Hulu is also looking to go public with an offering that could value the company in excess of $2 billion. Hulu was originally founded in March of 2007 as a joint venture between several television networks, with funding provided by the private equity firm Providence Equity Partners. With a web site offering ad-supported streaming video of television shows and movies, Hulu has grown rapidly since its inception. The company has recently announced Hulu Plus, a $9.99 per month subscription service alongside its core advertising-supported business.
A Foray Into International Markets
Netflix (NFLX) introduced its streaming service in Canada in late September. This marks an important milestone for the company, which previously generated all its revenues from the United States. Particular challenges the company will face on the international scene include licensing the right content and trying to identify the best marketing channels. Canada will serve as a test bed for Netflix, before the company moves into additional foreign markets.
Research In Motion
Research In Motion (RIMM) has recently announced a product to rival Apple’s (AAPL) iPad. The BlackBerry PlayBook tablet computer will run a new operating system (the BlackBerry Tablet OS) and is expected to be released to customers in early 2011. A successful new launch may be just what the stock needs. Shares of Research In Motion have performed poorly over the past year, as investors appear concerned that the company is losing ground to the likes of Apple.
Dell’s New Offering
Dell (DELL) has recently released its first smartphone in the United States. Dell’s 3.5-inch Android device is called the Aero. It costs $99 with a two-year contract from AT&T, or $299 without the contract. Dell had originally entered the smartphone market in China in late 2009, with the release of its Mini 3. Apple remains the leader in the smartphone market, which is expected to grow considerably in the current year.
Apple’s New Ad Platform
Apple’s new advertising platform, iAd, has been generating interest among advertisers and mobile app developers. iAd is a mobile advertising network that developers can use to incorporate ads into their apps. Apple both sells and serves advertisements on this new platform. This ought to boost the company’s revenues going forward and heat up its competition with rivals such as Google.
IBM’s Acquisition of Netezza
IBM (IBM - Free Analyst Report) has recently agreed to acquire Netezza for $1.7 billion. Netezza makes a data warehousing appliance which competes with Oracle’s (ORCL) Exadata device. Should the deal be completed, IBM would begin competing with Oracle on this front. Netezza is expected to generate roughly $250 million in revenue this year. While this will not have a large impact on IBM’s top line, the company will also use Netezza to sell other software and services. The Netezza acquisition is part of a broader strategy for the company. IBM has acquired over 23 analytics companies in the past five years, and is looking to further expand on the business analytics front.
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.