Thanks to R.F., I culled this from our RNWK discussion group. It parallels how I feel the RSA Security patent-expiration will play out, and how RSA will dominate its space.
A true gorilla gets paid despite competitors having equal or better technology. It's true with Intel (AMD has pretty regularly had faster chips), Microsoft (Unix, Apple, and OS/2 are all superior operating systems), and Cisco (who does not make the fastest routers), and now its true with RealNetworks. Despite both major competitors (Microsoft and Apple) offering their products for free, Real is beating earnings with higher than expected sales of the "Professional" version of its player.
The value of a network grows exponentially with its user base. As broadband connectivity and content proliferate, Real will experience a majority of the growth. Let's say that Real has a network reach of 50 million man hours right now, while Microsoft has 10 million man hours. Real's network is worth 2,500 imaginary value units, while Microsoft's is worth 100 value units. Now lets say both of those numbers triple. Real would then be worth 22,500 value units, while Microsoft's media player would be worth only 900. Domination leads to a nice valuation.
John |
