Six Predictions for 2006
mercurynews.com
By Mike Langberg
Mercury News
Posted on Sun, Jan. 01, 2006
Happy New Year!
I'm wiping the champagne off my crystal ball and risking whatever reputation I have as an insightful technology columnist with six predictions for 2006.
These hunches all relate to Silicon Valley, and I've imposed one rule on myself: The predictions must be specific enough so that we can look back in a year to see if I was right or wrong.
But I don't want to go down in flames alone.
If you've got a Silicon Valley-related prediction for 2006, send it to mike@langberg.com by noon Pacific time on Tuesday. Please follow my rule, making your prediction specific enough that you'll be proved right or wrong a year from now. Include your full name, city of residence and a daytime phone number.
If enough of you take the plunge, I'll share your predictions in my column on Wednesday.
Prediction One: Google's stock goes down, Hewlett-Packard's stock goes up.
Google has repeatedly humiliated Wall Street bears since its initial public stock offering at $85 in August 2004. The bears said Mountain View-based Google would never pass $100 a share, which it did on the first day of trading; or $200, as it did in January 2005; or $300, as it did in June; or $400, as it did in November.
But nothing goes up forever. Google's continuing growth and success won't be enough to sustain rabidly excessive enthusiasm among the bulls. So the stock will finish 2006 somewhere below its 2005 closing price of $414.86.
Hewlett-Packard, meanwhile, is in the opposite situation. Investors have been so disenchanted after several years of dismal performance prior to the arrival of CEO Mark Hurd in April that Palo Alto-based HP is undervalued. Even after gaining 48 percent this year from its low of $19.34 in January, HP will finish 2006 above its 2005 closing price of $28.63.
Prediction Two: Substantial job growth in Silicon Valley for the first time this century.
Just as nothing goes up forever, nothing stays down forever. Silicon Valley is still the global headquarters of technology, and there are encouraging signs of growth among both established companies and start-ups. Profits and venture-capital investment are both moving up, and new technology ideas are flowering. We have what should be the first clear evidence of a turnaround since the tech bubble burst in early 2001.
Total jobs in Santa Clara and San Benito counties, as measured by the California Employment Development Department, were essentially flat in November at 871,200, up a microscopic 700 from November 2004. But the increase will be significant this year, at least 4 percent, so the November 2006 total will exceed 900,000.
Prediction Three: Broadband monthly rates drop under $20 with no strings attached.
If there is really a ``broadband gap'' affecting the United States, with other countries having more ubiquitous high-speed Internet service, it's because of price more than anything. The cozy U.S. duopoly of cable and phone companies have kept rates so high enough that only about half of American households with access to broadband are actually subscribing.
But real competition is finally emerging, with cable and phone companies suddenly eager to sign up more customers before the arrival of new broadband technologies such as wireless.
AT&T, formerly SBC, offered a teaser rate of $15 a month for DSL last year, but only for 12 months and with requirements to buy other phone services. The competitive pressure will escalate this year to the point where DSL will be widely available for under $20 without restrictions or conditions. Cable companies, which offer speedier connections, will also cut prices, although they'll still run $10 to $20 a month more than DSL.
Prediction Four: Global economic competition and innovation become election issues; Democrats retake the House of Representatives.
``The World Is Flat'' by New York Times columnist Thomas L. Friedman got the nation focused in 2005 on issues already familiar to Silicon Valley, such as the rise of India and China, along with the need for more education and innovation in the United States.
The Democrats in Congress, powerless since losing control of both the House and Senate in 1994, are now gearing up to make competitiveness and innovation into major issues for the November 2006 mid-term elections. It's usually tough to get voters to care about such abstract ideas, but there have been enough changes in the economy lately to make the topic resonate.
Republicans won't be able to completely shift the blame elsewhere for the nation's lack of investment in education and technology, giving the Democrats enough of an edge to gain at least 15 seats in the House and thereby retake control. But with Republicans remaining in charge of the Senate and the White House for at least two more years, the outlook for 2007 and 2008 will be legislative gridlock.
Prediction Five: Apple allows flexible song pricing on iTunes, but doesn't open up iTunes or the iPod to competition.
Emperor Steve Jobs, the Colossus of Cupertino, has decreed that all songs will sell for 99 cents on Apple's hugely popular iTunes Music Store. This is causing restless muttering among the dukes and barons of the music industry, who would like to offer hot new releases for more and older back-catalog titles for less.
To keep peace in his kingdom, Jobs will allow flexible song pricing during 2006. But he won't take down the high walls surrounding Apple's music customers -- downloads from iTunes will continue to work only with the iPod, and the iPod will continue to limit playback of copy-protected files to those purchased from iTunes.
These restrictions won't hurt Apple's dominance this year, given the superiority of the iPod/iTunes combo, but Jobs might have to give ground in 2007 or beyond as other hardware and music services become more compelling.
Prediction Six: The first-ever big merger between a Silicon Valley company and a New York-Hollywood media giant.
The future of mass entertainment -- music, movies, books, news, video games and more -- is digital and online. The future of consumer technology is delivering digital entertainment. So it only makes sense that Silicon Valley snuggles up with the New York-Hollywood media establishment.
Up to now, there have been lots of partnerships and talks. But there hasn't been a big merger, where ``big'' is arbitrarily defined as more than the $2.6 billion that eBay paid up front in September for the Internet phone service Skype.
Maybe Viacom, owner of CBS and Paramount, will buy Yahoo. Or HP will acquire Dreamworks Animation. Or Cisco will take control of Disney. Or Rupert Murdoch will grab Electronic Arts. Whatever happens, you heard it here first.
Which prediction do you think is most likely to come true? Cast your vote in our pool.
Contact Mike Langberg at mike@langberg.com or (408) 920-5084. Past columns may be read at htp://www.langberg.com. |
