As many of you know, I have been obsessed with the MSFT competition at the end of 1999. Hadn't found any meaningful barriers to entry, and no one seemed able to articulate any. Despite this rather large worry (as a former antitrust lawyer, I am prone to obsessing about such things) I couldn't shrug off my good feeling about the stock, and continued adding until I inched my way to a large position. THEN -
I read the announcement re the six licensees - and the barriers to entry thing hit like a ton of bricks. HP et al build devices - handheld, etc - the cheaper and more of them, the better -- that have ICA embedded in them. Worst case scenario is that Jan 1, 2000 MSFT announces a new better ICA, without CTXS. What, I wondered, is to stop all users of servers from right then and there punching delete, and installing msft code (lets assume it was time
to buy CTXS new version of software, and that its and MSFT product were equally priced. What, that is, was the barrier to MSFT's quick entry into this previously protected market. NOW I SEE. Its the installed base of devices NOT connected to a network that could easily change the the thin side of the software. In other words, once a company puts CTXS product on their server to service devices that cannot be easily converted (if at all)
to another protocol, the cost to the server provider is not just the cost of new (and different) software. Its the cost of either supporting in parallel two different protocols -- ICA and MSFT's variant -- or the cost of abandoning the installed base of ICA protocol devices. (Assuming msft variant is not both better AND COMPATIBLE with ctxs product, and assuming ctxs maintains a backward compatibility strategy.). What I have just described should
sound familiar - its the key to Windows success - and as the installed base gets larger, it will become more attractive for OEM's to utilize ICA - more compatibility with more stuff. All leads to my very favorite investment concept INCREASING marginal returns.
Will this all come to pass?? Is the barrier a sure thing??? I don't know, and NO. Respectively. I, however, have never asked for a fool-proof barrier to entry, just a plausible barrier that makes sense. I think I have found it, but would WELCOME any and all takers showing the error of my ways, otherwise, I'll be buying more CTXS.
Mike??? Christine???? Chaz??? Others????
Thanks in advance.
Rob |
