Thread: OK, maybe we can get this back to some issues. It's a quiet time, but maybe we can come up with a subject for fruitful discussion. I have 3 candidates, or, pick your own:
1. Rambus: What is their status on the "candidates" list? Have they made enough missteps that they should be removed from it? Can they possibly beocme a royalty gorilla?
2. Intel: Are their days numbered as a gorilla, with today's announcement by AMD of a 750 Mhz chip?
3. Or, from left field, Zi Corp. Is it a possible gorilla? I posted a description of them a couple of days ago on the old G&K: Message 12123268
Which I repost here for those not inclined to go back.
(In reply to a Mike Buckley post)
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Thought provoking. Can I try it on a nascent gorilla-wanabee?
The company I'm thinking of is Zi Corp. (ZICA). It's a little company based in Calgary, developing software for
the Chinese phone market. First, some statements on why they might qualify on Gorilla Game criteria:
The market: The wireless phone business in China is exploding, but communication is hindered somewhat by the
variety of dialects in Chinese, as well as the number of homonyms. Phone makers want to be able to allow the
user to input text through their phones. Chinese is an ideographic, not alphabetic written language.
The product: Zi has developed such a product. It allows efficient input (2-3 strokes per character) of the
symbols. It can be installed in phones, and in fact is being sold in Ericsson phones now.
The bowling alley: Zi has been knocking them down. The Ministry of Information has apparently designated Zi's
input system as the preferred input system, and has entered into a couple of related items with Zi. Subsequently,
13 separate license agreements have been signed, including with Ericcson, Alcatel and Legend (China's largest
domestic computer maker). The licenses are for various appliances, not just phones.
Competition: One company identified, Tegic. [Query: Is the Ministry of Information competition?]
Financials: Up until recently, they've been awful. But, the company's share price has rebounded to about $15
recently, putting $20MM in options and warrants in the money. That should be ample for the time being.
Important: It is still not known what the prevailing licensing rate is. That will become apparent with next month's
results, as sales of ERICY's phones ramp up (there were some in the last quarter, but its hard to tell how many).
Discontinuous Innovation: This product has not existed before. It is satisfying a recognised need. It's been
suggested that it's an interim solution; voice-to-text translators might supplant this. My take is that those are too
memory and processor intensive to be of much use on portable devices in the short and medium term.
Now, to Mike's corollary questions:
1) Is the company putting all of its eggs in one basket (one market segment)?
Until recently, Yes. The company closed down or sold a couple of unrelated operations a couple of years ago.
The expansion now is into related language input software, primarily for some European languages.
2) Is the company's product a whole product, not one that is 80% complete and thus unable to satisfy the
pragmatists who occupy the earliest stage of the mainstream market?
Apparently, yes. It's being installed into actual phones that are being sold.
3) Is the size of the chosen market segment no larger than 2.5 times the planned total revenue of the
company? (The idea is that the company wants to have 40% of the segment's revenue and can't do that if
the segment's market is larger than the company's capacity to own it.)
I think so. The market is clearly huge--practically every input appliance that will be sold in China. The only
question is whether Zi has been giving away the store with their licensing agreements.
4) Having decided on the market segment to "attack," is the market segement well funded and readily
accessible to the sales force?
The company has good presence in China, and good visibility. The chairman, Lobsinger, has been a featured
guest of the Chinese Premier, e.g., at China/Canada summits.
5) Does that market segment have a compelling reason to buy?
Described above. It appears that it adds utility at little cost, and thus will become standard in Chinese phones,
pda's, laptops, desktops.
6) Is there no entrenched competition that can prevent the company from dominating the market
segment?
No entrenched competition. But, Zi is small. They don't have the muscle to battle China if there's a problem on
that front. (Although they have shown by their patience that they seem to know how the game is played over
there). Also, if any larger company wants to take them on, it will of course have lots more resources than Zi can
bring on.
7) If that segment is eventually won, does it offer leverage to win over other segments? In other words, is
that
market segment truly a head bowling pin that knocks over one or two other bowling pins when it falls?
Maybe the first "segment" was with the Ministry of Education, which was the springboard to the MII agreement,
and the Ericsson and Alcatel and 11 other agreements. Maybe, the pins have already fallen.
Or, do we need an extension beyond this? The European language input doesn't seem nearly so sweet to me, and
doesn't dovetail with the China stuff.
There. Done.
Mike, I assume that in setting forth your corollaries, you want them tested. Do they work? Do they help weed out
Zi? Or confirm Zi as a candidate?
Best,
JS |
