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Strategies & Market Trends : Gorilla and King Portfolio Candidates -- Ignore unavailable to you. Want to Upgrade?

To: LindyBill who wrote (1046)	4/4/1999 11:37:00 PM
From: Bahama	Read Replies (2) \| Respond to of 54805

From the GorillaGame website, regarding the status of Intel Gorilladom: (this isn't exactly "fresh" information, but the points still seem to hold for the most part) "Intel has been the subject of much analysis over the past nine months, and its stock is down. It makes for a terrifically interesting gorilla game discussion, which we would like to model here as a profile of what we hope can show up on gg@ecatalyst.com. Here are some of the downside points people are making about Intel: The company is on a treadmill model of CPU upgrading that is only valid as long as the next upgrade occurs. More and more PC makers are turning to non-Intel chips. This is forcing cuts in Intel's pricing margins. It's reacting instead of leading, as witnessed by its problems with its low end chip Celeron. It's under fire by the FTC for its withholding future product information from Intergraph, a company which had filed suit against it. It's falling behind on Merced, its 64-bit chip co-designed by Hewlett Packard, by six to nine months. Once again, authors are split in their reaction to this news, and once again you are going to hear from Geoffrey, the guy who was wrong about Netscape, but here goes anyway. My view is that all these problems attributed to Intel are all endemic to its "late tornado gorilla" status, as follows: The treadmill is a version of "tornado forever," a game invented by Microsoft and Intel that, since perpetual motion is inconsistent with the laws of the known universe, will eventually have to wear down. But when will that be? And when it does happen, won't Intel still be the gorilla on Main Street? To be sure, gorilla stocks take a big hit at the end of their tornado, but they are expected to recover nicely from it, whereas their competitors are not. And guessing when a tornado market ends is like guessing when a bull market ends—it is just too hard. Yes, there are more non-Intel chips in PCs than ever before. This is "monkey competition," and yes, it does cut into gorilla margins. The question is, can the monkeys overrun the gorilla, the way the clone PCs overran IBM? The answer is, only if they can somehow freeze the architecture and thus take away architectural control. (In the PC example, IBM gave the industry the occasion for doing this when it announced a proprietary 32-bit bus called Microchannel architecture and then refused to license it to the clones.) Merced, however, seems to me to creating a legitimate new generation of PC architecture, so I don't see this as anything more than normal monkey business in a tornado. Intel is following, not leading, with Celeron. Yes. Please recall, however, that gorillas do not have to be the innovators going forward, as Microsoft has repeatedly illustrated. They do have to be effectively responsive, to be sure, so Celeron, an anti-monkey device, does need to be competitive. But although there is nothing yet for Intel to be proud of here, I do not see any urgent threat. Intel is under fire from the FTC. Yes, it is. This is an example of news that I suggest one learns to ignore. I can't see that it has any impact on the gorilla game. It is simply part of an ongoing interaction between a gorilla company and its political and economic environment. Intel is falling behind on Merced. Yes, it is. And this will give 64-bit chip vendors an additional period of differentiation against Intel. And it will give the monkeys more time to chew away at the Pentium. But is there anything that has changed the scenario of architectural control? I don't see it if there is."

To: LindyBill who wrote (1046)	4/5/1999 12:28:00 AM
From: Mike Buckley	Read Replies (1) \| Respond to of 54805

I am an investor in Gemstar (GMST), whose dynamic future (I hope) lies in their electronic program guides (EPG) used in televisions. The guide is a database of content programming that can be sorted by all sorts of criteria. The consumer uses the EPG to determine what to watch, what to record, and to record it with one-button programming (since none of us are smart enough to program a VCR with any degree of reliability.) I've been thinking that an EPG is an enabling technology. But now I'm thinking differently. Tonight I read a major portion of Gorilla Game again and have decided that an electronic programming guide is primarily an applications technology, not an enabling technology, but with an interesting enabling twist. More about that later. First, back to basics. The book clearly shows that an enabling technology tells the hardware what to do, enabling the opportunity for applications to ride on top of it. Systems software embedded in a microprocessor is a classic example of an enabling software, telling the hardware what to do, without which there would be nor opportunity for word processor, e-mail, and spreadsheet appllications. A disk drive is a classic enabling hardware, enabling the place to store those apps and the data they manipulate. Applications technologies are those with which the end user interacts, such as the spreadsheet and word processor apps. Using that definition, it's pretty difficult to dispute that an electronic program guide is an applications technology. (My apologies if I should not have included the above basics considering the informed readership of this folder.) But it's not quite that simple, at least not in my mind in which nothing is ever simple. :) The authors of the book focused on computer technologies because that is their area of strength. You might have noticed that they hardly ever delve into consumer technologies, even those within their area of expertise, the computer biz. It's apparent that their natural hunting grounds are in the business-to-business area of commerce, not the realm of consumers. Taking that into account, I've done some additional thinking about an electronic programming guide as a consumer product. I've come to the conclusion that it is a hybrid technology that combines both the applications and enabling aspects, with an emphasis on the applications end of things. There's no question that an EPG is an applications technology because it's the consumer who interacts with it. The interesting twist, however, is that the consumer uses it to tell the hardware what to do. Just as the software in your digital microwave oven is used by the consumer to tell the oven what to do, the EPG is used by the consumer to tell the television and/or VCR what to do. There is a fascinating ramfication about that. The typical enabling technology has the strength of the product manufacturers behind it as part of the value chain. The typical applications technology instead has the strength of the end users behind it as part of the value chain. In the case of an EPG which I proprose is a hybrid between the two, it has the strength of both. In the early stages of the product adoption cycle the manufacturers will be the mainstay of the value chain's strength. As adoption of the product moves out of the tornado and onto Main Street, the consumers will take over in the vale chain's strength. Not a bad combination, huh. Comments anyone? --Mike Buckley