The Price of Danger: $500,000,000

Microsoft just picked up Danger, inventor of the Sidekick mobile device and overall very clever mobile company founded by Andy Rubin who is now working for Google on Android and Open Handset Alliance stuff.

Om Malik is quoting the price as 500MM after what his reasearch showed was 225MM in past injections of capital.   

Although at first glance everybody thinks these deals make huge money for everybody associated with them, this is not the case.   As we’ve noted before average VC deals  *lose money*, and more importantly you always need to factor time into these equations to make sense of the profitability of a deal.

In this Danger sale people made out well, but depending on when the big money was invested it’s not clear anybody had a spectacular return here unless the big money came in very recently (I don’t know if it did or not).

Why would MS want this company?   As with the Yahoo aquistion and as MS has done for so long, they are trying to gain a huge foothold in key markets by buying up a key company in the space.    I’m expecting some competition for the Google/Dell phone to be announced soon.


Yahoo’s Yang and Filo at CES

Yahoo’s Yang and Filo at CES
Originally uploaded by JoeDuck

One of the things I left out of my earlier David Filo interview post were the details of Jerry Yang’s talk, which I’d have to say was lackluster given the amount of attention the markets are paying to Yahoo leadership right now, and given the slick pizzaz of yesterday’s Gates keynote. (C’mon Jerry – no Guitar Hero action?). Yahoo spent a lot of time talking about and “introducing” Yahoo Go” Version 3, a product I’m not familiar with but Yahoo treated as if it was a household word. It looked a lot like the MS mobile phone innovations and offered excellent info+browser+mapping+data integration for phones. Also announced was an expansion of mobile and widget platforms to make them more “open” and therefore more appealing to developers, though I’m not clear how significant this will be. Yahoo, like Microsoft yesterday, noted that they are looking at *billions* of mobile users and that although PCs are still important to them it’s clear that mobile is the bright and shining star where innovation will be happening.

Disclaimer:  I’ve got some Yahoo Stock, but none of it was helped by this post.

Google tells me I’m going to win the spectrum auction! w00t! ?

Screw Ed McMahon and Publishers Clearinghouse, Google has assured me that you and I are going to win the multi billion dollar spectrum auction coming up at the FCC.   I just hope I can resell it to Google after we win because I have yet to build my new amazing Google phone.

Actually I really am rooting for Google, and they really do have a point that the mobile marketplace has become far too stuffy from the stench of expensive cologne and Brooks Brothers suits.  

I want to see the clever T-shirt and sandals crowd at Google take a bite out of this market, and my mobile bill, and I want the Open Handset Alliance to bring all the great innovation they have promised in this space.

Google, don’t let us down.

Seybold on wireless = early senility?

Update:  Andrew Seybold’s reply:

Tonight PBS covered the smart phone market, and asked for input from Andrew Seybold.   He should have been a great choice and clearly has an insider view, so how could he say something this transparently absurd? 

ANDREW SEYBOLD: As much as I respect Google, the wireless industry can’t be an extension of the Internet because wireless bandwidth is finite. It’s a fixed resource, and it is shared bandwidth. The more people who use it in a given area, the less data speed they have.

Andrew, with all due respect – and considerable respect is due, I think you’ve missed something profound here.    Sure, wireless capacity must increase to accommodate all the data, and it certainly will.    There are already technologies like WIMAX and EVDO that will scale up to meet demand, and it’s likely that improvements and new technologies will emerge very fast in response to this cash rich, market.   In any case, it is now *crystal clear* that all players in this space are moving to converge the phone experience with the internet experience.    It is not clear exactly how that will shake out and eventually become seamless, but you are suggesting this is not even the *direction* in which things are moving.  

ERIC SCHMIDT: I completely disagree with the characterization that somehow the wireless network is going to be any different than the wired network, because there’s enormous spectrum becoming available through licensing programs, better radio design, faster computers, and so forth.

Thank you Eric, you are absolutely right.  In fact I expect you already have several plans in place to make the higher speed and broader bands available to prospective gPhones and Google Phones and Android equipped phones.  

Google Phone is coming, the gPhone is coming!

The Wall Street Journal has (ummm – just figured out?) that Google’s phone ambitions are substantial.  It’s not yet clear if they’ll become their own huge phone company, but I’m guessing they will and that they will do a good job solving some of the nagging problems that have been experienced by .. lets see now … 99.9% of all cell users?    I do not think this necessarily bodes well for Google financially though, and release of hardware and a national cellular network may be part of their “jumping the shark” moment.    Google has thrived as a company that could ramp up as profits rolled in.   Not so with mobile, where they will have to anticipate a lot of profit and incur huge capitalization costs in a “bet” that they can capture enough of this market to turn a big buck.     Clearly Google is already going to influence this market quite a bit by spearheading the open handset alliance and other open architecture initiatives, but it’s not clear their bottom line would have a huge positive impact even when you anticipate the revenue from advertising (currently small but sure to grow) and revenue from subscribers  (currently huge but capital and labor intensive).    

I’m torn between thinking Google clearly will fix many technical challenges with the hardware (I see even cheap phones as iPhone clones with great mapping and data and more), but Google has done a simpy *terrible* job of basic customer service over the years, feeling that if a problem solving thing can’t scale up then they won’t put much energy into that problem.    Typically this has related to advertiser problems with adwords and webmaster problems with websites.  Google has made some improvements as they hired legions of people to deal with customer service, but I cannot see Google handling millions of calls along the lines of “now, which button do I press to dial my sister in Toledo?”.  Google culture is not compatible and will become impatient with the slow, labor and capital intensive mobile landscape.   Maybe they’ll change it into something better.    Maybe they won’t.

In any case they’ll bring some great phone online and as I’ve noted before I’m very excited about that.

G Phone Musings

David Berlind has a very insightful piece about the upcoming offering from Google in the cell phone space.   Usually this is called the “G Phone” (or maybe “gPhone”?  “gee, Phone!”), and it’s certainly coming soon to a handheld device near you.  

It is still not clear if Google will actually endorse the hardware as well as the mobile software they’ve been working on, but there will be a phone by next year (I still predict it’ll be out in time for Christmas), and it will feature rich integration with Google maps, search, and probably a bunch of other clever Googley applications developed for the explosive mobile market.

Berlind notes that we are all seeking technological “religious experiences” with our devices, and the current crop of phones, even including the iPhone, do not deliver enough of them.

David is harder on the Apple iPhone than I have been but I agree that the holy grail ain’t here yet, and also agree that Google, learning from iPhone’s mistakes and all the hype and feedback about that project, might hit the cellular nail on the head with the gPhone.      I predict a major Google phone innovation in using advertising to defray the cost of calling.   This could take many forms but I think a clever integration of highly targeted advertising during web browsing and text messaging could be fairly inoffensive to users but provide a decent portion of the revenues that the carrier would need.   Frankly all Google needs to do is reduce the cellular cost enough to the customer that they’ll switch over from other carriers like ATT and Sprint.     These companies have done little to create brand loyalty and a better system will have users leaving in droves.

But we may have to wait until 2008 to find out how good the gPhone is going to be.  

Unless they are out by Christmas, in which case I may actually do my Christmas shopping early this year.