Was the market’s nosedive on Friday related to the 25th anniversary of Black Monday, the largest single-day percentage drop in market history (22%)? Man, if that were true, it would really be scary, but, alas, I am not scared. Friday’s decline more than likely came because the market needs to do this now and then – slow down and consolidate. When it needs to do this, it finds convenient reasons to do so, and Black Monday is not one, but earnings might be.
- Poor earnings reports from three companies in the Dow Jones industrial average — Microsoft, General Electric and McDonalds — sent indexes down sharply Friday.
McDonald’s and GE don’t really bother me. Their revenue will return next quarter, or soon thereafter, more than likely, but Microsoft, Intel, Google, and AMD are another story, one that I will write about from an investment perspective.
- Earnings disappointments this week from Intel Corp, Microsoft Corp, Google Inc and AMD underscore how Silicon Valley, both the old guard and new, is struggling to profit from consumers’ waning love affair with the stalwart PC and infatuation with mobile – the most significant tectonic shift in the industry since the advent of the Internet.
This is a big story for market players and I have a history with the context, which I will share, but before going there, here is the most important piece of the story.
- Signs that some of the most innovative of today’s Silicon Valley titans are struggling with how to make money off mobile users come at a bad time for an industry already struggling with a worsening macroeconomic environment.
In 1992, I started an Internet Service Provider (ISP) company. Eventually, it morphed into a web-hosting business. Back in those heady days, the thrill of participating on the cutting edge of a major technological, social, cultural, and economic transition seem to outweigh the necessity of earning revenue. My partners and I kept going, although making money was, at best, difficult. I remember one conversation with a competitor, the largest ISP in Central California at the time and the source of my company’s bandwidth. He asked me directly, “Have you figured out to make money at this?” I took the question as rhetorical, so a laugh was the appropriate response. The reality? Things were changing so fast it was difficult to make profit when all your revenue when into buying newer technology, changing your model (ISP to Chat Room provider to web hosting, to web designing, to online marketer), and most of your marketing time was spent explaining what you did and why you were doing it. Guess what? History is repeating.
- We’re really starting to live in a new reality. It will create a huge new universe of opportunities for advertisers, where they … will be dynamically adapting across a whole bunch of different devices, to reach the right audiences at the right time.
Folks, this transition is a big one. Just ask Mr. Zuckerberg, leader of the Facebook mania.
- The value of Facebook CEO Mark Zuckerberg’s stake in the company he founded has plunged $7.2 billion since its initial public offering.
Putting FB and Zuckerberg’s volatile fortune aside, it is the rest of the technological realm that we need to keep an eye on, and when the time is right, buy in, as the Internet ain’t going away. The players are simply morphing, and that will take some time. I remember this same issue arising in the 90s, not just with me and my small company, but across the spectrum of advancing tech companies (Amazon did not make any profit for years). The question then, as it is now – how is anyone going to make money off this in-demand technology? Save for the mobile-device providers (Apple), wireless providers (Verizon), and ancillary companies (production and parts), this is the case.
- Internet companies in China, the world’s largest Internet market by number of users, are also struggling to make money from those who access the Internet from mobile devices. Top China search engine Baidu Inc saw its shares tumble last week after Credit Suisse downgraded it to “underperform” on concerns about its money-making plans.
.Let’s follow the story and make some money.
Trade in the day; Invest in your life …
