Tuesday, August 27, 2013

Great potpourri in the SJ Merc Biz section today

The juxtaposition of four stories today on the front page of the San Jose Mercury-News caught my eye.

1. Facebook is now a 'hot new darling' stock.  Well, it's about time.  Yesterday, for the first time, the stock price neared the number achieved mid-day on the IPO launch day.  FINALLY.  $100B valuation

2. Tesla achieved $20B stock valuation yesterday, its car outselling all but the Mercedes E and the BMW 5 series in the popular and hot California market for sports and luxury cars.

3. Coca-Cola's secret recipe is locked in a vault, with red strobe lights surrounding it

4. Amazon's Web Services division is being challenged in court by IBM.

On page 2 (actually B8 the dumb way the Merc has revamped its newspaper), another headline screams that "Microsoft commits to Ballmer's plan."

The next headline says, "China cracks down on daring microbloggers."

What is worth taking away from these scribbles?  Let's take them in turn:

1. Shares are up from $17.78 to $41.54, which the analyst called "up 55% for the year" but obviously a lot more than that from the low.  "Facebook shares are now trading at about 180 times earnings, higher than all but 3 companies in the S&P 500," said one analyst who then tried to explain that this was a good thing becuase it shows faith that the company will grow.  Even so, a critic pointed out that $100B valuation was less than Intel at $110B, Amazon at $180B, Google at $289B, and Apple's 450B.
Revenur for the quarter, up 53%, hit $1.81B, still small alongside Intel's $13B.  Ah, well. growth wins..

2. Tesla sold 10,500 cars in six months, and is completely manufacturing limited.  Its shares trade at 360x forecasted 2013 earnings; its valuation is more than Fiat International, and about 44% of General Motors which produces 10,000 cars each morning this year.

3. Coca-Cola and Kraft and Twinkies were held up as obvious trade secret brand winners.  HP???

4. Here's the sleeper.  Cloud services -- whatever they are -- are DOMINATED by Amazon Web Services.  You all know this, right?  Selling books and dishwashers and wine coolers over the web takes a special sort of security smarts, and Amazon is better at it than anyone else.  Okay, got that!
But wait -- the story is not about that.  It is that AWS has moved into data storage and computer-server time rental to companies., AND THAT IT JUST WON the CIA business away from IBM.

This is big news, or should be.  HP, CISCO, ORACLE -- pay attention.  IBM already IS paying attention.  AWS is credited in the article with having 5x more business in this space ($3B) than the next fourteen players combined, according to Gartner, "a research firm."

These stories always slay me a bit.  Journalists are journalists partially because they couldn't pass the math classes.  AWS has 83% of the total business.  It is $3.5B total, estimated.  And that leaves 17%, spread amongst all the other players.  And last I looked, 83 / 17 divides as 5/6ths and 1/6th.  So, technically, the guy is right.  All of the others have 17% or 1/6th of the business.  AWS has 5/6ths, which indeed is five times all the others.  So, the story is 'correct' -- it just is an odd way to say it.

The better way to say it, is that there is a nascent business here, which at first blush is being served by AWS, and IBM would like to do so.  The real business isn't what AWS (or IBM, HP, or Rangeware or any of the others do well yet) currently serve, but would like to do so.   That business is the SECURE CLOUD COMPUTING Stack for Enterprises.   And it is less than $1B today -- and will grow, trust me, by at least 100x, maybe 1000x, in the next decade.

It will be bigger than stories 1, 2, 3, and 5 in the Merc today, and possibly even #6.  It had the smallest story, but far and away the most significant.

Watch this space!

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