What’s On

Flintstones vs Jetsons: Can Google, MS ride the mobile cloud?

According to research firm Gartner, PC shipments totalled 76 million units in the second quarter, a 10.9 per cent drop from last year. Another report by IDC too doesn’t have encouraging figures. It reports a total shipment of 75.6 million units in the second quarter, a decline of 11.4 per cent over the same period, the previous year.

PhlintCtone era?
Before moving ahead, let’s see some of the financial results. Google reported profits worth $9.7bn, a growth of 16 per cent; Microsoft improved revenues from $18.06 billion a year ago to $19.9 billion; Intel reported net income of $2 billion, as compared to a net income of $2.83 billion for the same period the previous year. Meanwhile, AMD reported $1.16 billion in revenue for its Q2 2013, taking a net loss of $74 million (and an operating loss of $29 million).

Figures for Microsoft and Google are not that bad. They’ve posted a growth still. But the story is that the figures didn’t match analysts’ estimations. The common thread that binds these losses and the disappointments is the decline in PC shipment figures.

So is the PC going to the museum? Some analysts like Eric Jackson, Founder and Managing Partner of Ironfire Capital, a tech-focused hedge fund and angel fund, had written off Google, Facebook, Amazon and Yahoo as early as April, last year. He gave much credit to Siri, stating in Forbes, “It’s a lot easier to start asking Siri for information instead of typing search terms into a box compared to thousands of enterprises ceasing to upgrade to the next version of Windows.” Jackson gave too much credit to iPhone and iPad and refused to put Apple in the same league as the ilk of Google as he thought Apple was a hardware company rather than a web company.

“But with each new paradigm shift (first to social, now to mobile, and next to whatever else), the older generations get increasingly out of touch and likely closer to their significant decline,” Jackson said, as a matter of fact predicting doom for Google and giving it at most five to eight years of survival. For him there wouldn’t be any Web 3.0 as Web was already dead and was being replaced by mobile. He may be quite right in this statement. Yet Google had anticipated the mobile age quite some time back and Android is just one example. Youtube is another. But Jackson does discount Android too, which he thinks wouldn’t get any revenue for Google.

The flight of the Jetsons
All transitions are painful and it is a period that Google will have to wade through. If the OS (Android) itself isn’t going to get revenues for Google, the ads are, the apps are and the support network will. The Talk reformed as Hangouts, and the Market morphed into PlayStore – with Music, Movies, Games and Books can be big revenue streams for the future and on the mobile. Google Now beats all searches, which collates data, integrating with Google account, pulling entries from the calendar, directions, sports scores, and more. Another revenue stream for both Google and Microsoft would be the cloud.

The proof of the pudding is in the eating. “While our fourth quarter results were impacted by the decline in the PC market, we continue to see strong demand for our enterprise and cloud offerings, resulting in a record unearned revenue balance this quarter. We also saw increasing consumer demand for services like Office 365, Outlook.com, Skype, and Xbox LIVE,” said Amy Hood, chief financial officer at Microsoft.

About 15 per cent of Google’s profits are advertising revenues and more of Google’s advertising revenues are coming from mobile advertisements.

And let’s see some forward looking statement for AMD too. AMD’s CEO, Rory Read said, “Our focus on restructuring and transforming AMD resulted in improved financial results,” noting that AMD “expects significant revenue growth and a return to profitability in the third quarter.”

AMD is quite much banking on graphics and AMD silicon is baked inside of the Wii U, Sony’s upcoming PlayStation 4 and Microsoft’s Xbox One.

Much of the above services are either on cloud, or on mobile or on gaming. Also, Google has a lot of expectations from its business apps for enterprises from cloud – mail, office and communication and maps. The Maps are going to be big on mobile and tethered to much of the services from e-commerce to banking to travel. These services have more potential in the Asia Pacific region where much of users are still making a début on to computing and are not bound by migration – from Microsoft services – itches.

Critics point out at Google’s failure to capitalise on the acquisition of Motorola – which has been a drag on the company’s profits – if it was really serious in the mobile space. Let’s remember that Google never bought Motorola to sell Motorola handsets. It still would be happy selling Google branded smartphones and tablets from time to time. The acquisition of the company was strategical more from an acquisition of patents point of view to counter much of the litigations Apple was throwing at Android users – Samsung and HTC rather than at Google. Smaller vendors who cannot fight Apple would be looking at Windows as more of an option than Android. Motorola did give a patents’ edge to Google.

If that’s not all. Yahoo which had been written off entirely, has managed to resurrect itself in the last one year, and revenues for second quarter rose seven per cent to $1.35 billion. And Yahoo is certainly looking at inorganic growth. The company made nine acquisitions – Summly, Astrid, Milewise, Loki Studios, Go Poll Go, PlayerScale, Rondee, Ghostbird Software and Tumblr – in the second quarter.

While the PC may get stormed and framed up in the museum, the companies – Google, Microsoft and the ilk aren’t yet joining the Flintstones Inc. The transformation to Jetsons is for real.