VR / AR – State of the nation.

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VR & AR still miles from being properly ready.

  • Facebook has launched a wireless VR headset that appears to be very similar to Oculus Gear which addresses a gap in its portfolio but does nothing to alleviate the issues that keep VR a niche segment.
  • At the same time Apple has admitted that real AR is years away, explaining its (and almost everyone else’s) focus on offering AR using the camera and screen of a smartphone.

Virtual Reality

  • Facebook has launched the Oculus Go which is a self-contained VR unit that sports better resolution (2560×1440) than the original Rift and a “fast-switch” LCD display which I assume aims to increase the refresh rate to improve image quality.
  • Facebook did not announce which processor is being used but I am almost certain (see below) that it is a smartphone processor with some commentators speculating that it is the Snapdragon 821.
  • The price is right at $199 and the fact that the Go has binary compatibility with the Gear implies that this device probably has the guts of a smartphone.
  • This makes sense as the Android supply chain has huge volumes which would have been very useful in designing the device to have a reasonable specification and yet meet the price point of $199.
  • It also means that there is already a range of apps and services available which removes the problem of there being no content available for the device at launch.
  • While the Oculus Go plugs an important gap in its portfolio, it does not do much to solve the real issues that plague VR which remain:
    • Price: Many of the devices cost several hundreds of dollars and also require a PC to run, further increasing the cost.
    • To be fair, the Oculus Go does address this issue but it does so at the expense of raw performance.
    • Clunky: VR and AR units are still large, clunky and uncomfortable to wear.
    • In many cases they also make the user feel foolish when wearing one.
    • Comfort and security: VR cuts the user off from almost all sensory inputs from his immediate environment, severely limiting the situations in which the user would feel comfortable using one.
    • Many units also cause feelings of nausea due to an imperfect replication of the real world compared to what the brain is expecting.
    • Cable: Many units require an HDMI cable which prevents the user from moving and also increases the risk of a fall should the user trip over the cable.
    • Again, the Go addresses this issue but does so at the expense of performance.
  • To bring VR to the mainstream, I think that these issues need to be solved with no compromises being made with regard to the user experience.
  • Of this there is still little sign leaving me very cautious on the outlook for the immediate term.

Augmented Reality

  • The requirements I see for AR to really come of age remain far more challenging and include:
    • First: a head unit that is no more intrusive to wear than a regular pair of spectacles (also applies to VR).
    • Second: a full field view of the virtual world as it is superimposed upon the real world.
    • This is proving to be so difficult that all the solutions available today are letterboxed (limited field of view) with no real time-line as for when this problem will be solved.
    • I have doubts that Magic Leap will be able to solve it an time soon.
    • Third: there will need to a vibrant ecosystem of developers to ensure that the experience offered is both broad and deep.
    • Developers will also be needed to ensure that the experience is easy to use and fun and to push the boundaries of what the device can be used for.
  • AR is even further away from meeting these ideals in my opinion but it is finding an initial lease of life in the enterprise.
  • This is because when users are paid to have the experience, tolerance of clunky head units and a bad user experience is much higher.
  • When this is combined with a good improvement in productivity there is enough benefit to see some traction.
  • However in consumer, the challenges remain enormous which is why the consumer ecosystems are pushing AR on smartphones as a stop gap.
  • I think that the experience offered there is pretty weak meaning that investments here are really about being prepared for when the above issues can be fixed rather than driving uptake of a new use case for smartphones.

Take Home Message

  • The net result is that I see nothing on the horizon that is going to change the current situation in either VR or AR.
  • Hence, I think that they will remain ancillary to the propositions offered by the big ecosystems and incapable of influencing a user’s purchase decision on where to live his digital life.
  • The result will be relatively low volumes and disappointment compared to the hype that regularly surrounds product demonstrations.
  • I continue to believe that investors in this space need to have a very long-time horizon.

Microsoft FQ4 17 – Head in the clouds.

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Not a cloud in the sky.

  • A strong finish to the fiscal year cements Microsoft’s positions as the main alternative to Amazon Web Services and as the preeminent provider of a Digital Work ecosystem.
  • FQ4 17 revenues / Adj-EPS were $24.7bn / $0.75 nicely ahead of consensus at $24.3bn / $0.71.
  • Outperformance was primarily driven by Azure which grew by 97% YoY and Office 365 which showed continued to show healthy progress in both the enterprise and with prosumers.
  • Gross margins improved slightly as favourable product mix was able to offset the impact of the increasing share of revenues coming from the cloud which has much lower gross margin than licence sales.
  • This is entirely normal and RFM research has shown that in Microsoft’s case in the long-run, it is better to have recurring revenues at lower gross margins than one off sales at much higher levels.
  • This is because the one-off sales do not occur frequently enough to generate more profit than subscription revenues at much lower margins.
  • Consequently, gross margins are going to remain under pressure in future albeit at a lower rate as cloud gross margins are rapidly expanding as the businesses continue to scale.
  • Guidance for FQ1 18E was a little light with revenues / EBIT of $24.0bn / $7.1bn forecast compared to consensus at $24.2bn / $7.4bn.
  • Guidance for FY18E remains unchanged with the priorities being placed upon increasing cloud gross margins and cautious growth in OPEX.
  • While the Digital Work ecosystem is going from strength to strength, the consumer ecosystem continues to wither away.
  • The one exception is gaming where the Xbox live community is still growing nicely and Microsoft remains the only real challenger to Sony in console gaming.
  • Despite this, I still think that Xbox Live is a massively under-utilised asset is it has completely failed to get any real traction in mobile gaming.
  • This is why I still think that there may be a party out there that is willing to pay more for Xbox than it is worth to Microsoft.
  • In that instance, Microsoft should sell Xbox in the best interest of its shareholders.
  • Microsoft is not the most exciting company in my universe but it has been one of the steadiest over the last 2 years and there is every sign that this will continue into FQY 18E.
  • Microsoft remains along with Baidu and Tencent, my two top picks.

Microsoft & Facebook – BFF

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I see Microsoft and Facebook creeping quietly together. 

  • I continue to think that Facebook and Microsoft make very good partners and I see them doing more and more together over the long-term.
  • In addition to building an undersea cable together (see here), Facebook and Microsoft have a long history of collaboration and when I look at their assets and the directions they are taking, it continues to be an excellent fit.
  • The latest place where they have appeared together is Section F which is a huge start-up campus in Paris with space for 1,000 start-ups.
  • Both companies are involved with Microsoft lending support to build is AI program and Facebook also being a major launch partner.
  • Facebook and Microsoft have often worked well together in the past and I can see this collaboration deepening going forward.
  • This is because Microsoft and Facebook are now going in very different directions meaning that there is almost nowhere where they directly compete with one another.
  • Facebook has the intention to become by far the biggest consumer ecosystem of them all while Microsoft appears to be edging away from the consumer and is increasingly dominating the enterprise.
  • If I look at their respective Digital Life pies there is also a good fit as Facebook is very strong in Social Networking and Instant Messaging while Microsoft has good assets in Gaming, Search and Browsing.
  • Consequently, I think that should Microsoft decide to bite the bullet on consumer, Facebook would represent a natural place for many of those assets to find a home.
  • While Microsoft is not the best in AI, it is far better than Facebook, and sharing that expertise would move Facebook meaningfully forward.
  • This could also benefit Microsoft as it really is only able to generate data using Bing but if it had access to some of the data being generated by Facebook, this could help it to both improve the diversity of algorithms it creates as well as the speed of development.
  • Even in Gaming where Facebook is already present with Oculus, the fit as good and it has already been announced that the VR headset will be able to be powered by the Xbox.
  • I don’t think that Facebook and Microsoft will merge but there are many areas in which collaboration is mutually beneficial and there is a remote possibility that Facebook will buy some of Microsoft’s consumer assets.
  • In the short-term I prefer Microsoft as its increasing strength in enterprise still gives plenty of support to its current valuation.
  • However, over the long term, I suspect that Facebook’s growth into new Digital Life segments will provide greater upside potential once it has overcome the short-term slowdown in growth (see here).

 

WWDC 2017 – Catch-up gems.

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Mostly catch up but studded with a few gems.

  • While Apple spent most its time catching up with innovations made by other ecosystems, there were a few areas where its announcements put it ahead of the pack.
  • Machine Learning
    • Apple is weaving machine learning into all of its services.
    • This combined with increasing integration of Apple’s own apps and services promises to enhance the user experience.
    • This includes new predictive faces (like Google Now) on the Apple Watch and photo recognition and organisation and smart responses predicted from the user’s history in other apps.
    • The demos were slick and effective but how well this will work in the field and with a user that does not use all of Apple’s Digital Life services remains to be seen.
    • Apple is working hard on AI but I think it still remains way behind Google, Baidu, Yandex and even Microsoft.
  • iOS 11
    • For the iPhone, iOS11 is an incremental update but one that focuses most attention on iMessage and the App Store.
    • Apple, is following Tencent in allowing users to do more and more with iMessage including the enablement of peer to peer payments using Apple Pay.
    • iMessage and Photos are the only two services that really got some attention this year leading me to think that these are the two areas where Apple is really trying to create stickiness.
    • This is particularly relevant as I observed yesterday (see here) that leaving iOS for Android was particularly easy as I don’t use iMessage.
    • The network effect can be particularly strong leading me to think that iMessage is now one of the most important services that Apple has.
    • I think that it is much more important than photos as Google Photos is just as good and makes it easy to move photos off iOS.
    • The App Store update aims to address the problem created by its own success which is that discovery of new apps and services is now pretty difficult.
    • New tabs aimed that highlight the new and cool stuff as well as give tips on existing apps is curated through the user’s history and aims to drive more purchases.
    • The aim is clearly to further distance itself from the humdrum experience of Google Play.
    • App Store is an area where Apple is extending its lead.
  • iOS 11 for iPad
    • However, it was for the iPad that the new iOS software really shines.
    • In conjunction with a solid update to the line, iOS 11 enables new functionality that takes the iPad even closer to the laptop.
    • The iPad now has a file system which combined with enhancements to multitasking and window management take its usefulness to a new level.
    • This includes the ability to drag and drop links, pictures and files from one place to another and to share them in multiple ways more easily.
    • This takes the iPad (particularly the pro) closer to a laptop in terms of functionality but it does still fall short.
    • Without support for a mouse and full fat office, the iPad cannot replace a laptop for most content creators although it is getting closer all the time.
  • Hardware
    • In addition to the iPad Pro, the iMac and MacBook Pro all received incremental updates that keeps them in line with the high end of the PC market.
    • Apple also launched a super high end iMac Pro all in one aimed at the professional who needs to spend more than $5000 on a computer.
  • HomePod
    • Apple also gave a sneak peak of a home speaker that aims to replace expensive WiFi Speakers but also has the functionality of Amazon Echo and Google Home.
    • This is a high-end speaker that sports features that are designed to produce excellent sound quality and functionality potentially rendering Sonos obsolete.
    • At the same time the HomePod has Siri embedded meaning that it can answer questions and control the smart home through HomeKit.
    • Apple has positioned this as something that the user buys for a high-quality audio experience with Siri coming as an added bonus.
    • This is a smart move because Siri is not that bright and is easily out performed by Google Assistant while being on a par with Amazon’s Alexa.
    • HomePod shows no sign of being open to developers other than through HomeKit and I was disappointed that Spotify and other music services have not been enabled on the device.
    • Hence, this a device for the Apple Music subscribers of which there are now 27m and not really for anyone else.
  • The net result is that while I think there are some very interesting moves being made around the productivity elements on the iPad, Apple is mostly keeping step with the competition.
  • The good news is that its edge as the best distributor of apps and services of third partied has yet to be matched by Google, giving it time to re-invent its hardware differentiation.
  • The valuation case in Apple is not nearly as strong as it was 6 months ago leaving me still preferring Microsoft, Baidu and Tencent.

Google Auto – Greek gift pt. II.

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Tinkering with Android for cars is a dangerous game.

  • Ahead of its developer conference, Google i/o, Google has demonstrated another version of Android that will be able of running many more aspects of the car beyond infotainment.
  • While Android Auto is limited in terms of what it can do and the data that it can access, this version of Android for the car is much more deeply embedded.
  • As a result, I think it will have access to everything as the infotainment unit is the nerve centre of the vehicle where the 4 data networks in the car (CAN bus) meet.
  • This means that Google services such as Maps, Search and Assistant will be fully embedded in the car enabling these services to be far more contextual and relevant.
  • It also raises the possibility that Google will be able to suck all of the data out of the car, robbing the OEMs of one the most important pieces of exclusivity that they have.
  • Audi and Volvo have signed up to use this software which will be demonstrated on the Q8 and the V90 SUVs at Google i/o this week.
  • The two most important issues are:
    • First, Code control: Who is in control of this code is crucial to the outlook for the OEMs.
    • From the presentation, I get the impression that the manufacturers are nominally in control of the Android code going into their cars but I seriously doubt that they have done the implementation themselves.
    • This was most likely done by their tier 1 suppliers or even Google itself.
    • While this means that the OEMs will have control over software updates and feature releases, there are almost certainly going to be hooks in the code that Google can still use.
    • Second, Google agreements: If the OEMs have a similar relationship with Google that the handset makers do, it is important to understand what the OEMs have agreed to.
    • Google controls Android through its agreements with the handset makers and given that the OEMs are getting Google services deeply embedded in their systems, something similar is likely to be demanded by Google.
    • Parts of those agreements are likely to include aspects of user interface design as well as the sharing of data.
  • I view this software as a replacement for the OEM designed software that resides in the head unit of the vehicle.
  • Android Auto and Car Play run on top of the OEM software but have limited access to the rest of the system.
  • This is likely to be the same such that CarPlay will still run as before but Android Auto will obviously be obsolete.
  • Google has said that the new software will not be draining the vehicle of data but I suspect that Google is referring to how the software behaves as it leaves the factory.
  • Once it is in the hands of the user and he has agreed to a pop message requesting access to data to improve Google services, the reality could be very different.
  • Sharing this data will make Google services on other devices better for the user but critically, this is the data that the OEM needs to hang onto in order to differentiate itself in all things digital in the car.
  • This is the risk of deploying software that has not been written in-house as the reality is that the OEMs will have no real idea about what they are deploying on what is becoming the most strategically important part of the vehicle.
  • Tesla and BMW are the only ones that seem to understand the importance of this which is why they are the only OEMs I know of that write their own code.
  • Google has everything to gain and little to lose by helping OEMs use Android instead of their in-house software which is exactly why OEMs need to look in minute detail at this gift before letting it into their holy of holies.

 

Microsoft BUILD – The right choices.

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Enterprise remains the focus.

  • At Microsoft’s developer conference, it continued to emphasise its move away from being a platform for the consumption of content to one that is primarily for the creation of content.
  • At the same time it cemented its move away from mobile with the migration of its strategy from cloud first, mobile first to intelligent cloud, intelligent edge.
  • Effectively, Microsoft is signalling two main changes:
    • First, device agnostic: Microsoft no longer cares what device the user has, but instead is aiming to ensure that its services work seamlessly across everything that is available.
    • This was embedded in every presentation during the first two days of BUILD where cross device was emphasised time and again.
    • Cortana, Office 365, team collaboration and communication will be increasingly integrated across all the devices that the user has.
    • This was made very clear with the announcement of the cloud powered clipboard where text and pictures copied to the clipboard on the PC can be pasted into non-Microsoft apps on iOS or Android devices.
    • Microsoft employees no longer have to hide their iPhones and Galaxies or take off their Apple Watches when entering hallowed ground in Redmond.
    • I have long argued that cross device is a good way to differentiate an ecosystem that is vying for engagement with the two giants Apple and Google.
    • Microsoft has led in this space for a long time and, as long as this works as billed, it will take Microsoft further into the lead.
    • Second, processing at the edge: Microsoft discussed a future where all the processing does not happen in the cloud but part of it is redistributed to the edge for faster response times and greater efficiency.
    • Microsoft demonstrated how running diagnostics locally could cut an emergency shutdown time for a piece of industrial equipment from 2000 millisecond to just 100.
    • However, this is a problem that is supposed to be solved by 5G, which was not mentioned once, further cementing Microsoft’s move away from mobile as a standalone technology.
    • This goes directly against what Intel (and others) is aiming for as its most profitable and highest market share products are the processors that power the cloud meaning that it wants as much as possible to run there.
    • I see a number of schools of thought with regard to how intelligence and processing should be distributed throughout the network with each proponent obviously going for the option that benefits their business the most.
    • I think that the reality will be that different use cases require different scenarios.
    • For example simple monitoring that requires rapid response makes sense in the edge but object recognition and tracking and relating that to policies is a very intensive task that is best carried out on big servers in the cloud.
  • Microsoft also announced the fall creators update for Windows 10 to support all the cross-device capability as well as badly needed improvements to the Windows Store that is needed to give Windows 10 S a chance (see here).
  • Hololens was also upgraded with the addition of a controller to bring it into line with the other offerings but this remains very much a tool for the enterprise.
  • This was clear in the demos and examples which were focused around productivity with the idea of a virtual shoot out in the living room, thankfully not being repeated.
  • With every presentation that passes, Microsoft distances itself further and further away from content consumption and the consumer.
  • Consequently, while there is a strong rationale to keep Bing (data generation), I cannot say the same for Xbox, Minecraft and a number of other assets.
  • Hence, I would not be surprised to see them sold off should a good opportunity present itself.
  • The net result is that Microsoft is doing exactly what it should in playing to its strengths and differentiating where it has a chance rather than wasting money trying make a difference where it has no chance.
  • This sets it up for steady growth with its dominant position in the enterprise, still giving support to the valuation even though the shares have been strong.
  • I still like Microsoft alongside Baidu and Tencent.

Microsoft – An Office education.

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Office in education sets up the future.

  • While the education segment is still relatively small when it comes to computing, the opportunity to influence preferences of future content creators makes it a market worth putting considerable effort into.
  • Microsoft appears to be taking 2 more steps in that direction with the launch of Windows 10 Cloud expected on May 2 at an education related event and another try at Windows on ARM at the end of the year (see here).
  • I think that the May 2 event is likely to centre around a new SKU of Windows 10 called Windows 10 Cloud that is a stripped-down version of Windows not unlike Google’s Chromebook OS.
  • This brings back the bad memory of Windows RT but I suspect that this time, Microsoft will be sticking with Intel.
  • By stripping the product down and only running software from the Windows Store, Microsoft can really bring the price of the devices down significantly but this will also ensure that appeal will be limited.
  • For example, Windows 10 Cloud will be useless for every corporation that has its own software as well as being underpowered and limited for many power users.
  • However, for education this could work well as cheap yet reliable devices are required to distribute to students.
  • Furthermore, this would work well with Microsoft’s move to make full-fat Office free for education obviating the necessity to use the inferior Google Docs.
  • I suspect that this strategy is most likely to succeed outside the US where Microsoft already has a strong and growing position.
  • Windows 10 Cloud could do well in protecting and expanding that position keeping Chromebooks out.
  • Inside the US, Google with its Chromebooks has gone from 38% share in 2014 to 58% in 2016, mostly at the expense of Apple’s Mac OSX and iOS (Futuresource Consulting).
  • Here, Microsoft’s task will be much more difficult as many establishments have only recently moved to Chrome but critically, Office is available on Chrome giving it a fighting chance.
  • As far as Microsoft is concerned, I think that in the long-run the OS and chipset are almost irrelevant with Office being the only asset that really matters.
  • This is because I think that Office is the only reason why the majority of content creators and corporations choose use PCs and hence represents a large part of Microsoft’s differentiation.
  • If it can increase its penetration in education through Windows 10 Cloud as well as through Chrome, then there should be a strong preference for Office as students enter the workforce.
  • This is why I think the focus of Microsoft is to bring down the cost and increase the options for hardware that can be used to access Office rather than at the high end where it is already strong.
  • If Microsoft can win in education then the legacy of Office should be far more secure going forward.
  • I think it has a very good chance as its product is far superior, and used by more people globally than anything else.
  • Microsoft continues to offer steady value and hence I still like it alongside Tencent and Baidu.

 

Enterprise AI – IBM and Salesforce

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Microsoft to Facebook could be what IBM is to Salesforce.

  • Salesforce and IBM have announced a wide ranging partnership which will combine their two AI offerings but they will continue to sell the combined offering under two brands.
  • At the same time IBM has announced that it will move its CRM business to Salesforce, depriving Microsoft of a landmark customer.
  • IBM and Salesforce also stated that they already have about 5,000 clients common but virtually no overlap which means to me that the cross-selling opportunity is actually not that large.
  • Hence, I think that the main reason for the combination is that today AI requires both a lot of time and a lot of data and it is here where IBM and Salesforce can help each other out.
  • IBM’s Watson has been around for many years which makes it one of the most experienced.
  • Salesforce is a relative new comer to AI but I think that it is generating far more data than IBM is.
  • Consequently, it is not hard to see how using Watson’s brains and Einstein’s data could result in more effective AIs being trained in a much shorter period of time.
  • Compared to consumer, enterprise AI is much trickier as each corporation wants different things from AI and the data sets are quite specific to each company.
  • Hence, I can see more general algorithms being trained by the supplier which are then customised with the requirements and specific data set of specific customer companies.
  • The net result is that I can see a lot of sense in this tie up as both companies will be able to do what they are currently doing better without treading on each other’s two.
  • In the same vein, there may be some sense in Microsoft doing a similar deal with Facebook in consumer.
  • Facebook is sitting on the second largest data pool in the world but has no idea what do to with it while Microsoft has some history in AI, but its waning consumer ecosystem means that its data volumes in this area leave a lot to be desired.
  • Furthermore, Facebook and Microsoft do not really compete against each other anymore and are already co-operating on building an undersea cable (see here).
  • Consequently, a co-operation on AI could have significant benefits to both companies and would go quite some way to fixing the serious problem that Facebook has with AI (see here).
  • I continue to prefer Microsoft, Baidu and Tencent over Facebook.

Virtual Reality – Virtual standstill.

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VR seems only to be popular at trade shows.

  • After a very disappointing 2016, Virtual Reality looks set to have another disappointing year in 2017 while its proponents work out how to fix the issues that keep it from being a success.
  • The latest blow is the removal of 200 out of 500 of Oculus Rift demonstration stations as a result of poor performance within stores.
  • The idea has been that to get a user to buy VR, he has to try it but in some stores entire days have gone by without a single demo being given.
  • Best Buy will continue to range the Oculus Rift but the real estate given up will be re-used for products that produce better sales per square foot.
  • It appears that the only place where people queue for a demo is at trade shows with the regular user not really seeing the point of the technology.
  • This is a further indication that the limitations of VR continue to hamper its appeal.
  • These remain:
    • Price: Many of the devices cost several hundreds of dollars and also require a PC to run, further increasing the cost.
    • Clunky: VR and AR units are still large, clunky and uncomfortable to wear.
    • In many cases they also make the user feel foolish when wearing one.
    • Comfort and security: VR in cuts the user off from almost all sensory inputs from his immediate environment severely limiting the situations in which the user would feel comfortable using one.
    • Many units also cause feelings of nausea due to an imperfect replication of the real world compared to what the brain is expecting.
    • Cable: Many units require an HDMI cable which prevents the user from moving and also increases the risk of a fall should the user trip over the cable.
    • Content: Both games and content remain in short supply limiting the reasons for users to immediately adopt the platform.
    • The adult entertainment industry is a good yardstick for the adoption of new media types and even this has been slower than expected to jump in.
  • The net result is that I think 2017 will be a disappointing year for VR.
  • The one bright spot remains augmented reality (AR) to enterprise customers.
  • For the enterprise, it is productivity that really matters with the user experience being less important.
  • This is because in consumer, the users pay money for an experience but in the enterprise users are paid to use the technology.
  • Hence, enterprise users’ willingness to put up with a substandard user experience is much greater.
  • The AR user experience is still miles from where it needs to be but critically it does offer productivity improvements that have led to many companies trialling it particularly for employees in the field.
  • Hence, I think that AR in the enterprise should see both unit shipment growth as well as good growth in revenues from software and services in 2017.
  • Consequently, the companies to watch this year are those in this field like ODG, Microsoft HoloLens, Meta, Atheer Labs and of course Magic Leap.
  • Magic Leap is an exception is it has made incredibly bold promises around a consumer offering in AR, but it is questionable as to how close it really is in terms of having a working, commercial product (see here).
  • From an investment perspective, AR in the enterprise is the only place I would entertain putting money into this year unless it is something aimed at fixing the limitations I have listed above.

Google Enterprise – No G man.

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G Suite and Chromebook upgrades are too little too late.

  • Functionality upgrades to the mobile version of G Suite (Office-like apps) and enhancements the Chromebook proposition are not likely to alter the downward trajectory that I see for Google in the enterprise.
  • Google has announced upgrades to the iOS and Android versions of Docs and Sheets that include more advanced editing and formatting.
  • It has also moved forward with its intention to enable Android apps on Chromebooks by stating that all Chromebooks launched in 2017 will be able to run Android apps (although not all of them will be able to do so right away).
  • In theory both of these moves could help to enhance the appeal of using Google for Digital Work as well as Digital Life but I see a number of problems.
    • First: Ever since Microsoft released free Office 365 apps for iOS and Android, I feel that Google has been losing the Digital Work game.
    • I think that this is because Office 365 with basic editing being free on iOS and Android obviates the reason to use G Suite at all.
    • I think that the same goes for the other Office alternatives such as Libra Office and so on.
    • Office is by far the leader when it comes to functionality and compatibility and now that it is free in simple user cases, it makes very little sense to use anything else.
    • Second: I do not think that adding Android apps to Chromebooks will do very much to enhance their appeal.
    • This is because the vast majority of Android apps are designed to be used with a device that uses touch as its input mechanism rather than a keyboard and mouse.
    • It is also worth noting that enabling Android apps on Chromebooks will have the side effect of bringing Office 365 onto the platform.
    • Consequently, I think that the user experience of Android apps on Chromebooks will be substandard, pushing users back to their smartphones and tablets to use them.
    • Furthermore, I think that the keyboard and mouse input system is increasingly the domain of the content creator with content consumers overwhelmingly finding touch based devices cheaper and easier to fulfil their requirements.
  • Consequently, I do not see either of these actions improving the appeal of Chromebooks nor increasing the use of Google Docs by content creator users.
  • I see content creators preferring Windows or Mac OSX with a keyboard and mouse and content consumers sticking to iOS and Android on a touch based device.
  • I think that the combination of Office 365’s superior functionality and the free basic functions have obviated the reason to use anything else which will lead to a long-term decline in G Suite.
  • One area where Google has a chance with the enterprise is in the cloud, but there it is already very far behind both Amazon and Microsoft and will also have to contend with Alibaba’s clear intention to take AliCloud international.
  • The net result is that I continue to see almost all of Google’s growth remaining in consumer where mobile and YouTube are still growing very nicely.
  • Finally, I think that this growth is already fully priced into the shares leaving me still preferring Microsoft, Baidu or Tencent over Alphabet.