Monday, February 2, 2009

Glimpse of The Future

Latest earning reports paint very interesting picture. Almost everything is bad. And here we have exceptions: Apple (AAPL), Google (GOOG), (AMZN), Research in Motion (RIMM).

All companies are getting revenue from the sectors which are hurt badly. Apple is in consumer products, which are also fashion accessories, RIMM is in cell phones (OK, smart ones, but cell phones anyway), Google is in advertising and is in retail. What's different? Two companies are Internet companies.The other two make devices to connect to the Internet. This is the future, predicted in 1990s. The future has arrived. The Internet business model, which was buried by countless commentators in 2000-2003, is working. And it's taking business from brick and mortar companies in many sectors of economy.

What's next? It's really easy to predict, just read what was written in 1990s. Almost everything was right, except the timing. It takes time for any revolution to develop. And first comers are quite often die in droves. But survivors strive.

In the next several years we'll see complete death of newspapers. Some of them will switch to Internet, but most will die. Printed edition will survive, but just a handful of them and most probably they will be much thinner. Local press will be mostly free, nobody's going to buy some county paper. They are free in many places already. I'm getting local papers for free, without even asking.

Next shoe to drop will be most of retail. We'll see many chains die. Brick and mortar retail will survive, but it will become much smaller. Computer shops are almost all dead now. Remember Egghead, CompUSA? Circuit City (CC) is next. Best Buy is the only big survivor. Of course, there is Microcenter, but it's a small niche player, and probably a survivor. It's the place geeks go to buy parts.

TV stations will go next. Unless they will be able to switch to Internet delivery. It won't happen soon, we need good broadband in most places for that, but it will happen. We'll see a lot of fight, attempts of cable companies to prevent video over IP, sabotage of traffic a la Comcast, but future always wins. Horse owners tried to fight cars too and sometimes succeeded (red flag laws in England). Never mind. in about 20 years, cable service will be replaced with TV over IP, and most of TV stations will die, to be replaced by unknown new companies.

There will be a lot of things impossible to predict. Just watch for opportunities. And if you see them, pounce. I lost money on several companies I bought in 1990s. Yahoo and Apple brought enough profits to make those investments wildly successful. Same will happen now. Internet is still in infancy.

Full disclosure: at the time of publication author had long positions in AAPL and GOOG and no positions in other companies mentioned. Positions can change any time.

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