Mark Evans wrote a thought provoking article on the "Americanization" of Nortel and then posted the story in his blog.  It is the story that gets your thinking going (that is what makes an article great, no matter what your viewpoint happens to be - as long as you can get together with some friends for a beer and have a discussion about the material, the article's mission is accomplished).

So I felt compelled to get on my soapbox and write a quick comment, but that got me thinking a bit more.  Mark might have a valid point about of the loss of Nortel's Canadian entity, but I believe that the major "Canadian content" loss happened way before, when the ownership of the company changed.  When Jean Monty sold the controlling share that Bell Canada had of NT stock, Nortel certainly lost a bit of that identity.  There is still the Bell Canada/Nortel joint research center in Ottawa, but you do not hear so much about BNR anymore (the lab I worked at here in Toronto used to be BNR but it no longer exists).  However, that was not really the "fault" of the Nortel executives, or the board, etc.  It was just a process - Monty astutely cashed in the BCE NT chips (near the height of the stock), although what he did with the proceeds of that sale might be open to another debate altogether. 

But the point is that the Bell Canada sale of Nortel's stock definitely marked a loss of the company's Canadian identity (for one thing, obviously the shares changed hands and perhaps the foreign ownership percentage of the stock went up).  Bottom line is that this will probably continue to happen, although not quite as much.  I am talking about the change in RRSP foreign content rules, which might lead some Canadian investment houses to slowly start moderately divesting from their Canadian stocks (that had to make up 70% of their fund portfolios in order for the fund to be considered domestic).  This might lead to more of NT stock going to American hands.

As far as R&D goes, yes, it is true that Nortel already had centers in Mission Park (CA), Richardson (TX) and Raleigh/Research Triangle Park (NC) for a long time.  But that makes sense, given the fact that a lot of the telecom action in North America happens to be in the US (which has far more enterprises and big telcos - Verizon, SBC, Bell South and Qwest).  But I expect Nortel to still continue having its own R&D centers in Canada, as Canadian engineers still represent better bang-for-the-buck than their American counterparts (which are more expensive).  So I do not foresee a JDS-like massive migration to the US for Nortel.  On a separate note, from all the foreign telecom vendors that have Canadian representation, only Ericsson has a Canadian R&D center (a lab in Montreal).  That is interesting, considering how many talented people we have - perhaps Ottawa should consider offering more incentives to strengthen our own Silicon Valley (in Ottawa).

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After reading a bunch of Om Malik's posts on his huge storage arsenal, I decided to learn a bit more about storage technologies, and after a bit of surfing, I came across a great tutorial about Hitachi's perpendicular recording state-of-the-art technology.  The Global Storage Technologies unit of the Japanese vendor has achieved a breakthrough, attaining an areal density of 230 Gbits / square inch, relying on its perpendicular recording technology (this is quite a feat - almost double of what can be done today with longitudinal recording).  This will lead to a product in 2007 having up to 20 GB on Hitachi's one-inch Microdrive.  But what really impressed me about the site is the excellent level of technical detail and how the company clearly explains the technology.  The creative tutorial in particular stands out as one of the premier examples of how to market complex technology - the animation is simply a brilliant way to convey the point.

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Flexbeta has many cool screen captures of Longhorn, the latest Microsoft operating system.  These shots are from build 5048, which is apparently stable despite some work still needed for driver support.

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Looks like Loïc Le Meur's first Les Blogs conference was a huge success, based on the feedback of some folks, the high number of stories written (blog links found via Technorati, but there were many press stories as well - Google News has about 37 news stories, including publications such as Wired and the Guardian).  All in all, there were 300 participants from more than 20 countries, 30 speakers, 3 TV channels, France Info radio, 30 journalists from around the world - amazing for an impromptu get together of blogging experts, developers, vendors, investors and enthusiasts at large.

Unfortunately, I was unable to attend the event, but there are so many different folks that were there and so generously blogged at length about their experience, that I feel as if I had actually been there in loco.  However, there is a lot of information to digest, so here are just a couple of interesting links that are very useful:

- one is a Les Blogs Wiki put together by folks such as Loïc himself, Constantin Basturea, Neville Hobson, and others

- the second one is an entry from Mihai Crasneanu on the Doc Searls speech, which I thought hit home quite a few points about the current state of the blogging industry.  The set of slides can be downloaded from here.

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After much anticipation, the winners of BT's £10 billion (or about US$19 billion) RFP for its 21st Century Network (21 CN) were finally announced today.  The key objective is to upgrade UK's legacy PSTN and evolve it to a multi-service IP based network carrying both voice and data services.  The project will span five years and the migration of customers onto the new network is expected to start next year.  A grand total of eight vendors were selected for six major areas of this massive undertaking:

• Access (DSL, Metro WDM): Fujitsu / Huawei
• Metro Routing: Alcatel / Cisco / Siemens
• Core Routing: Cisco / Lucent (with Juniper's routers)
• iNode (network intelligence / softswitches): Ericsson
• Optical (long haul, switching): Ciena / Huawei
• Services: Lucent

The results have disappointed some Marconi investors and rumors already have started about a possible sale of the company (ironically to Huawei, one of the 21 CN winners).  Marconi's loss also has negative implications to Sonus, which was hoping to leverage its gateway product as part of the Marconi solution.  Huawei's wins on two areas (access and optical tranmission equipment) is a proof point of a higher penetration of low-priced Asian manufacturers into Tier 1 carriers.  Also, the commoditization of low margin business (broadband access and optical networking) is expected to be a contuining trend.  Cisco's win is another validation of its CRS-1 routing platform, which will be used on BT's IP/MPLS core.  Lucent comes out as a winner, getting a lucrative portion of the puzzle (services, which carry good direct operating margins of about 10%).  Lucent will resell Juniper's routing systems, but these will be souped up with Lucent's own OS software and extra tools (developed at Bell Labs) to optimize network efficiency.  The selection of Ericsson might be indicative of BT's future plans to provide its customers with a seamless wireline/wireless service.

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Cisco (Nasdaq:CSCO) has also been quite active lately from an M&A standpoint, and its most recent acquisition was announced on Tuesday: Sipura Technology.  The transaction, valued at $68 million (a cash and stock options combo) solidifies the Linksys wireless division (Linksys was another acquisition made in 2003 geared towards the SOHO/small business and home markets).  Cisco had been OEMing Sipura's ATAs since 2004; analog phones and fax machines can be connected to these ATAs to create a phone line over a broadband connection (e.g. DSL).  Om Malik had an interesting post on this transaction (including the past Komodo story).  Sipura is the third company bought by Cisco this year (after Airespace and Topspin).

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Besides the PEC deal, Nortel (NYSE:NT) also got a lot of press (particularly across the Ocean) on a rumor that it has been linked with Siemens on some cooperation deals involving both wireline and wireless products lines.  According to an article in German magazine Der Spiegel, executives from both companies met "secretely" near the Munich Airport to discuss product partnerships and maybe even some co-development (ed. note: well, the Genie is out of the bottle by now, but one always wonders how the press gets this info - which company was this info leaked from?).  Obviously, many are thinking about a possible spin-off of the German vendor's money losing handset division, but I doubt that Nortel would make a play there.  However, perhaps a wireless equipment play could be a remote possibility (Siemens next-gen wireless sales globally trail only Ericsson and Nokia), as could a VoIP-related deal (Nortel holds the edge over Siemens here, with almost a quarter of the global share, compared to roughly 10 percent by Siemens). 

The current consolidation in the carrier space, and the difficulties that Euro vendors have achieving a higher penetration on this side of the Atlantic (and vice-versa) help fuel the rumor mill of such deals. But, speaking about Nortel specifically, the company needs to continue on the path of building partnerships (such as the ones that it already has with LG Electronics in Korea, Putian in China, in addition to other smaller arrangements in the US and India) in order to boost its performance in the highly competitive telecom space.

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Nortel (NYSE:NT) was back on the headlines today spending money to the tune of $448 million (in cash) to snatch up IT services firm PEC Solutions (the deal is expected to close later in June).  PEC is a player in the government IT Services industry, which is being pegged at an estimated $60-65 billion in 2005, and growing at annual rate of about 4%.  The idea is to merge PEC with Nortel's Federal Network Solutions unit and to create a new business unit (a US-based wholly owned subsidiary called Nortel PEC Solutions) - thereby avoiding any restrictions a Canadian company might have in competing for US government contracts.

The reaction thus far has been mixed, with some naysayers pointing the fact that this was an expensive cash transaction in an industry that is growing at a relatively modest rate.  But the flip side of that argument is that the transaction opens the door to a very profitable LOB for Nortel (13-15% margins are typical) in a market where the company was not previously able to firmly establish itself.  Plus, of course, it is a way to get CEO Bill Owens to leverage his military connections to help boost the company's chances of securing US government contracts. 

This is just one of many moves Nortel will be making this year - there should be more M&A activity, as well as some consolidation. 

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After posting a journalist's negative view on the viability of blogging as a business tool, surely enough I would not miss an opportunity such as this one to post about the other side of the coin (i.e. the glass is half full rather than half empty).  Business Week had blogging in its cover page (see photo to the left) with a great insight into how blogs will impact the business world.  Even the article itself was written in the form of a blog - so kudos to them for being so creative.  Business Week also took advantage of the cover and the feature article to introduce its new Business Week blog (called Blogspotting).  Blogspotting's first entry was posted on April 21st. 

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Siemens' handset business has been suffering for quite sometime, despite some innovative models that the company has launched over the past year (including the SK65, which was reported here last year). Rumors have been everywhere, including a report that appeared this weekend on the Sueddeutsche Zeitung.  In that particular report, Taiwanese electronics powerhouse Acer was linked with being a potential investor in the German vendor's mobile phone unit.  Motorola has also been linked as a potential candidate in other articles.  In the meantime, losses the that cell phone unit have reached 100 million € (roughly US$ 130 million), and despite all these sales or partnership rumors, the exiting administration has given no guidance on the direction the company will take to find a solution.  The appreciation of the euro versus the dollar is further exacerbating the problem, and the company believes the € will rise over $1.35 this year.

Siemens shareholders expect incoming CEO (Peter Kleinfeld) will find a solution (i.e. spin off, seek a partner or even close the operation).  But Acer is denying the newspaper report, and the Motorola partnership does not seem a very likely scenario anymore, given that the US vendor has already made good progress into the European continent, so teaming up with Siemens would not be as advantageous (the Motorola story has been floated around for the past couple of years, before the Euro progress made by Motorola).  I had an "Eureka" moment thinking about this issue and thought of a more interesting partner that has not been mentioned too much... LG Electronics.  This could potentially create a Sony-Ericsson type entity, which can pickup strong shares in markets such as Asia/Pacific, Europe and the Americas.

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The award goes to this photo, courtesy of Denver's ABC Channel 7, which captured two penguins having to go through security at the Denver International Airport (DIA).  The photo caption on the news channel's web site said: "The first penguin seems to be wondering why this is necessary. "It's not like I planned to hijack the plane to Antarctica."  (hat tip: Brad Feld).  No folks, this is not a Linux ad, it is just the TSA in action.

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Much has been blogged about VON Canada already (and I recommend both Jon Arnold's and Mark Evans' various opinion pieces).  In its second year, there was more traffic at the VON show, and the new venue (in downtown Toronto) certainly helped.  I believe that the event definitely had star power, with figures such as Niklas Zennström (the CEO of Skype, the VoIP wonder company), Lawson Hunter (the Bell Canada Exec VP and regulation czar), Ibrahim Gedeon (the Telus CTO guru with a great sense of humor and realism), Alexander Brock (VP of Business Development at Rogers and one of the FMCA czars), and even young rising stars such as Mark Spencer (the president of Asterisk, an open-source IP PBX).

My enjoyable moments were many, including the Q&A session with Niklas after his keynote (reporters kept asking him questions, including many who made the trek from the US to take advantage of his being in Canada) and chatting with him the next day (again, thanks to Ash Chopra for taking the photo), chatting with various VCs in the VC session about their VoIP-related investments, listening to Arun Sobti and Eric Burger (they each gave a great lecture in the Media Server session), getting a good laugh from the crowd with my cocktail party question during the IMS session, and getting a great industry perspective from Tom Evslin (his VON Canada slides can be downloaded from this entry).

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Here is a rather skeptical view of the viability of blogging as a business from Graeme Thickins (via Dragos from @rgumente).  In summation, here are Graeme's 10 points of why he believes blogging and business are not a good match:

Business doesn’t do “passion.”

Business doesn’t like gossip

Business doesn’t like doing public experiments

Business doesn’t bare its soul, and certainly not its personal diary

Business is already time-strapped and blogs burn time like nobody’s business

Businesses already communicate well in various ways

Businesses are advertisers, and advertisers don’t like blogs

Business and politics don't mix well

Business writing style and blogger style don’t even come close

Businesses have other ways of dealing with promoting their stances

Here are a few issues I have: some businesses "do passion" all the time, in fact, passion is a key ingredient for success if you are a startup (well, in mathematical terms, a necessary but not sufficient condition).  As for gossiping, I would say that depends on the nature of the business ;-).  Even in the telecom industry, it is nice to read a few "insider" postings that one sometimes can get at Om Malik's blog, for instance.  So for blogs like B2Day (the Business 2.0 blog), a bit of gossip certainly cannot hurt.  As far as public experimentation, consider again a counter-example from the telco world (there are many, but carrier focus groups are one of them).  Businesses do not like to bare their souls?  Try telling that to Jonathan Schwartz, the Sun CEO (yes, he has his own blog).  Burning time?  Well, as long as employees work on their blogs during their own time, there should not be any problems (their free time is sacred and they should be at liberty to use it however they choose).  As far as advertisers, I have a couple of words to say: Google AdSense.

Graeme's points are well taken, despite the above notes - the case for blogging in business still needs to be made or to be better articulated.

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Another interesting panel that I participated on at VON Canada was the IMS (IP Multimedia Subsystem) general session.  So what is IMS?  Many folks still think of IMS as it was originally by design, i.e. a spec geared towards delivering SIP services to the wireless space (as defined by the 3GPP folks).  In reality, it is much bigger than that. 

The best way to define IMS is as an access agnostic spec that enables service providers to deliver a new generation of SIP-based multimedia apps (in the SS7 and SIP domains).  This allows for the convergence of wireline and wireless network architectures and the benefits are OPEX savings (due to a decreasing incremental cost of deploying apps within this framework), a faster time-to-market (due to reduced complexity) and the new apps, which are geared towards increasing subscriber stickiness and the uptake of enhanced services.  The key idea is the re-use of common functions: IMS takes the network from a vertical integration modus operandi to a horizontal architecture model where these common functions are re-utilized.

In other words, IMS is supposed to be everything the intelligent network was supposed to be plus more.  But before drinking all the vendor Kool Aid, much work still needs to be done, both in terms of the actual IMS standard itself, the value proposition of vendors to service providers, the conceptualization of new services and the establishment of new pricing models that will make this network evolution a bit more palatable to service providers.

The session proved to be really interesting - I was particularly impressed with the candor of all the panelists.  Some folks might have expected that given the fact that there were four vendors (IP Unity, Lucent, MetaSwitch and Nortel) and one lone service provider (Bell Canada), the tone of the session would have been based on more hype and promotion.  However, that was not at all the case - in fact, the session provided a realistic view of the current state of the market, the realities facing both vendors and service providers, as well as the issues that still need to be worked on.  I will be posting more on IMS in the future, so stay tuned.

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Intel announced a couple of days ago the volume production of its IEEE 802.16 standard WiMax modem chipset (known as Rosedale), geared towards equipment vendors that are targeting the broadband wireless market.  The chip, now officially called the Intel PRO/Wireless 5116 broadband interface device, is fabbed externally and utilizes a programmable architecture.  Intel is only delivering the silicon, with the vendors being able to implement their own software up to the MAC.  Intel expects most vendors will use 5 MHz for channel bandwidth thereby yielding roughly 10 Mbps of IP traffic. 

The chips will be used in CPE gear and eventually in wireless base stations.  The advent of the 802.16e standard (expected to be ratified later in 2005) will lead to better power efficiencies and the silicon will be targeted for desktops by 2007.  As of today, Intel is producing the Rosedale chips externally and as the uptake increases, the production is expected to shift in house.  Despite the fact that 2005 volumes are expected to remain relatively low, there is a lot of hope that with 802.16e, reduction in costs, higher volumes and economies of scale can be achieved. 

Despite the fact that this is still probably the bottom of the first or top of the second inning in terms of WiMax (to use the baseball analogy), I believe that this is still a very important milestone for Intel, because the company has finally delivered the next step in its vision.  Also significant the fact that Intel currently has 12 hardware customers and 100 operators planning to sample their Rosedale chips (the manufacturer customer list includes the likes of Airspan, Alvarion, Aperto Networks, Axxcelera Broadband Wireless, Gemtek, Huawei, Proxim, Redline Communications, Siemens Mobile, SR Telecom and ZTE).  To add a further dose of realism (and silence some skeptics), a total of 15 carriers worldwide will be announcing their intentions to trial the Intel 5116 WiMax chips.  The list includes: AT&T, Altitude Telecom, BT, Brasil Telecom, ETB, Iberlanda, Millicom, Qwest, Sify, Speakeasy, South Africa Telkom, Telmex, Tower Stream and UHT. 

How long before the Centrino model takes over WiMax as well?  Well, it will be a while, as power efficiencies of 802.16e will be needed.  So this second phase push probably will not happen until 2007, at which point the technology will start getting moved into notebooks.

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I will definitely be posting more on the Skype story (got a couple of separate threads there worthy of separate postings).  But first, an insight on the analyst panel at VON Canada, which counted with Jon Arnold (a friend and ex-colleague of mine at Frost&Sullivan), Jeffrey Fan (director and equity research analyst at UBS here in Toronto) and yours truly.  I understand that due to force majeure reasons, Daniel Berninger had to drop out, and I certainly hope that everything will be OK with his kid.

The discussion centered around VoIP in three key areas: enterprise, service provider and the MSOs (the focus of most of Jeff's research).  Jon asked a few thought provoking questions, particularly about the rollout of fiber-to-the-x to various homes.  One thing I definitely brought up is that in contrast to their US counterparts, Canadian carriers such as Bell and MTS have very good loop length profiles.  In fact, according to Bell, 85 to 90 percent of its customer dwellings are within 1,200 meters of the node (that's about 3,600 feet, well within the 5 kft. distance to ensure a bandwidth of between 15-20 Mbps for a FTTN deployment with ADSL2+ or VDSL2 as a last mile technology - note Bell is going with a VDSL solution).  That is way better than SBC, for instance, which has over 57 percent of its loop lengths exceeding 6 kilofeet.  So FTTN with VDSL2/ADSL2+ seems to be the right approach for Canadian ILECs such as Bell to bring the triple play to all of their customers as quickly as possible.

Jeff mentioned the triple play efforts of some MSOs, including Shaw and Rogers.  Interestingly enough, nobody from the audience asked any of us whether or not the $55 that Shaw is charging per month will be able to deliver the uptake in triple play services.  Obviously, since Bell and Shaw own the only two DBS licenses in Canada, that leaves Telus a bit vulnerable on the video side (until the latter launches its own IP-TV solution) - and until that point in time, maybe Shaw will just continue to keep its price at that level.

Jon also made a few comments about the uptake of VoIP in the enterprise, where thus far, the CPE approach seems to be winning.  The slow uptake of IP Centrex has surprised some, but given the dynamics of the market, and the typical lenghts of contracts offered, in hindsight, the modest ramp-up was to be expceted. 

All in all, it was an interesting session - it would have been nice to have Daniel in there, as well as Cody Willard (perhaps we can have him in a future session). 

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Note: Mark Evans wrote about Merrill Lynch analyst Glenn Campbell's estimate that Shaw is signing up about 1,000 customers a week for cable telephony in Calgary, but the question still remains whether Shaw can reach 20% penetration of cable subscribers within 5 years.

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One of the highlights of Day 1 at VON Canada was Niklas Zennström keynote speech right before lunch.  Mr. Zennström is the CEO of Skype, the peer-to-peer VoIP client that is taking the world by storm, earning huge coverage in the blogsphere, from Andy Abramson to ZDNet blogs (by authors such as Russell Shaw). 

Despite the skepticism of some bloggers such as Om Malik, the results of Skype over the past year are nothing short of amazing.  According to the numbers in Niklas' presentation, the company is attaining a growth rate of 1000% a year, reaching an installed base of roughly 35 million users worldwide.  Given that Verisign is pegging the global number of Internet users at 900 million, Skype has captured almost 3.89% of the total number of cybernauts out there.  But that also includes users still bogged down by low bandwidth, so a more telling statistic would be the penetration of Skype into the global installed base of broadband users.  A quick scan at ITFacts.biz reveals that 150.5 million users around the globe have broadband access.  This yields a Skype penetration figure of about 23.3 percent, which is pretty good for a company having a product that has been launched less than two years ago.

More importantly, Skype has also been very adept at increasing the take rate of premium services (i.e. getting the subscribers that have been obtaining the free service to pay for extra services such as SkypeOut or SkypeIn).  Thus far, the company is counting mostly on SkypeOut, and is getting a take rate of roughly 3.43% of its users (corresponding to 1.2 million SkypeOut accounts).

Figuring out the annual ARPU for SkypeOut might be a bit tricky, but here are a few datapoints: James Enck figures that $75 per annum is a reasonable figure.  After consulting the SkypeOut pricing list, one can see that the per-minute rates for the U.S., France, Germany, Italy or the U.K. are 2.3 cents US$ per minute.  So the $75 translates to roughly 272 MOU per month, which might be a bit optimistic (granted that the assumption there is that most users make calls to cheap locations instead of India (18.5 cents/min.), a mobile phone in Yugoslavia (28 cents/min.), Vietnam (35.8 cents/min.) or a U.K. wireless number (27.5 cents/min.).  I would suggest 3 hours per month at the "low" rates is a more conservative assumption (want to err on the low rather that high side).  That means $4.14 per user per month or an annual ARPU of $49.68 (let's just round it up to $50 for convenience).  Of course, this can be done in a more scientific way factoring in the top countries by users (Rodrigo Sepulveda Schulz has a list here), but the numbers wouldn't be that far off (Poland has a charge of 3.5 cents/min. and Taiwan 2.9 cents/min.). 

Now, fast forwarding a bit to the short term future, it would not be unreasonable to see Skype get 25% penetration of 200 million broadband subs by the end of this year (about 50 million subs).  Assuming that the take rate for SkypeOut grows to 5%, that yields 2.5 million paying customers by the end of 2005, at an annual ARPU of $50 resulting $125 million in revenues for SkypeOut.  In Niklas' presentation, he mentioned a SkypeIn annual fee of 30 € per user, which translates to roughly $39.10 (let's just use $40 for simplicity).  With a take rate of 2.5% (assume half of SkypeOut due to the fact that it is a newer service), this means 1.25 million customers generating revenues of $50 million for SkypeIn, or a combined total of $175 million for Skype services (for 2005), not including extras such as SkypeVoicemail or headset partner deals.

That is a pretty amazing result, particularly considering the very low marginal cost per call minute and the near zero customer acquisition cost.  How much will this make the company worth?  Valuation depends on the sensitivity analysis of various DCF scenarios, but regardless of the multiple, with this much revenues, the company should be able to invest in R&D and enhance the product even more.  For kicks and giggles, why not partner with an speech rec vendor and bundle in some speech rec features (that would really make Om Malik's discussion about passing the "mom test" academic)?  Cannot use a simple interface to make a call?  Simply say the number you want to call!  Of course the speech engine does not even need to be that sophisticated (it could have a very small vocabulary, which does not add that much to the cost and/or complexity of the application).  But this is just one of many ideas of what Skype can do with the revenue streams.  Another one certainly is to hire top talent.  One sign of good things to come is the hiring of Microsoft guru Lenn Pryor, who left the Redmond,WA software giant to join Skype - a great coup for Skype.

Of course, despite all this optimism, a certain dose of reality is also needed.  For Skype to succeed, peering agreements will be sine-qua-non, and while Skype has the jump on the competition, more of such agreements are going to be required over time.  Moreover, for SkypeIn, Niklas also highlighted in his presentation that the company will need authorization from telecom authorities around the world to offer local numbers.  Thus far, the only countries with SkypeIn numbers are the U.S., U.K., France, Sweden, Norway, Finland, Denmark, Poland, and Hong Kong (ed. note: later, I asked Niklas about why Canada was not on the list, and he mentioned nothing happening yet, but my suspicion is he will probably wait for the CRTC VoIP decision in May before making a move in that direction).

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Despite the relatively flat economy (due in part to higher oil prices), Red Herring reported today that VCs got a lot more money to play with in Q1 of this year versus a year ago (in fact, double of last year's Q1 figure of $2.67 billion in 49 funds).  The 2005 tally comes to 48 funds at a total of $5.33 billion.  On the private equity side, the numbers for Q1 2005 were an astounding 4 times higher than the same interval over last year.

Despite the positive raised capital numbers, there is still a lot of money staying on the sidelines, with more than $53.6 billion yet to be spent.  So how come VCs are raising money faster than they can spend?  Could it be their perception that there is a lack of startups with enough potential to justify VCs to invest in them?  Or that after the bubble of the early 2000's, VCs are trying to be more careful about their investments?  Maybe that will make an interesting question in the VC session I will be moderating tomorrow at VON Canada.

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Here's an interesting get together in Paris later this month that will feature a lot of blog enthusiasts around the word: Les Blogs.  The conference will discuss what is happening in the blog and social software world, and provide some future perspectives on the subject.  Cognoscenti such as Loïc Le Meur, Caterina Fake, Ross Mayfield, Stowe Boyd, and Joi Ito, among others.  Sounds like a really cool event (saw even a posting about this on Robert Scoble's blog, and I echo his sentiment and regret my not being able to attend the conference, but there will be a lot of people blogging about it).

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Note: Interesting to see Nokia as one of the sponsors.  There is definitely a connection there: moblogging (short for mobile blogging, or the art of blogging from a mobile device such as a cell phone or a PDA).  Rodrigo Sepulveda Schulz (another one of my favorite Euro VC bloggers) happens to have one such moblog, where he posts stuff right from his Nokia 7710 handset.   more »

After making strategic investments in "advanced technology" areas such as security, storage, wireless LANs (including companies such as Aironet and Airespace), enterprise VoIP, Optical (SONET), and home networking (including companies such as Linksys), you can tack on the newest addition to the list: clustered servers.  Cisco (Nasdaq:CSCO) announced yesterday the acquisition of Topspin for $250 million. 

The Mountain View (CA) company is a provider of so-called server fabric switches, which are designed to connect interconnect servers in a clustered environment and also deliver network and storage connectivity to that server cluster.  Topspin was founded in April 2000, has about 135 employees in Mountain View and Bangalore, India, and will join Cisco's Data Center, Switching and Wireless Technology Group. 

The raison d'etre of this acquisition is the increasing popularity of the clustered server approach.  The idea is to pool IT resources into a single virtual machine that monitors system demand and accordingly tweaks the supply.  Moreover, Topspin may complement Cisco's Ethernet and SAN switches, making Cisco a top player (#1 or #2) in the SAN switch market.  Another Topspin intangible is its relationships with companies such as Dell, HP, IBM, NEC and Sun, all current Topspin partners.

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CNet has an interesting article detailing the City of Philadelphia plans about making 802.11 access ubiquitous across its streets. As reported here before, Verizon supported PA state House Bill 30, which states that an ILEC will get the first rights of refusal if a city in the state decides to follow Philly's footsteps and offer wireless broadband access to the masses.  However, Verizon agreed to grant an exception to Philadelphia, and in time, residential consumers will be able to get throughputs of 1 Mbps at prices ranging $16 to $20 per month.  This is still a far cry from what cybernauts can get in France (10 Mbps for €10 a month), but cheaper than the other broadband offerings in the area (3 Mbps for $30 a month by Verizon or $45 monthly for 4-5 Mbps by cable companies such as Comcast).   more »

For people following the MCI sweepstakes, this week is providing yet another interesting twist to the story. The latest thickening of the plot: in what some believe to be an astute move by Verizon (NYSE:VZ), the company offered Carlos Slim, the largest shareholder of MCI, as much as $25.72 for each of Slim's 43.4 million shares.  This is a significant premium over what other MCI shareholders will receive from Verizon (which has agreed to buy MCI for $23.10). Moreover, Verizon's MCI shareholder offer was constituted by 60 percent cash and 40 percent stock, whereas Mr. Slim got paid fully in cash.

The thinking was probably to buy off and silence the largest shareholder, in order to avoid further shareholder dissent.  But it might backfire, as some MCI shareholders are upset.  Here is exhibit A from Bill Miller of Legg Mason (via Light Reading):

As I indicated in my letter to the Board last week, events had made Verizon's $23.50 offer moot; this subsequent development confirms that. There can be no reason for the Board to support an offer to MCI owners that is substantially inferior to what Verizon has just agreed to pay for a non-control block of stock. Shareholders would be outraged if the Board did less than insist that the identical terms be made available to all other owners.

This reminds me of George Orwell's Animal Farm famous quote: "'All animals are equal, but some animals are more equal than others".  In order to win MCI, Verizon will have to ultimately sweeten their offer to the rest of MCI's shareholders, and get it pretty close to the deal extended to Slim. There is legal precedent for suing boards of directors when they let different classes of shareholders be taken out at different prices, so there will be pressure coming to both the MCI board and Verizon. Furthermore, there has also been some speculation that Qwest will raise its bid to $30 a share, or change its composition (50 percent cash, 50 percent stock). So we still have not heard the final chapter of this story... stay tuned!

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Peter Howe, one of my favorite technology writers in the Boston area, had an interesting interview with Sprint's CEO Gary D. Forsee that appeared in the Boston Globe last week (Mr. Forsee was in Beantown to give a speech at the Boston CEO Club, among other things).  One of the key highlights of the interview was about dual mode phones (i.e. handsets that can allow seamless roaming between 802.11 and 2.5G/3G networks), a topic that I have discussed at length here at TF and in other publications as well (such as the IPCC January 2005 newsletter). 

Mr. Forsee believes dual mode handsets will hit the US market in 2006, and I would tend to agree with that.  Now that most technological challenges have been overcome (e.g. the handoff and battery power issue, the latter thanks to 802.11e and smart solutions such as Motorola "deep sleep" strategy), the key hurdle that needs to be overcome is the million dollar market issue.  Some wireless operators will probably reject the technology (at least initially) as a threat to their margins because it will cause a big reduction in the amount of 2.5/3G minutes of usage, that will be shifted to cheap (sometimes even unlimited) calls via 802.11 WLANs. 

This narrow-minded vision might end up costing wireless carriers even more than the small loss of minutes of use.  Savvy service providers (tier 2 wireless, MVNOs such as Virgin, or MSOs such as Comcast, Cox and Time Warner) will see this as an opportunity, not a threat.  Because most of them will gain - for MSOs, anything is gravy, as they fight the competitive threat of the RBOCs "quad play" (triple play of voice, video and data plus wireless); for tier 2 wireless players, the increase in ARPU due to extra pull-through data revenues will make this a worthwhile play; for MVNOs comes the opportunity to get more revenues from customers looking to get extra value. 

But, more importantly, how significant is the amount of lost revenues due to fewer minutes spent on the 2.5/3G wireless networks?  The prevalent modus operandi is for cell phone users to hang up their calls as they enter their offices or get closer to another fixed line phone.  I know I do that - and not only to save money off my wireless plan, but also because the still unknown effects of too much talk time on my cellular handset.  Again, wireless operators are failing to see that most of those minutes were not really there to begin with (e.g. even on the wireline side, enterprises use a PBX, which can be thought of a big multiplexor, to save them money).  In the end, for fear of cannibalization of revenues, they might miss on the bigger picture.  But in time, they might realize that if they do not forego some of those minutes, their competitors (tier 2 players, MVNOs and MSOs) will certainly do so.

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Update: Obviously, Sprint is astutely leveraging the opportunity by enabling MSOs (and potentially MVNOs in the future) to provide the wireless part of the "quad" play to these players.  It would not surprise me to see Sprint also play a key role in enabling the seamless roaming play.  The wireless operators I was referring to above were just the big incumbents.

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Next week, Jeff Pulver's famous VON show returns to Canada.  The lineup of speakers is again very impressive, including the likes of Niklas Zennström (the CEO and co-founder of Skype), Ibrahim Gedeon (Telus CTO), Alexander Brock (VP of Business Development of Rogers), Ian McLaren (CEO of Ubiquity Software), Ron McKenzie (Executive VP of Allstream), and Mark Spencer (President of Asterisk).  Moreover, the new venue (Metro Toronto Convention Centre, right downtown) and quite a few interesting sessions - such as for instance a great "Town Hall" meeting with Lawson Hunter (Executive VP for Bell Canada) and Larry Shaw (Director General for Telecom Policy at Industry Canada) - will also contribute towards making this a can't miss show. 

I am honored to have been invited for a few sessions and hope to make a positive contribution to the event.  Two of the sessions in which I will be participating will be potentially very interesting: one is a venture capital perspective (where experts in the VC industry will give their impressions on VoIP-related investments) and another one on IMS (IP Multimedia Subsystems), where we will have impressions about this new architecture for next-gen networks from both the vendor and the carrier side.  IMS has been a buzzword that has gotten a lot of press lately, and I will have a follow-up posting on the topic.

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Late Friday afternoon, I always get a few funny e-mails (part of the Friday afternoon humor habit that I share with a few of my friends). Today, it surely was not a disappointing day, as I got a link to a Tom Evslin blog entry that I missed (it was originally posted back in March). Here are a few highlights from this gem:

“It’ll be done ASAP.” Translation: There is no schedule yet.   “That feature shouldn’t add any time to the schedule.” Translation:  There is no schedule yet.   “It’s fifty percent done.” Translation: It hasn’t been started yet.   “It can literally do anything you want it do.” Translation:  There is no spec yet.   “It’s ninety-five percent done,” Translation: The remaining five percent will take ninety-five percent of the elapsed time.   “It’s feature complete.” Translation: The feature list has been truncated.   “It’s Alpha ready.” Translation: A lot of code has been written; none tested.   “It’s Beta ready.” Translation:  It’s Alpha ready.”    “Ship it!” Translation:  The Development team is sick of this and wants to move on to something else.  The customers will test it.

Read it all!  Definitely very entertaining...

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Jawad Khaki, Microsoft Corporate VP of the Networking and Devices Technology Division, discussed Longhorn's networking features in an interesting discussion posted in the "Executive Chat" session of the Microsoft TechNet portal.  Among the various new enhancements being added for both enterprise and consumer networking, the most notable ones include support for IPv6, a new WiFi stack (being re-written to allow for extensibility and support for 802.11n), and peer-to-peer (P2P) features.  It is an interesting interview and good reading material.

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Net Applications, a web monitoring company released in late March its February figures for web browsers.  The statistics revealed that Firefox, an open source browser, has gained market share (6.17 percent as opposed to 5.59 percent in January).  Microsoft still has the most popular browser (Internet Explorer) with a share of about 89 percent, albeit that is down from its January number of 90.3 percent.

Of course, Technology Futurist uses SiteMeter to track the blog hits from different browsers, and I have posted on those numbers before, back in November 2004.  There is no scientific method behind this - pure number tracking, and certainly the pool of people that visit TF is not random, or representative of the Internet out there (even back then, I made the case the there were probably a bit more Firefox hits than I expected probably because there were more techies coming in to visit, and those techies are more savvy users willing to explore new browsers).  But a quick peek at the numbers show a marked increase of Firefox browsers registering hits here.  Of course, this is just a sample snapshot, and it is bound to change anytime, but typically, over the past 3 months, Firefox has been able to consistently oscillate between 13-15% and 22-25% of the views at TF, which is an amazing result, compared to where those numbers were just five months ago.

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With wireless markets nearly tapped out in Western Europe and slowly getting to that point in North America, handset manufacturers will be soon focusing on cheaper handsets that can sell well in the so-called "emerging markets".  In markets such as Brazil, there are many pre-paid customers who typically bring a low ARPU, so there is also added pressure for the carriers not to subsidize high-priced handsets if their payback period would be long.

In the quest for that cheaper cellular phone, vendors are faced with margin risks.  For instance casings for phones typically cost $8-$10 with not much variance due to the handset price.  For an average $150 handset, that translates to roughly 6% of the cost of the handset.  However, applying the same logic to chaper phone (let's say a $50 phone), the same casing would constitute 16 to 20% of the price.  With margins staying relatively flat, at roughly the 10-15% range at current prices, vendors will find it hard to embark on an ultra-low price handset strategy.

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The other day, I stumbled upon some Romanian/US SME Internet usage stats at Dragos' @rgumente site and that got me to ITFacts.biz, a great site that publishes factoids on anything from 3G to WWW.  The VoIP section was interesting, as were the telecom and VC sections.  I spent a good chunk of time browsing that last one, and discovering information such as the fact that Sillicon Valley, New England and NY Metro constituted 56% of the capital and 49% of all VC deals reported in 2004, according to PWC.  Definitely a very bookmark-worthy website.

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I do not know if anybody had the opportunity to check out the FOREX markets during the past few days, but there was a major consolidation session in Chicago on Friday, as the Fed made a few hawkish statements about inflation, and a lot of traders sold their USD shorts.  Should this trend continue, chances are that the Euro will lose some of its shine versus the dollar.  So maybe the time has really come for Euro vendors (e.g. Alcatel, Ericsson, Siemens) to really consider even more North-American based companies to complement their respective product portfolios.  Arguably, this has been already taking place, with Siemens and Alcatel quietly buying companies such as Chantry Networks and Spatial Wireless (respectively).  But we expect to see a lot more of those acquisitions in 2005.  It is now still relatively cheap for a strong Euro player to buy some assets on this side of the Ocean, but that window might close if US interest rates keep going up.

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In what industry watchers believe the first of many SBC (Session Border Controller) plays this year, Juniper bought Israeli startup Kagoor Networks for $65.5 million in a deal announced earlier this week (Tuesday).  The hefty multiple (more than 13x 2004 sales) caught a lot of attention, given the amount of other SBC companies available in the marketplace.  Companies such as Acme, Jasomi and Netrake can also be potential acquisition and/or IPO targets.  So why $65.5 million for a company that is not yet profitable?  Obviously, Juniper (Nasdaq:JNPR) felt that Kagoor's product was top class, but Kagoor also happens to have key relationships with the same companies that resell Juniper, namely Lucent, NEC and Siemens. 

It was surprising for some to see Juniper acquiring an SBC vendor, when all along the street kept dreaming up scenarios such as a wireless gambit, an Ethernet company purchase, or a Layer 4-7 play.  Other folks in the Street were even speculating Juniper might acquire Sylantro.  But in the end, Kagoor can play a key role in Juniper's Infranet initiative and is the first piece to fall into piece in the 2005 SBC puzzle.

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