Technology sector wakes up a little

February 20th

i wrote this (unpublished article) in december. but google did survive the release of a lot of shares in mid february, and it stock continues to trade in the 190's after a boost following very good results in the most recent quarter.

is google -- the company everyone loves to watch -- heading for a fall? what do you guys think?

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New excitement in the technology sector

Rajeev Srinivasan

Things are beginning to look up a little in the Silicon Valley, after a couple of hard years following the dot.com bust. There is new energy, and a lot of it has to do with novel challenges to Microsoft. On the one hand, search has taken on new dimensions, and on the other, a new browser is finally challenging Internet Explore. In addition, Google as a company is attracting a lot of attention.

For most consumers, search has become the holy grail of the web, the killer application, to the extent that ‘google’ has become a verb like ‘xerox’. You google for that article you remember seeing somewhere. You google to use the web as a virtual encyclopedia. It has now become an article of faith that Google’s search engine can produce more relevant results than the slew of other search companies also in the business.

The exciting new development has been the extension of this technology to the desktop. Google Desktop Search was introduced in October, and it is a boon to all of us who know there is a file or an email on a particular topic somewhere on our chaotic desktops, but we don’t remember exactly where we put it.

As an early user of this technology, I am sold on it: an index on your system enables lighting-fast searches in text, spreadsheet and presentation documents, email, and chat transcripts. Furthermore, it can also check cached web pages that you have browsed. This last is perhaps a little worrisome for the paranoid, for it could create an audit trail, as well as potentially expose sensitive data from say, financial applications. Fortunately, this feature can be turned off.

On the other hand, for the average user, the familiar Google web interface is now available for searching your desktop as well. You can search both web and desktop together if you so desire, or you can search just your own computer. Google swears that none of what the program finds on your system is transmitted to them, and I suppose we trust Google enough to believe them.

The challenge in search has energized the competition. Microsoft Desktop Search has been announced, based on technology from new acquisition Lookout Software, and it will provide links to the popular Encarta as well as location-based content. Smaller firms such as Blinkx and Copernic also offer desktop search products.

Yahoo has just bought Stata Labs, which has a search engine and email; most of Stata Labs’ engineers are in Chennai, India. Yahoo intends to use this technology to compete with Google Desktop Search and Google Mail. Google Mail also turned the free web-mail market on its head, as Google offered an incredible 1 Gigabyte of storage, plus its trademark search to organize mail. Others have been forced to also offer more free storage: no email vendor is going to make money by charging for storage.

Going back to desktop search, both Microsoft and Apple have announced that they will enhance their operating systems to maintain more detailed data about files, allowing them to offer high-value desktop searching. Customers will benefit; Microsoft Windows and the Apple OS will both be better products as a result.

Another new development is the arrival of Firefox in the browser market. This is a full-featured web browser from the nonprofit Mozilla organization, and it is based on open source products. In a single month, over 8 million copies have been downloaded, and it is posing a real threat to Microsoft’s Internet Explorer, for the first time since Netscape was bested in the browser wars a few years ago. Microsoft still holds an overwhelming market share, but Firefox is attracting quite a fan following.

Firefox has a number of attractive features such as better security, tabbed browsing (you can view multiple sites in different tabs or panes in a single browser instance), active bookmarks (better support for syndicated content), pop-up blocking, more search engines built in, and so on. No doubt Microsoft will come back fighting, and once again this is good for the customer plagued by problems with viruses, spyware, and the like.

I have been using both Firefox and their new mail client Thunderbird, and I am quite happy with them; just as I am with Gmail and Google Desktop Search.

The Mozilla products indicate once again that the open-source movement is here to stay; for instance Sun Microsystems just put its crown jewels, the Solaris operating system, into open source. Part of the impetus is the fact that governments, especially in places like India and China, are actively supporting open-source products, fearing lock-in into Microsoft’s proprietary products. The continued advance of Linux, despite FUD created by SCO’s lawsuits, is propelled by the same trend.

So there is certainly a buzz in the Valley about new products and new opportunities. This time, the venture capitalists are also holding back a little, not funding dubious new startups with the vigor they showed in the roaring late 90’s. VC funding has gone down sharply according to the San Jose Mercury News’s Money Tree. This is a good trend, so that there isn’t too much money chasing marginal ideas.

Among newly public companies, Google stands out again as an investment possibility. It has tried to reduce the power of investment bankers by offering stock directly to the public. Its stock has been on a wild ride since the IPO at $85 a few months ago; it crossed $200 after the announcement of the desktop search product. In a couple of months, the founders, as well as CEO Eric Schmidt, will bring a large number of shares to market, and there will probably be a correction then.

All in all, there might well be the beginnings of a new tech boom, which is to be expected as the Silicon Valley reinvents itself.

See also:
http://www.stanfordalumni.org/news/magazine/2004/novdec/features/google.html for a story on Stanford spin-offs including Yahoo and Google.

1000 words, December 5, 2004