What I missed last week...
- 16 April 2012
- From the section Technology
I've just spent a week on holiday in a place where I only had sporadic access to the internet. But whenever I did log on one thing struck me - I'd picked a hell of a week to be out of the loop. Big news on the technology front seemed to be breaking every day, so here's my attempt to catch up on just some of last week's events.
A new dotcom bubble
One big story of the week, the billion dollar deal that saw Facebook snap up Instagram, provoked two instant reactions. That this was evidence of a new dotcom bubble, and that Instagram would soon be rendered worthless as users dismayed by Mark Zuckerberg's takeover packed up and left. And, as I Instagrammed away on my Moroccan holiday, both seemed to me to be wrong.
OK one billion dollars for a business with no revenues seems a bit daft, and there's a good chance that the social network will never make a return on its investment. But remember, Facebook is rather in the position of a Russian billionaire paying way over the odds for a London mansion - with a flotation imminent at a valuation of about $100bn it can afford to splash out without worrying too much.
That's not the case for most potential buyers of hot tech startups. In the last bubble, anything with dotcom attached to its name saw its value soar, whatever the weaknesses in its business model - that does not seem to be the case this time. For every "pre-revenue" firm like Instagram, there are plenty having to prove they can earn serious money before catching a buyer's eye.
As for users decamping in disgust, last week's news added up to a great free marketing campaign, introducing millions to Instagram for the first time. For every user that left, I wouldn't mind betting that 10 tried the photo-sharing app for the first time.
And if Facebook sticks to its word and doesn't mess with the brand, it's likely that Instagram users will care as little about the takeover as the YouTube crowd did when it was swallowed by Google.
Nokia's battle for survival
Just six weeks ago Nokia's Stephen Elop was his usual sunny self at Mobile World Congress in Barcelona. He told me that his new strategy was working, with sales of the new high-end Windows smartphones "exceeding our expectations" and Nokia continuing to perform well in the developing world with the Symbian platform.
But last week Nokia's shares plunged after a profit warning, as Mr Elop revealed that his "transition" strategy had yet to pay off. Sales of Symbian phones had fallen faster than expected, while despite brave words about the new Lumia range, only two million had been bought in the first quarter of 2012 at an average price of about £200. By comparison, in its last quarter, Apple sold 37 million iPhones at an average price of about £410.
In Barcelona I put the pessimists' view of Nokia's prospects to Mr Elop - that the Chinese would own the developing world, and Android and Apple would own the rest of the world, leaving his firm in a pretty desperate position. He came back and asked me what the optimists were saying.
I told him there was a view that Nokia might be able to beat RIM, makers of the Blackberry, to third place in the smartphone wars. But even that is beginning to look doubtful now.
Apple under attack
But even for Apple, last week wasn't so great, as the firm came under attack on two fronts. Having reassured its customers for decades that the Mac operating system was safe from the viruses and malware that plague Windows users, Apple suddenly had to take action against an intruder. The Flashback trojan, which apparently infected as many as 600,000 computers, was a wake-up call for the Mac community - and evidence that they are now sizeable enough to attract the attentions of those who unleash malware across the web.
Perhaps even more worrying for Apple is that it is now evidently in the spotlight of the regulators. The US Department of Justice has launched a lawsuit accusing the company of colluding with publishers to fix the price of ebooks. Further action, on this and other issues, is likely from EU regulators. Publishers and authors have hit back, accusing the DOJ of actions that are likely to shore up the monopoly position of another American technology giant Amazon. But once the regulators have you in their sights, as Microsoft and now Google have found, you are in for a long and costly battle.
Apple's shares, meanwhile, hit a new high last week and are up 50% since the beginning of the year. So maybe they won't be too worried in Cupertino just yet, though it's worth remembering another company whose shares peaked right in the middle of a sustained assault from the Department of Justice. Microsoft's shares hit $58 at the end of 1999 - for much of the time since then, the company and its shares have been treading water.