After the acquisition of Writely, a collaborative online word processing tool, and SketchUp, an illustration tool for creating three-dimensional models, the recent rumors about a Sun Microsystems acquisition seem to point to a bundling of PC applications offered either online or on a low cost (Sun?) PC.
Others have speculated about using Sun computers to run large high speed database applications to support or sell Google services. In either case, Google is once again offering products that are already in the marketplace, and, at best, will offer only marginal gains in productivity. Even if all of these products were actually sold to the public, they would not generate the massive earnings growth reflected in Google's stock valuation.
Google's need for higher earnings growth has sent it on a search for new products outside its core business; foreign territory for two geeks who have only demonstrated big profitable success in the area of targeted ads posted on their search engine. Most of the recently introduced products have been a series of me-too products: Picasa, photo management, Google Maps, navigation, Google News, etc. While some have been very good refinements of their competitor's products, they do not provide a great leap in productivity for customers. Even worse, the vast majority of theses new products don't appear to have been monetized in any significant way.
The founders of Google don't seem to be trumpeting any grand improvement to their search engine technology either; something that seems to have lot of room for improvement (see my last entry, "Google's A-Go-Go Power is Gone").
It's not uncommon to see this kind of one-hit-wonder phenomena in the tech world, after all, designing just one great tech product usually requires a lot of skill, labor and good timing. What is surprising is that Google doesn't seem to be going after a large under-served market. Nor does it seem to be close to developing new and vastly cheaper solutions to some of Information Technology's most expensive and time consuming tasks.
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Article comments
1 - Kevin Hutchinson
Sun is a network computing infrastructure company. Google is an information management company. Please understand this fundamental difference, and conclude they are unlikely to become a single entity anytime in this century.
Google's core revenue (and profits, unlike Sun) come from selling advertising. They do this by increasing a number of metrics, including:
1) ad views
2) ad click rates
3) ad click costs
To increase ad views (1), they increase audience and frequency, for example by buying 5% of AOL. To increase click rates (2), they use clever relevancy algorithms (the Google secret sauce). To increase click costs (3), they market Google AdWords service to marketeers worldwide. That's it. Nothing more, nothing less. It's simple and it works.
2 - Daniel M. Harrison
Kevin:
"Sun is a network computing infrastructure company. Google is an information management company. Please understand this fundamental difference, and conclude they are unlikely to become a single entity anytime in this century."
You mean like Nabisco (Standard Brands) was a consumer foods manufacturer, RJR was a cigarette manufacturer?
The postulation that because one company does something now it is unlikely to eneter another market went out with the boom in capital markets in the eighties I think: today, with capital availability and the need to drive for consistent equity returns and strong pitch on corporate mission statements, the kind of argument you put forward is obsolete.
There have been plenty of e.g.'s over companies that have got together, with far more apparently incompatible agendas than Google and Sun.
3 - Mike
You mentioned googles lack to make money on maps, news, and all there other off-shoot products?? They make a killing off these through advertising. They make their products free in order to bring in incredible amounts of users who in turn view their ads. They've done an outstanding job at "monetizing" these products.
And then you tout that google should buy up more search related companies, and then go on to say the founders have not shown versatility? By buying Sun Microsystems they will most likely be expanding their business into the economy pc market, letting more and more users buy pc's who would normally not be able to afford it. By doing this they will be greatly expanding the number of users who use their free products, and in doing so see their ads to fuel the real heart of their business: Ads.
You think google should have bought Apple? I hope you're being sarcastic.
4 - Greg
Ken,
For a long time, I had trouble reconciling the two companies also, but recently, it's beginning to make a little more sense.
It certainly fits in with Google's roll-your-own infrastructure mentality. They like to control the design and development of their software infrastructure with open source s/w, and not be beholden to propriety solutions and their slow upgrade cycles. By buying Sun, they can have a lot more control over the computing infrastructure and its future optimizations. Plus they could now buy servers and such at wholesale prices.
So, the merger doesn't sound so crazy after all. But who knows.
5 - Greg
Oops,
I meant to say "the rumors of a merger" don't sound so crazy after all, not "the merger".