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Minyan Mailbag: Searching for Clarity


Everywhere you see the word "server" I see infrastructure and opportunity.



I continue to enjoy your media thoughts. You really do a great job of putting everything together into one logical big picture. A couple points/questions:

-I remain intrigued by your SunMicro (SUNW) call. I have no doubt that a Google (GOOG) partnership would be a good thing for it, but I'm trying to wrap my head around where the revenue surge would come from. With Apple (AAPL), the revenue streams are (now) obvious. GOOG's revenues come primarily from search, and while they have a lot of other great products/ideas, they haven't been monetized very well yet. Additionally, a few years ago AAPL sported a $6B market cap, whereas SUNW today sports a $16B market cap, so it's not starting from as low of a base as AAPL did.

Minyan Conor


I believe the biggest kick in revenue will come from the hardware needed to support a utility model of computing. The smart server/dumb terminal model is not drastically different from the cable box/video servers that exist today. However, if Google champions the utility model where applications, content, information, etc. is managed at the server level, I believe this would be a boon for Sun.


--Where do you fit search engines into your input/output/distribution channel/content buckets? Yahoo (YHOO), via Yahoo Sports, Yahoo Finance, Yahoo Music, etc., seems to have a lot of content already, and I think plain vanilla search fits under distribution channel (it's just linking you to the content you want). Google seems like it's in a bit more of a precarious position here as it seems to really focus on just the distribution channel and not the content, so it's a little more susceptible to competition. Additionally, something that cable/satellite/telcos have going for them is they control a network that was very expensive to put in place. I can't start a company with a few friends and put a wire into everyone's house in America. However, I could theoretically start a search engine to compete with Google, and could grow it from the ground up. I think this difference gives cable/satellite/telcos pricing protection in the long term relative to Google, just because it's too easy to (theoretically) create a search engine better than Google's. The bull argument would be that it's a branding thing, and consumers trust Google and turn to it first, but I would counter that it wasn't so long ago that Yahoo was the leader, and before that Alta Vista. We're not talking Dr. Pepper vs. Dr. Thunder just yet.


The truth of the matter is Google is not simply a search company although that's their foundation. They are a technology company. And furthermore, there are other search engines as good if not better than Google. But if you recall, search was the foundation of Yahoo! as well.

Google's mission is to organize the world's information and make it universally accessible and useful. This is not done by a software program alone. When they talk about scanning and archiving everything in public libraries, this content has to be stored and managed somewhere. They aren't doing it through third party hosting companies. They need a massive infrastructure and global storage system to do what they are talking about doing. Take a look at this. Everywhere you see the word "server" I see infrastructure and opportunity. This would drive my thought process.


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Position in SUNW, YHOO, AAPL
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