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A Night For the DVR

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Sun-shine after cloudy days?

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Let the sunshine
Let the sunshine in
The sunshine in

-Hair

Last night was a night for the DVR (Digital Video Recorder)...

With about five minutes to go in the first half of the Rose Bowl, I passed out. I've done this once before during a big game (actually, I may have passed out more than once before - but for different reasons). When I finally came to I heard Keith Jackson saying "Goodnight!" I had missed the game! Who won? What was the score? Who was MVP?

I started flying through the channels and then remembered the trusty TiVo (TIVO); the perfect solution for a hard-working, exhausted father of two boys. But this time it was almost the answer - TiVo, as do most DVRs, bases its recording schedule on the codes from Gemstar-TV Guide (GMST) and unfortunately ended recording about four minutes before the end of the game. What the %$@#?! Get Heidi on the phone!

It's technology and even though we often ask ourselves "how does it know?" IT DOESN'T. It's a computer.

I entitled this piece "A Night for the DVR" because it wasn't a night for TiVo. As a matter of fact I believe TiVo is the Betamax of this generation. Let me see - a technology that can be easily duplicated, essentially un-patentable (yes they hold a patent...but) and now copied by cable companies. As much as I like my TiVo and I have the lifetime subscription (it was a good deal!) I don't think it's long before I start seeing the mountains of junk mail from Cablevision (CVC) to upgrade my cable box to include a DVR.

So now to the heart of the story:

There are two forms of DVRs being developed. The first is the TiVo or TiVo-like DVR that essentially is a giant hard drive sitting on top of your TV. The system updates by pulling codes from GemStar's interactive program guide. GemStar holds the patents on this guide. In my mind it's the equivalent to the patent that Qualcomm (QCOM) had on the microprocessors for GSM cell phones that sent the stock off the charts. In 1999 Qualcomm went from $4-$100.

The other kind of DVR in development is located somewhere deep inside a bunker with the cable companies' servers. These DVR servers are in essence the same type of technology as the on-demand video service you'd find in a hotel room (Not that I'd know how that really works!). So when you'd hit the channel guide for a program, it would pull the information from a central server at a remote location. For the pay-per-view model this is brilliant, but with bandwidth constraints the technology is not there...yet. And for GemStar, this is a great plan. However, if Google (GOOG) evolves the way I think it will, GemStar could go in another direction.

This leads me to my next thought; this week is the Consumer Electronics Show in Las Vegas and for any gadget geek this is tantamount to the academy awards of electronics. The rumbling, conjecture, speculation is that Google is going to announce an internet device with no hard drive. How is this different from the DVR server? IT'S NOT! It's exactly the same.

Now for the speculation:

I worked on the Sun Microsystems (SUNW) advertising account in the mid 90's. At that time, Eric Schmidt, now CEO of Google (GOOG) was the Chief Technology Officer of Sun. The big push then was for the "Network Computer." In 1996 Sun launched the Java Station. It was a terminal with no hard drive that pulled all applications and information from a central server. The idea was way before its time. But today, it is much more relevant and a partnership between Google and Sun (more than the Google search bar embedded in Sun's software) can't be far around the corner. Furthermore, this would spell the end of the Wintel (Windows (MSFT) and Intel (INTC)) dynasty. Hey all dynasties come to an end and new ones begin.

If Google were to re-launch the Java Station, essentially it is analogous to the cable box. A cable box is a dumb terminal that pulls information from central servers. Today, cable boxes only pull...well...cable distributed shows. That will change. Soon these boxes, maybe even Java Stations will pull everything digital into the home. If Google's stated mission is to organize the world's information and make it universally accessible and useful, then why not control the distribution of that information? The IP (Internet Protocol) technology was mastered more than ten years ago by ...you guessed it...SUN...under the leadership of, guess again... their CTO Eric Schmidt! WOW, I love it when a plan comes together.

I have to hand it to Scott McNealy, he built a company with vision, way ahead of its time. He's survived the downturn, his legion of partners and thought leaders have (continued to) assumed the new technology realm - Schmidt to Google, Bechtolsheim to Kealia (which Sun acquired about a year ago) and Bill Joy to Kleiner Perkins (the VC that has the pulse on everything technology.)

A Google-Sun combination I believe is inevitable and the knock on effect for Sun will be positive. I've been investing in and out of Sun for close to 10 years. I had it at $80; I had it at $8. It's now at $4.50 and I believe the five year drought is going to end. I'm go'n back in!

Google is leading the new New Media revolution and I'm keeping a close eye on CES and Google's announcement tomorrow to see if they happen to let the Sun shine in.

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Position in SUNW
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