by Don More and Francesca Bartolomey

On Tuesday Google launched the latest effort in its battle for supremacy against Microsoft in all things Internet – the Google Chrome browser. Chrome has cool features such as sandboxing (allows tabs to run independently of each other – a crash in one doesn’t bring the whole browser down), a task manager that shows what sites are memory hogs (and lets you kill a tab without killing the entire browser), and a private mode called Incognito that prevents browsing activity from being recorded. More broadly, Chrome’s open source roots and design are meant to make it a better web application platform than Internet Explorer (IE).

Google and Microsoft have been going at it for some time now – search, email, office productivity applications, and now the browser. What’s next in Google’s arsenal?  Signs point to full-out war on Microsoft’s chief money-makers – Windows and Office. It’s no secret that Google’s ambitions extend to full-scale computing in the cloud, and Chrome is a key step as it provides an on-ramp to web application services. One small example of this is that Chrome lets users drag a tab containing a web application, such as Gmail, to the desktop where it looks just like a regular application – the browser’s tabs, buttons, address bar, and menus all disappear. While Microsoft’s franchises are not immediately threatened, Google’s combination of a web-based operating system, SaaS apps, and the market-leading search engine will present a growing threat.

So what does Chrome mean for the Internet browser market?  Currently, it consists of three primary players, but is dominated by Microsoft (see figure below). Some journalists and bloggers tout Chrome as the IE killer, but it could be that Firefox has more to worry about. Google and Mozilla (maker of the super-awesome Firefox browser) have historically had a collegial relationship.  Google’s foray into the browser space, however, looks as though it will result in, if not quite a direct hit on Firefox, at least collateral damage. Both browsers leverage open source and both appeal to the same demographic – the young and tech savvy. Microsoft, with 72% market share, has less to worry about; at this point if users haven’t migrated off IE to Firefox, it will probably take something seismic to get them to move – especially since IE 8 launched in beta last week with new cool features (private browsing, Web Slices,  and visual search,  to name a few). In addition, some are already highlighting security vulnerabilities that Chrome may introduce. Maybe Chrome is a good enough browser to lure the IE-faithful away, and will open up a new front against Windows and Office, but only time will tell.

Browser Market Share

Francesca Bartolomey, Updata Advisors

In the past few years as Generation Y has been graduating from college and entering the workforce, employers aren’t really sure what to make of us. To them it seems that while we are reaping the benefits of a childhood crammed with lessons, practices, rehearsals, and tutors and are tech savvy beyond our years, we are stunted by a spoiled unwillingness to pay our dues at work. To introduce today’s employers to Generation Y, articles have proliferated on the web. National periodicals such as the Wall Street Journal, the New York Times, and the Washington Post  have all had something to say about Gen Y. The general consensus is that we’re a generation of status-seeking, label-conscious narcissists who’ll wither unless lavished with praise. I must say that to have such venerable sources as these devote so much text to us is plenty flattering. But even as our detractors (mostly cynical Gen Xers) deride the indulgent way we were brought up, by writing about us they acknowledge something crucial – we matter. And of course, we revel in the attention. 

As we charge into the workplace in Boomer-comparable numbers, here are a couple of crucial Gen Y idiosyncrasies to consider:

• Gen Y is in constant communication. Our parents waited for days in line to get tickets to the Rolling Stones. We waited for days to get the latest iPhone. Whether it’s via Twitter, Facebook, or Loopt, we are always connected to our friends. And we talk. About everything. That’s right, even salary. It’s not uncommon for a circle of close friends to know how much each one makes, and I mean right down to the dollar. After all, we plaster our lives all over the Internet so why should we conceal potentially useful information like that from our friends? When it comes to job hunting, friends are our first source of information. By using our friends as a barometer, we can figure out what we’re worth and set expectations appropriately. If a job offer doesn’t meet expectations, many of us won’t hesitate to walk away. After all, Gen Y is known for having an exceptionally close relationship with their parents and so moving back in with mom and dad isn’t the end of the world for us.
• Gen Y thrives in a flexible working environment. We don’t want the Office Space life. We want to enjoy our jobs, but they’re not going to be the center of our worlds. Strict cubicle confinement is a surefire path to low morale and low productivity. You see, in college, laptops were standard. To get our work done, we weren’t restricted to the library or to the dorms. While previous generations may have hung out in coffee shops snapping their fingers to beat poetry, we’re there primarily to get work done. We’ve become accustomed to taking our information with us everywhere. As a result we are looking for flexibility in our job. If our job doesn’t demand our presence in the office every day, we’d like the opportunity to telecommute once in awhile.
• Gen Y has honed the skill of multi-tasking into a fine art. If there’s one Gen Y stereotype that continues to prove itself (if not quantitatively, at least anecdotally) it’s that we have a short attention span. At any given time, a typical Gen Yer is doing 20 things at once. Rarely will you look upon the computer screen of a Gen Yer and see just one or two applications open. It’s much more common to see two or more instant messaging apps (or, if the Gen Yer is particularly tech savvy, multiple IM apps consolidated into one via Pidgin or Adium), no fewer than 10 websites open (using tabbed browsing, of course) in Internet Explorer or Firefox (but probably Firefox), Excel, Word, and their corporate email all open at once. But although we’re bouncing from one item to the next and back again so quickly, we’re no less productive. As I’ve said, we’re used to having our information with us wherever we go and that includes our work information. While we don’t want to be confined to a cubicle for 8 hours straight, we also don’t really subscribe to the traditional workday mindset. If we’re playing around online at midnight or on the weekend and an idea involving a work project suddenly strikes us, we’ll open up a tab, log in remotely and get to work.
• We set ambitious goals for ourselves. We want to be successful in everything we do and we recognize the importance of education. Many Gen Yers were brought up believing that attending college was not optional, it was expected. We’ve been groomed to value education and continue to seek it out in the workplace. Companies that place emphasis on training programs and mentorship or that offer tuition reimbursement are very attractive to the Gen Y set. (Coldstone Creamery earns bonus points with its interactive, computer game-based training programs.) Additionally, we are not unwilling to start at the bottom, but everything we do in the meantime is in preparation for the next step. Gen Y doesn’t respond well to institutionalized rules governing advancement; if we master all the skills for a particular role in one year, we won’t stay in that role for two just because corporate policy demands it before allowing for promotion.

Generation Y has benefited from growing up in an age of economic prosperity, an age where all of the world’s information is available instantly at the click of a button. We did not grow up fearing war or hunger or joblessness – we’ve had it pretty good. And so it seems as though we are arrogant and spoiled and don’t want to pay our dues at work, but that isn’t the case. We know what it means to work hard and we are not afraid. We’ve had to work hard and differentiate ourselves in order to compete with unprecedented numbers of people to get accepted into college and then repeat that process to get our first jobs. Sure, we have our quirks, but we’re smart and hard-working and capable of big things.

Jin Ke, Updata Advisors

by Jin Ke

with Don More

Move aside Batman and Ironman. For world domination drama, the real action this summer is off-screen and on our phones, er, mobile devices. Big handset players, notably Research in Motion and Apple, are leveraging dominance in their territories to attack each other’s turf – iPhone’s attempt to dethrone BlackBerry’s enterprise supremacy is the most notable example.  

Meanwhile on the OS side, on June 24, 2008 Nokia acquired the remaining 52% of Symbian it didn’t own and opened Symbian’s mobile OS platform to the public to compete with Google’s nascent-but-highly-touted Android mobile OS. Earlier this year, the Finnish company also bought cross-platform solution vendor TrollTech for $153 million, and in December 2007, mobile-PC interoperating player Avvenu. 

Google, lacking experience and handsets to push its platform, will be hard-pressed to take major share from the leading global platforms (see chart below) but it will be interesting to see their next move. Given the importance of mobile to Google’s ad-driven growth strategy, plus their cash and pluckiness, they are likely to do something big to follow their acquisitions of mobile social networking players, Jaiku and Zingku, last year.

While hardware device vendors are kings of the mobile value chain jungle because they own the user channel, it is software that will drive future market success. iPhone’s blockbuster sales highlight the importance of software-first (rather than feature-first) mobile devices. RIM has taken note, launching a $150 million fund last May to invest in applications and services for its BlackBerry device and other mobile platforms; it’s called BlackBerry Partners Fund.  Kleiner Perkins similarly launched a $100 million fund in March for iPhone application vendors called iFund. 

Given software’s criticality to the mobile device wars, Microsoft is a looming threat, with its ubiquitous enterprise application portfolio and widely installed mobile OS. Showing it means business, in the last 12 months Microsoft spent millions snapping-up mobile technology companies.

Recent Microsoft acquisitions in the mobile space:

• Mobicomp: Data security & social network
• Danger: Mobile social network
• Musiwave: Mobile music content
• ScreenTonic: Mobile ads
• Tellme Networks: Mobile search & FMC

Will Google be able to incorporate the mobile space into its search-advertising juggernaut? Will Microsoft be able to take its PC OS and apps success on the road? Who will win the battle for handset supremacy? Whatever the outcome, the mobile slugfest will help drive M&A and IT venture deal volumes in an otherwise slowing year. Stay tuned as the battle heats up after Labor Day.

by Don More and Lorie Roscitt

While the recent softness in technology M&A has been well documented, certain companies – which we call the Tech Titans – evidently did not get the memo. These companies (Microsoft, Google, IBM, Cisco, Oracle, and HP – all with market capitalizations in excess of $100 billion and operations that cross multiple technology sectors) have been prolific buyers during the past 12 months.

Since August 1, 2007, (which roughly coincides with the start of the current credit ‘crisis’), while the NASDAQ declined 8.7%, the Tech Titans purchased over 60 technology companies, for combined disclosed enterprise value of $30 billion. (Many deal values are undisclosed.) As a group, they paid a healthy median trailing revenue multiple of 4.8x and a trailing EBITDA multiple of 18.5x.

As shown in the chart below prepared by Updata Advisors, acquired companies operate across tech sectors highlighting that the Tech Titans are exploiting market weakness to fill out product portfolios, augment growth, and remain competitive.

Eight of the acquired companies purchased in the past year by the Tech Titans were publicly-held companies whose shareholders were paid a median 1-day premium of 28% and a median 30-day premium of 44%. 

Overall, at least 50 public IT companies, representing $70 billion of market capitalization, were acquired over the past 12 months. While this marks a decline over the prior year (August 2006-July 2007), which saw $99 billion of public take-outs due to private equity activity, strategic buyer volume actually rose 35% since the market downturn (see chart below).

Tech Titan acquisitiveness, together with a big increase in public-public M&A activity, highlight ongoing strength in tech M&A and a realization that the market is getting more competitive and that the tech market is viewed by buyers as ‘cheap’ by historical standards – perhaps the sign of a nearing bottom.