Microsoft could usher in a new era

Shlomi Cohen

We have the prospect of four gorillas competing against one another in everything. Plus: What we will not learn from Oracle's results about Melanox.

There will be two interesting events in the technology sector this week. Tonight comes the unveiling of a new product by Microsoft (MSFT), and on Thursday after the close Oracle (ORCL) will release its financials. Experts expect that Microsoft will launch its own tablet computer, and, if that is correct, then it will be a historic change, because, since it was founded, Microsoft has never entered into direct competition with its customers, the computer manufacturers, with a hardware product of its own. They say that Microsoft is fed up of sitting on the sidelines and watching how Apple has won sole domination of the tablet market, while other computer makers have stood idly by, and tablets are known to be slowly but surely nibbling away at the PC market.

This evening, perhaps, a new era will begin, in which we will have four gorillas, Apple, Google (GOOG), Samsung, and Microsoft, competing head-on in everything: in operating systems and hardware for tablets and smartphones, and in ecosystems, that is to say content, applications, and so on. Google bought Motorola Mobility, and this month it will launch a tablet of its own, while persistent rumors speak of Nokia (NOK) being acquired by its partner, Microsoft.

Samsung, which so far has relied mainly on Google's Android operating system, is aware of how problematic it is that it does not control the operating systems for its high-selling smartphones and tablets, and so it is working on upgrading its in-house operating system, by the name of Bada. When Steve Jobs unveiled the first iPad, in early 2010, he said of the product that it was the most significant and the most exciting for him of all the products Apple had launched since it was founded, and he was right.

There has never been an electronic product, including the iPhone and iPod, whose sales have taken off as fast as those of the iPad, which, for the time being, leads the tablet category without any real competition. Morgan Stanley (MS) projects delivery of 133 million iPads this year, and 216 million next year, numbers that are respectively 57% and 112% higher than the projections it gave for those years just eighteen months ago.

As far as today's launch is concerned, Microsoft's management has learned its lessons about secrecy and generating media buzz from Apple wel. Journalists do not know why the event is taking place in Los Angeles when Microsoft has a huge campus in Seattle, and, this morning, they did even know where exactly the event, to which they have been invited for 1:30 am Israel time, would be.

If Windows launches a Windows 8-based tablet tonight, one that also has Office programs on it, adapted to work on a tablet, that will be received as a big surprise justifying the secrecy, and Microsoft's share price will soar. The lack of Office programs on iPads, and generally on the tablets currently available, is considered the great disadvantage of this burgeoning category.

As mentioned, on Thursday Oracle will release results for its quarter to May, the final quarter in its fiscal year, and seasonally the strongest. From the Israeli point of view, we are interested in how sales of its "Exa" platforms for cloud computing and Big Data went, because these rely on Mellanox (MLNX) Infiniband technologies.

In April, Mellanox astonished the market when it substantially raised its guidance for the June quarter, to up to $130 million, sending its share price up 52% in a single day, to a new peak.

In my view, there will be no point on Thursday in looking at Oracle's results for signs of Mellanox's amazing guidance. This is despite the fact that, eighteen months ago, Oracle bought just over 10% of Mellanox on the market, signaling strong business to come between the two companies. Indeed, in the first half of 2011, Oracle accounted for 11% of Mellanox's sales. But Mellanox's rise since then happened because of other customers, such as EMC, HP, IBM, and Google, and with projected sales for 2012 at $430 million, it will be a while before Oracle is again a 10%-plus customer.

Published by Globes [online], Israel business news - www.globes-online.com - on June 18, 2012

© Copyright of Globes Publisher Itonut (1983) Ltd. 2012

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