Microsoft

New Google OS: Solidifying the cloud/SaaS partnership

Google is said to be announcing a new PC/netbook operating system today, a move that would make Google’s competition with Microsoft a very real thing and not just media hype. Rumors about the new OS are that it will be based on Google Chrome, the browser Google has already released, and in fact will be called Google Chrome OS.

We’re hearing that this is really a lightweight version of Android with a Chrome front-end, designed to be tightly coupled to online applications like Google Docs, Wave, Voice, etc. Chrome, the browser, is not a complete OS and would require some embedded background OS to work with and to adapt to various hardware designs; thus, the Android connection.

Our sources say that the big thrust of the new OS is to codify the SaaS/cloud partnership that Google wants to establish. In other words, it’s not about being a direct Windows competitor; it’s about extending the online paradigm where Google is already successful to the desktop via notebooks. The new OS will be available next year, though, and we expect that in the meantime, a lot of companies (including Palm) will be looking at porting their own smartphone OSS to netbooks.

Microsoft and HP join UC hosted service trend

Microsoft and HP announced a major partnership in unified communications (UC) building on HP’s ProCurve blades and Microsoft’s UC and collaboration software tools. The two companies articulated a vision of communications as something more virtualized than tied to an appliance, a story that’s not unlike that being told by Cisco and one likely to be advanced further by Oracle. The deal is most likely a part of the overall trend we’ve discussed before; IT and networking players are fighting for the middle zone of hosted service features where much of the future value of both networking and IT will lie.

Nokia’s migration of smartphone OSs to netbooks

Nokia is planning to release a netbook line based on Symbian, according to reports. The move is certainly a reaction to the Google plans to introduce netbooks based on Android.

The barriers to the use of a smartphone OS as the basis for a computer are less with netbooks because more of the usage is likely to be online, based on hosted applications or simple offline operation, than on general PC applications.

In theory, either Symbian or Android could be used on any hardware platform based on any reasonably flexible chipset. The Nokia move, coming after Google, could be a signal of a major shift in the computing space, something that could make life for Microsoft very difficult even given Windows 7, and something that will put considerable stress on Apple’s plans, particularly ifS teve Jobs does not return to the company later in the year.

Microsoft, whose Mobile version of Windows 7 is also due out next year, is rumored to be harboring netbook aspirations for the new OS as well, and some at Microsoft believe that a strong position in the netbook space, likely to create greater application developer support, would help them with smartphones.

Cisco positions for cloud computing move

Cisco is reportedly eyeing VMware for possible acquisition, a move that would surely put Cisco squarely into the IT competition and mark perhaps the most dramatic transformation of business model attempted by any major U.S. tech vendor.

There are other things that Cisco could be focusing on, but the recurring rumor we’ve heard is that Cisco plans a major cloud computing initiative, recognizing correctly that enterprise transition to a cloud computing model may be the most significant incremental spending opportunity in 2010 and 2011 (it isn’t likely to hit this year, so Cisco has some time).

Cloud computing is a strategic mixture of IT and networking, but it is also a space where having the total solution seems valuable, and Cisco fears that IBM, HP, or Microsoft might at best support a strategy that was open in terms of networking, and at worst ally with a competitor. IBM and Juniper have done some joint cloud announcements already.

Microsoft’s cloud strategies

Microsoft is still playing coy with its Azure cloud computing pricing, but there is little question that Microsoft and IBM are both gearing up for more competition in the space, and other players like Sun and HP are doing likewise.

Cloud computing is a typical emerging market in tech—vague and multiply defined. But it appears that the early opportunities for cloud computing will come in areas like hosting some web content, supporting collaboration and other interpersonal communications applications, and perhaps some backup/offload.

The broader transition to cloud computing must come, as IBM suggests, from the reorientation of current application architectures to something more mashup-friendly and better able to take advantage of selective movement of applications to the cloud, and also to broader private cloud usage by enterprises. We think most of this won’t happen until 2H10 or later.

Online developments at AOL and Yahoo

Big news in the online game: AOL is creating a new division and Yahoo has finally found a new CEO. The AOL move creates MediaGlow, which is formed of two groups—Platform A for advertising and People Networks focused on social media. Yahoo has selected Carol Bartz, formerly of Autodesk, in a move that has some analysts concerned about lack of online and search experience and that has apparently prompted Susan Decker to depart Yahoo.

Both companies had little choice but to do something, and the outcome is far from certain in both cases. AOL’s People Networks may be its best hope, and Bartz will have to quickly come to terms with the Microsoft search sell-off opportunity, which Balmer has indicated won’t be on the table forever. We think Yahoo may be thinking of a more software-intensive position in the future.

Google, meanwhile, may be in for a surprisingly strong Q4 according to one research firm, who says its ads rose 58% in the quarter.

Net neutrality breakdown?

There are strong indications that the “net neutrality” coalition of portal giants is breaking down. Microsoft and Yahoo have withdrawn from a cooperative agreement to support net neutrality and Google has been in discussion with access providers to come to some deal on “fast lane” content expediting for a fee.

The truth is that there has always been a level of dialog on this issue, and the portal players are now realizing that they need an alliance with the telcos. We believe this is linked to the Alcatel-Lucent and Cisco announcements on supporting the “ecosystem” of web developers and telco service features that were made last week.

We also believe this might be the signal of a major shift in Internet direction. The likely cause is the increased interest by access providers in content delivery networks (CDNs) to substitute caching for core bandwidth and earn money from the substitution. Lack of settlement has been the bane of the Internet for a decade.

Yahoo still looking at deals

Yahoo’s board may be looking inside itself for the next CEO, hoping to get someone who can manage the company effectively without a learning curve, as well as someone who can deal with Yang, who is expected to be a difficult partner to any new CEO.

Yahoo is also still considering an AOL deal, apparently quibbling over how much of Yahoo Time-Warner would get for the deal. All the time this goes on is time lost for Yahoo, which is clearly rudderless in the period of transition and at risk in a market where display ads are becoming less relevant. That, in our view, is partly because Yahoo is becoming less relevant. Icahn, it is reported, opposes the partial sale of Yahoo (presumably to Microsoft) in favor of something he hopes would be more lucrative.

Microsoft telco framework quietly dropped

Microsoft has quietly dropped its Connected Services Framework, an ambitious program that targeted telcos with a package of components that was, at some points in Microsoft’s positioning, a service and sometimes a product.

The move has been interpreted as a response to the complex telco environment, but we think the real reason is more complicated. First, vendors are finding telcos are not happy about closed platforms for services and thus are more likely to demand standards conformance. That opens the ecosystem, making it less profitable for the vendor. Finally, monetization of new services is still problematic, and as a result, the investment needed to create them has to be carefully justified.

All of this speaks against CSF. We note, however, that Microsoft has specific point products that we believe it intends to deploy to telcos. In fact, Microsoft has been successful with carriers worldwide in getting some of these into networks—as much as anyone has, in fact. It’s shedding the CSF packaging and positioning, in our view, but not the market.

Yahoo’s Yang steps down

Yahoo’s Jerry Yang, an icon in the search business and a focus of shareholder angst after refusing the Microsoft deal earlier this year, is stepping down as CEO. The move is not a surprise, given that it now appears that there is no way shareholders could hope to recover what they lost when Microsoft was turned away.

Since the decision, which resulted in a board change led by Icahn, Yang has failed to offer any constructive steps to building value as an independent company. The board is likely to at least consider Susan Decker, the president, as successor. We believe this would be a mistake; she might well prove simply a proxy for Yang’s views.