Waypoints Release 2.0

   Waypoints Release 2.0.pdf (664 Kb)

In this issue:

Thanks for joining us!  We hope to have you with us every two weeks as we journey together through the changing tech universe.
 
This is the second of four planned Beta releases of Waypoints.  After issue four, we will be moving to a paid subscription basis. We aim to help make sense of the sometimes overwhelm and confusing world of global tech, telecom and media and perhaps help in increasing the clarity and conviction you have in the decisions you need to make in the changing world and save you time in clearing through the muck.

-pip

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Waypoints Release 2.0 -
Short questions …short answers

“Every product according to its maker is easy to use. And for the folks who designed it, I’m sure it is. But, say what you will, so many products that should be easy to use, just aren’t. This ‘exasperation factor’ – the sigh you heave when you hit that brick wall – undoubtedly causes many would-be buyers of a demo package just to leave, never to return. Still, vendors seem to be blissfully unaware of the opportunities that they are losing…”
… Kevin Tolly, Network World

This week, we talk a lot about the “user experience / perceived pain of adoption” component of our Change Framework and focus on three stocks that are investment ideas off this theme…Apple, RIMM, Salesforce.com…    

Q: What do we make of Intel’s mid-qtr?  Any change to our thinking? 

No …no change. Broadly speaking, tech estimates are still reasonable and end demand looks fine.  But inspiring?  Nah… not enough to make us want to buy “tech” broadly. We are in a stock picking market – unlike the 1990s. 

Q: STOCKS: What takeaways do we have after modeling RIMM? 

We’d love to hear mgmt not only talk about continued strong growth but also more about process efficiency and margin expansion. We run sensitivity analysis to see what type of margin expansion we’d need to see in FY07 to make 50% upside on a current investment in RIMM … more on page 9.

Q: STOCKS: As we head to Salesforce.com’s User Conference, what key questions are on our mind? 

Lots, but one key question involves their SG&A expenses. Currently at roughly 70% of revenues, it’s a big lever in their model.  Sensitivity à In 2007, all else being equal, SG&A of 65% of sales gets us $0.43 EPS… whereas SG&A of 55% gets us $0.83. Huge lever. Where can it head?...more on page 12.

Q: CHANGE:  How does Salesforce.com fit into our Change Framework?

Conventional wisdom on CRM – for the bulls at least – says it’s just about hosted software.  We love the CRM story, but for an entirely different reason à Salesforce.com is a champion of “user experience” … by co-designing products with the actual user – as opposed to selling to a C-level executive. Salesforce.com lowers the perceived pain of adoption for the end user…more on page 19.

Q:  CATALYSTS:  What are the key events on the tech calendar?  

Next week, we’ll be at CRM’s user conference and Merrill’s Media Conference.  On the earnings front, Best Buy and Adobe next week with several key software reads the week after – Oracle, Cognos, Tibco…

“Just remember: you’re not a ‘dummy,’ no matter what those computer books claim. The real dummies are the people who, though technically expert, couldn’t design hardware and software that’s usable by normal consumers if their lives depended upon it…”
Walter Mossberg