Another nice weekend on the east coast of the US and there is so much to think about that happened over the past week. CSCO spent five billon of their off shore pile of cash on a video company. ADTN announced a terrible quarter to start the year. These two events are part of the conundrum of the past 10-11 years that when I hear people telling me how the internet is going to break, the upcoming exaflood and video is a huge problem it makes little sense to me. At first I was going to write a big post with all sorts of charts, but the weather is too nice and I am not going to bother with the details. It might be better to just state my opinion and if you feel differently go ahead and put money to work. Just remember:
Innovative, Alternative Technology Solutions = Velocity
Developed Technology = Spent Capital, Doctrine, Incrementalism and Creativity Fail
- Since 2001 mobile phone and now smartphone growth has been great. We have more smartphones and now tablets that sales exceed a billion devices a year. 2G went to 3G and now 4G…all of it means more devices using more capacity.
- Many of the local loop upgrades are done in the US. DOCSIS 3.0, FTTx, xDSL…yes, we have solved the local loop bottleneck. It took ten years, but we are on our way to universal broadband.
- OTT video is everywhere and soon we will have 15 or more NFLX copy cats and that is because content, especially video is a DIY content solution
- File sharing, Dropbox, Box.net, Megaupload, S3…yes we have storage in the cloud
- State aware apps like Gmail are the norm
All of these drivers of bandwidth are ongoing in the ecosystem and yet service provider CAPEX is lumpy! CSCO has to buy a software based STB/codec company and ADTN who is in the heart of the local loop upgrade market has a huge miss because service providers CAPEX is lumpy, spotty, insert word of your choice. Go look at any 10-year weekly chart of a service provider communication equipment company and you will see that the trend is down. If the traffic trend is up, why is the equity value chart trend down? Enough said on my part on the subject.
The NYT reported that CSCO was supporting a spin-in startup called Insieme. I have a lot of thoughts on this subject, but I am going to take a few days to collect and organize my thoughts on the subject. It will be the topic of my next post. I posted some additional thoughts over on the Plexxi blog as to what I am seeing in the DC market.
* It is all about the network stupid, because it is all about compute. *
** Comments are always welcome in the comments section or in private. **