If you pick apart the recent set of Microsoft results (Q1/08) you discover that sales of Microsoft Windows fell by 24% (from $5.3 billion to $4 billion). When the PC market worldwide is growing at 12%, a collapse of 24% sounds disastrous, but those figures provide a distorted view. The $5.3 billion figure from a year ago included $1.2 billion of presales prior to Vista’s release, which actually took place in the previous quarter. So it is more accurate to view it as a revenue decline from $4.1 billion to $4 billion (2.4%) in a market that’s growing at around 12%.

Clearly Vista has not been a success (see 10 Reasons Why Vista Is A Disaster). It never provoked much immediate growth in PC sales when it was released, as previous releases of Windows did, and it isn’t particularly appealing to customers now that a year has passed. Aside from this, the decline is Windows revenues is caused by a combination of 4 factors:

1. Microsoft is probably discounting Windows in some markets.
2. There is an increase in the level of Windows piracy.
3. The growth in the sales of Apple’s OS X – it now accounts for about 3.5% of the market as a whole and 6.6% of the US market. OS X is currently growing at 51% by units.
4. Growth in the sale of Linux PCs – but no-one’s sure how much….

Linux in the PC Market

Linux PC market share and growth is difficult to gauge at the best of times. I’m not aware of any analyst company measuring units shipped directly, but I believe that the growth has now become significant. Figures from W3Counter.com, which counts by measuring Internet usage, indicate that Linux has undergone 61.6% growth since May of 2007 (from 1.25% to 2.01% of Internet users in March of 2008). This is a poor way of measuring numbers of users, but nevertheless there is no other explanation for the growth other than: Linux PCs are selling. Here are some other “straws in the wind”:

• The One Laptop Per Child (OLPC) initiative delivered over 200,000 Linux laptops to users, mostly children around the world last year.
• Asus has clearly had success with its Eee Linux PC. It is predicting it will sell 2 million of its Eee Linux PCs in 2008. The Eee PC has appeared at the top or near the top of the Amazon bestselling computer list for quite a while now. It is also sold by Best Buy.
• Sears now sells the Linspire Mirus PC, with Linux loaded.
• Wal Mart sells the Everex PC with the gOS version of Linux loaded.
• Both Dell and Lenovo now supply Linux laptops and PCs, and HP is expected to join them.

In the posting Has Linux Finally Broken Through? I suggested a number of things that needed to happen before the Linux PC could gain traction and most of them have now happened.

Linux has become a disruptive influence that is provoking innovation. Linux rather than Windows defined the category of the low cost laptop. The OLPC initiated this, but this in turn motivated Asus and now there’s a product category called “low cost Linux Laptop.”

Differentiation in the PC Market

Apple has smashed the homogeneity of the PC market with the success of the iMac and now its competitors are worrying about how to compete. In this they are no different to the vendors of mobile phones responding to the success of the iPhone – except for one thing. The ability of PC vendors to compete with the iMac is paralyzed by Windows. Right now PCs all run Vista, and they all live in little boxes and they all look just the same.

Vendors don’t have to be constrained in that way if they load Linux and it’s clear that some of them choose not to be constrained. Everex has just released a very differentiated Linux PC; the MyMiniPC. It’s offered as a “limited edition MySpace PC”. It runs the gOS (Good OS) version of Linux and the whole desktop environment is designed for MySpace users. You could think of it as a “MySpace appliance.”

There’s no reason not to produce similar PCs tailored to FaceBook users or eBay fanatics or surfer/shoppers or news junkies or some combination of these. In time there will be well crafted Office Linux PCs and Media Linux PCs.

With Linux, PC vendors can differentiate and given the dramatic growth in Mac sales, they surely will. They’re going to need some edge as they set out to kill the great white whale.

Nowadays, analysts write blogs. An analyst’s blog provides a window on the individual analyst and it has become a critical aspect of what an analyst does. But writing a blog doesn’t pay you directly. Like me, you can have Google ads on the page and this will generate a few dollars per month, but nothing that comes close to paying for the effort. So what pays for the effort?

1. Direct Publicity

A well managed blog generates publicity. Consider my AVID campaign. I started the campaign about 2 years ago and I never did it in the expectation that it would pay for the effort. And it probably hasn’t, but maybe it has. Since I began the campaign I have been hired twice to write white papers on the topic, twice to do webinars and once to address a gathering of IT users. I’ve also had many interactions with journalists and many security vendors have taken the time to make sure I understand what they are doing and where they are going.

I know that more work will arise from all of this and I’ve become a significant analyst name in IT Security – and that wasn’t previously the case.

2. The Amplifier Effect

Another way of looking at the importance of the blog is what I think of as “the amplifier effect”. AR staff and marketing staff read the analyst blogs. Those that don’t will have Google news links or some other kind of bulletin service that informs them whenever their company is mentioned. So, if I write about BulletResistant Software, the marketing staff at BulletResistant will get to know.

If what I wrote is generally positive, BulletResistant might want to buy the rights to use it as printed collateral (it’s not common but it happens), they will link to it from their web site and they may even quote from it on Powerpoints. Also, BulletResistant’s competitors might want to contact me to persuade me that their products are better and if it’s generally negative the competitors will refer potential customers to it. In general, the marketing people act as amplifiers driving traffic to my blog.

3. The Implicit Advert

The blog showcases my writing skills. This helps to generate white paper work (I’ve been told this directly) because vendors can get an impression of what they will get if they commission me to write something.

4. Product Publicity

Some specific posting on the blog turn out to be product publicity. It’s not intended that way, it just happens. I have a briefing with a vendor and I think it’s important enough to articulate what they are doing and I do so and then the posting just draws traffic. This is particularly the case when I write postings about new technologies or new ideas. I have a number of readers who deliberately come to the blog for that. Postings of that kind currently get between 200 and 1000 hits in a matter of months. That’s quite a large readership and it’s a quality readership. Vendors that get this free publicity boost are inclined to hire me as an analyst.

5. Influence

The blog generates influence. I’ll devote a separate posting on this because it’s a complex topic, but the point is that a blog posting can act like a pebble dropped in a pool. There are ripples that extend outward and they extend outward in ways that are not obvious.

To be continued…

Note: This posting is one in a series of postings that covers the topic of dealing with analysts. Click here for links to other postings in the series.

A little bit of a tiff has broken out between Intel and Nvidia vis-a-vis the future fo the chip market. Just to get an initial perspective on this consider that Moore’s Law (click here for a detailed explanation) has been shrinking CPU chips for decades – or to be more accurate the chip vendors have been doing so in strict obedience of Moore’s Law. And you may have noticed if you have a habit of opening up your computers that, despite this shrinking tendency, the chips themselves have been getting no smaller. On other words the chip vendors have been putting more on the silicon.

I must be getting old because I can remember the time when there were whole boards for doing nothing more than divide one number into another. Eventually we got down to two CPU chips, one of which, the math co-processor, “did the math”. Eventually that got eaten by the CPU as well. The only thing that didn’t get eaten was the graphics board in the middle of which is a GPU (Graphics processing Unit). And the leader in GPUs is Nvidia.

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Take a look at the above slide which I purloined from an Nvidia presentation and you clearly see that Nvidia believes that in a few years time it will all be about GPUs and, well, the GPU will be the real work-horse. Not for servers of course, but for PCs.

And thus there is a war or words going on between Intel and Nvidia, with Roy Taylor, VP Content Business Developmentof Nvidia declaring that the CPU will soon be pushing up daisies and Intel begging to differ.

In Taylor’s words (purloined from an email): “Basically the CPU is dead. Yes, that processor you see advertised everywhere from Intel. Its run out of steam. The fact is that it no longer makes anything run faster. You don’t need a fast one anymore. This is why AMD is in trouble and its why Intel are panicking. They are panicking so much that they have started attacking us. This is because you do still one chip to get faster and faster – the GPU. That GeForce chip. Yes honestly. No I am not making this up. You are my friends and so I am not selling you. This shit is just interesting as hell.”

This is actually a response to Intel’s adding an integrated graphics system to its chips  – but nothing that could claim to compete with Nvidia’s heavy duty graphics cards. But the truth is that there’s a convergence in progress here and:

• either one of these two companies gets to be the “front half of the pantomime horse”.
• or one of them gets to be the whole of the pantomime horse.

If you are wondering “where does AMD stand in all of this?” It’s a good question. AMD acquired graphics company ATI, wth the probable intention of adding the GPU and CPU together. Now AMD has been having a few bad quarters recently because of a resurgent Intel and it’s probably going to have one or two more, but it looks as though its acquisition of ATI counts as brilliant foresight.

The coming of the GPU, by the way, is yet another disruptive influence on the computer hardware market which is already awash with dsiruptive influences.

The Colorful Cardinal (from the series: They Move Amongst Us)

The male cardinal that displays the colors of his Catholic namesake, while the female cardinal is colored a more demure orange and brown. Perhaps it is appropriate that the only cardinals that wear red are male. This is a peculiarly American bird, found both in North and South America, but nowhere else. They are seed eaters, living in open woodland and hence they are tempted by bird feeders and not too shy to venture near the house.

If you want to confuse the male cardinal then place mirrors in places where the male is likely to perch. When a male sees its reflection in the mirror it will assume at once that it is face to face with a rival. Cardinals will fiercely defend their territory and have been known to spend hours fighting their own mirror image.