Cringely Gives KnowNow Some Unbelievable Free Press...

Ian Andrew Bell fork@ianbell.com
Sun, 06 Jan 2002 17:45:28 -0800


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http://www.pbs.org/cringely/pulpit/pulpit20020103.html

The 70 Percent Solution
Bob's Predictions for 2002
By Robert X. Cringely


Each year at this time, I make predictions about what will happen in high
tech business during the next 12 months. It's not really that hard to do if,
like me, you read a lot, go to lunch a lot, and have smart friends. My
predictions are 70 percent correct, year after year. What I got wrong the
last time out was I wrote that the recession would be over by now, that
Microsoft would be a bad stock to own, and that Cisco would be a good one.

My other predictions, which included Microsoft settling with the DoJ without
requiring a break-up, were all correct. You can find that column under the
"Old Hat" button on this page or among the "I Like It" links.

This year, I am going to do things a bit differently just because this year
feels different. There is a new feeling coming from the laboratories and
boardrooms, a feeling that has nothing to do with terrorism and patriotism
or even high tech, and has everything to do with waking up from a long sleep
and realizing that the blanket has slipped off the bed and it is cold.

As we slouch through this recession, it is clear to me that corporate
arrogance is a problem that has afflicted us for sometime, but there are
signs of it weakening. Last year, when I predicted Cisco would do so well,
it was only weeks after I had sat through the company's European, Middle
East and African division sales meeting. At that moment, Cisco executives
were setting high goals and expecting to reach them. Only it didn't work out
that way. This made me realize even the most successful companies don't have
any greater insight, just better luck. Back in October 2000, Cisco had
basically no idea where it was really going, just expecting that a corporate
body in motion would tend to stay in motion, that success would breed
success. 

Good companies learn lessons and not such good companies don't. It took
years of staggering losses and the hiring of an outsider for IBM to turn
around in the early 1990s. Big Blue has fared better than most of its
competitors in recent years, and it is entirely as a result of that
humbling. But losses and new blood aren't always enough. AT&T brought in
Michael Armstrong for exactly the same reason, and all he did was make a
$100 billion mistake. Same for Carly Fiorina at Hewlett-Packard, though her
loss was smaller. Great corporate names, both, and they are threatened
because of arrogance.

Now to this year's predictions:

1. The dominant theme will be the continuing battle between evil and evil as
Microsoft expands its .NET strategy and the rest of the industry responds.
Look for further stratification as the banks come to realize that Redmond's
goal is to take a piece of every online transaction, which is to say
Microsoft intends to steal the banks' business. This is a fundamental
reworking of business that WILL happen over the next three to five years.

2. The main technical tool for this reworking will be XML, and it will
probably be easy to label 2002 as the Year of XML. This new data standard
will be sprinkled on every type of software imaginable, whether it makes
sense to do so or not.

3. Look for emergence of an XML industry, which is to say a rash of new
startups built around XML services. Microsoft's dedication to the standard
in its relatively pure form makes this emergence inevitable. The big XML hit
for 2002 will come from a company called KnowNow.

4. KnowNow is a new company backed by Kleiner Perkins, the big venture firm,
and represents the resurgence of venture capital in 2002. Having spent 2001
NOT investing money, the VCs this year have to either resume investing their
funds or get out of the business. Look for the former, again thanks to XML,
as the VC industry finds another type of business to spawn than pawn off on
us. 

5. The resurgence of VCs can only come with a resurgence of the market for
Initial Public Offerings, which should happen by late spring.

6. Other hot IPO areas besides XML will include security (thanks to bin
Laden and Microsoft's continued incompetence in this area) and an emerging
niche called rich media.

7. XML is real, security is real, but rich media is not real -- at least not
in 2002. Just as the online music industry grew up around MP3, rich media is
built on MPEG-4, which is far more than just another video codec. MPEG-4 is
a framework for building new types of entertainment that are more
Internet-friendly. Beyond carrying traditional video, MPEG-4 enables the
creation of entertainment products made of up many levels of artificial
scenes, sets, even animated characters. It is the entertainment of the
future, but alas that future won't start in 2002. The problem is that
embracing rich media means rejecting old media and the tools aren't yet good
enough to make that jump.

8. Rich media doesn't absolutely require broadband, but it sure helps. And
2002 will be a pivotal year for broadband, which took a lot of lumps in 2001
with the fall of companies like Northpoint, Rhythms, Covad, and Excite@Home.
What is key here is the deal for Cox Cable to buy AT&T's cable TV unit. If
that goes through (and I think it will), Cox will try to make its big
investment pay off by competing for local and long distance phone service
over its cable system. Other cable companies will follow suit and the only
way for the local phone companies to fight back is with expanded DSL.

9. And Microsoft will make itself a part of every deal, everywhere, no
matter what happens with its anti-trust case. Quite simply, Microsoft will
take an equity position in every tech deal that's over $1 billion,
leveraging to the hilt its close to $40 billion cash hoard. Don't bet
against Microsoft in 2002. That is because, in addition to having deep
pockets, Microsoft owns the start page, the defaults, the windowing
environment, and the content standards. It turns out they also own the
traffic, the audience management, and if you're watching closely what
they're doing with Windows Media, they're going to force you to pay licenses
to show your own content on-line. Today, on the desktop, tomorrow, on
UltimateTV. 

10. Finally, I think last year's prediction for Cisco Systems will come true
this year. I wrote "The answer to every problem with the Internet will
continue to be 'pay more money to Cisco.' At current prices the stock is a
bargain." 

No, I don't own any Cisco stock.