Cody on RM: Revolutions Make for Strange Bedfellows

Administrator's Note: As a parting shot into the weekend, here is a post from Cody's Trader's Edge Blog on RealMoney this morning:


By Cody Willard
RealMoney.com Contributor
06/02/2006 9:59 AM
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Oh, (I wanna show you) the different emotions,
(I wanna run to) the sounds and motions
Electric woman waits for you and me,
So it's time we take a ride, we can cast all of your hang-ups over the seaside
While we fly right over the love filled sea,
Look up ahead, I see the loveland, soon you'll understand. - Jimi Hendrix

I believe Apple's going to take all kinds of market share from its biggest competitors, putting a serious crimp in its competitors' ability to make any money at all, much less grow.

I also expect that Google will take all kinds of market share from its biggest competitors, putting a serious crimp in its competitors' ability to make any money at all, much less grow.

And I happen to believe that Microsoft is going to take all kinds of market share from its biggest competitors, putting a serious crimp in its competitors' ability to make any money at all, much less grow.

YouTube.com? Huge market-share taker.

Yahoo!? Yup, gonna take market share.

P2P distribution? Yet another huge market share taker.

You see, Wall Street's got this Internet competition thing all wrong. Apple, Google and Microsoft are not each other's most important competitors.

YouTube.com's success isn't zero-sum with Yahoo's new user-generated video outlet.

And it's not as if Apple's biggest concern in growing its iTunes outlet is whether Yahoo! and Napster ever figure out that nobody wants to rent music but that they want to own it. GoogleTalk vs. Skype vs. Vonage? All are going to take huge market share and the first two will probably make their shareholders a lot of money.

"Alright then, Cody, who exactly are the losers around here?"

In video, the cable and satellite companies are going to lose huge chunks of viewership as their nearly 100% market share in video content distribution for the home has nowhere to go but down. I've mentioned this before -- I know I watch a little bit less TV these days as I watch a little bit more video on iTunes and YouTube and elsewhere on the Net.

Music? Well, I've been writing for more than two years that Apple is on its way to becoming the world's biggest vendor of music. It should pass Wal-Mart this year, right on schedule (well, my schedule from back in 2004 at least. Wait, did that prior sentence just outline how Apple's biggest competitor in music is ... Wal-Mart?! Yes, it did. That's who all of these Internet music distributors are competing against: the physical world retailers that still dominate music sales. But those retailers won't be a factor in music sales at all in 10 years.

Voice? The Bell companies and other originally tax-funded incumbents in this country still have more than 95% of the market. That'll be closer to 50% in 10 years, as I have written about before.

I was shocked to realize the other day, as I paid Microsoft for three sets of software at 99% gross margins for my new Apple computer that is running on Intel chips, that revolutions make for strange bedfellows. Apple taking share from the Wintel monopoly is actually a positive for Microsoft and Intel. Talk about "Flipping It!"

At the time of publication, the firm in which Willard is a partner was net long GOOG, AAPL and MSFT, although positions can change at any time and without notice.