Burnham's Beat

Dear Microsoft: Please Buy Plaxo

Dear Microsoft:

I saw over at TechCrunch that Plaxo is for sale.  Now, I realize that you guys may not know what Plaxo is because you didn't create it and it isn't located within 25 miles of Redmond, WA, but let me explain to you why I think it might make sense to part with a very small portion of your $21.5BN in cash to acquire it.

You see Plaxo is, in theory, one of the single most useful plug-ins for Microsoft Outlook.  I say in theory, because Plaxo is only useful to the extent other people you know also use it.  That's because Plaxo automatically synchronizes contact details between yourself and other Plaxo users.  In theory, if everyone used Plaxo, then your contact list would always be up-to-date and 100% accurate.  This would be fantastic for me and just about every other Outlook user because it would not only insure that we have always have accurate contact data but it would eliminate the numerous annoying e-mails we get from people throughout the year who are changing jobs, cell phone numbers, etc.

As one of the earliest adopters of Plaxo, I remember feeling giddy at the prospect of everyone soon adopting Plaxo and thereafter entering into a state of perpetual contact bliss.  Alas, this never happened as a result a lot of creepy spam-like user acquisition strategies and other generally bone-headed moves by Plaxo.  Sometime around 2005, I entered into a state of depressive resignation that my Plaxo-inspire contact bliss would never be realized, but now with the "leaked" news of their hoped-for sale by their bankers, my own hopes have been raised that contact nirvana may yet be achieved.

Why should you guys in particular buy it?  Well I can think of three very good reasons:

1. No one is in a better position to have Plaxo reach its goal of near universal adoption than you guys.  You have the clout to embed Plaxo into Outlook.  In doing so, you would practically guarantee that adoption would skyrocket and as adoption skyrocketed the perceived and actual value of Plaxo to its end users would also skyrocket.
2. Plaxo recently released something called Plaxo Pluse, which is basically a social network built on top of your contact list.  This is a pretty interesting idea and one that holds great promise in existing professional circles where someone's contacts are basically their social network to begin with.  By supercharging Plaxo adoption, you could also rapidly grow Plaxo pluse which would very quickly create a highly credible competitor to Linked-In and probably give you a great chance to establish a professional version of Facebook.  What's more you could buy 100% of this social network for far less that the $240M you shelled out for just 1.6% of Facebook.
3. What with all the other things you guys have going on you may not have noticed that Outlook really hasn't added a significant new feature since, oh, let's be generous and say 2001.  I can assure you as daily user I have noticed this, especially as other mail clients have rolled out all manner of cool new features.  Sure you've added support for all manner of obscure Microsoft products such as Groove, Sharepoint, Microsoft CRM, etc., but in terms of actually adding new features that make my daily task of sending e-mails, scheduling events, and contacting people, I might as well be using Outlook 97 for all I can tell.  Yes, you bought LookOut and attempted to integrate indexed-search into Outlook, but the Windows team screwed this up miserably when they insisted that the whole thing be integrated into Windows Desktop Search.  Now I know you guys are great developers and all and that no one else appreciates the massive complexity of adding features to a mail client, but perhaps you guys could suck up your pride a bit and actually go out and buy a feature that is truly useful to your patient, but increasingly suffering users.  After all, if there's one application that I spend the most time in, its Outlook, yet this application seems to have been completely devoid of innovation in recent memory while folks such as Zimbra and GMail make it look like it was coded in Fortran in the 70's.  So, do us dumb-ass end users a favor and throw us a bone, add something new, sexy, and truly useful to Outlook (and don't screw it up the way you did LookOut).

Now I know that buying Plaxo won't be easy for you guys.  After all it's a hosted service that uses the Internet and does not take an hour to install or require you to type in a 30 character sequence of random numbers and letters.  Still, take it from me, it's actually a useful application and it has the potential to help reestablish the relevancy of Outlook in an age when it is increasingly looking like it will soon go the way of the dodo bird.

Sincerely,

Bill

Top 10 Software Stocks of 2007

2007's list of Top 10 Software Stocks is a mixed bag.  There is an IPO, a few turn-arounds, some SaaS companies and some security companies, but no consistent themes.  To be sure, Software as a Service and appliance-based software remain perhaps the most important software themes right now, but they don't dominate the Top 10.

To qualify for this list a company had to start 2006 with at least $50M in market cap and its main business had to be selling software as a license or a service.  So, without further ado, here are the Top 10 Software Stocks of 2007:

1. ZIXI
   Price Change: 287% Ticker: ZIXI
   Comment: Pioneer in SaaS-based digitally signed e-mail and prescriptions sees stock soar as revenue growth picks up and speculators target stock.
2. VM Ware
   Price Change: 193% Ticker:VWW
   Comment:  The software industry's most anticipated IPO of 2007 lived up to its top billing.  VM Ware dominates the rapidly growing virtualization space and the market has rewarded it with a premium price.
3. Phoenix Technologies
   Price Change: 186% Ticker: PTEC
   Comment: Living up to its name, PTEC rose from its own ashes in 2007 on the backs of successful restructuring and new management team.
4. BlueCoat Systems
   Price Change: 175% Ticker: BCSI
   Comment: BlueCoat saw rapid growth in its core markets of WAN security and acceleration as well as increased adoption of appliance-based solutions by the security market in general.
5. EBIX Inc.
   Price Change: 162% Ticker: EBIX
   Comment: EBIX accelerated in 2007 as its focus on providing Internet solutions to the insurance industry helped it rapidly grow revenues while avoiding any fallout from the problems hitting the rest of the financial sector.
6. Innodata Isogen
   Price Change: 148% Ticker: INOD
   Comment: Innodata saw revenues accelerate as its "flat earth" approach to content management and production gained favor with customers.
7. Vasco Data Security
   Price Change: 136% Ticker: VDSI
   Comment: Years of trying to convince banks to deploy authentication software and tokens (as well as a few hackers making some big scores) finally paid off in 2007 as Vasco benefited from a  surge in interest in multi-factor authentication.
8. Broadvision
   Price Change: 130% Ticker: BVSN
   Comment:  After a near death  experience in 2006, Broadvision bounced back as a stable and profitable player in the content management space.
9. Concur
   Price Change: 126% Ticker: CNQR
   Comment:  This SaaS poster child benefited from its domination of online T&E reporting as well as software investor enthusiasm for all things SaaS.
10. Taleo
    Price Change: 118% Ticker: TLEO
    Comment: Taleo saw its stock rise as investors began to recognize the importance of the talent management sector and wanted to own the #1 player.
    

Top 10 Internet Stocks of 2007

2007's list of top performing Internet stocks provides a little bit of  de ja vu from 2006's list.  As was the case in 2006, China remained a hot investment sector, although this year's China winners are different than last year's.  Three of last' year's Top 10 performers repeat in 2007, something to be truly admired in the rough and tumble Internet sector.

To qualify for this list the company had to start 2007 with a market cap of at least $50M and its business had to be focused on the Internet.

So, without further ado, here are the Top 10 Internet Stocks of 2007:

1. China Finance Online
   Price Change: 392% Ticker: JRJC
   Comment:  The Chinese stock market was "en fuego" all year and what better way to play that market than an Internet company that sells online financial services products and information.
2. Baidu.com
   Price Change: 246% Ticker:BIDU
   Comment:  China's #1 search engine appeared to be pulling away from the pack in 2007 despite desperate attempts by Yahoo and Google to get in the game.  Right now the market seems to think Baidu is going to win.
3. Tradus
   Price Change: 184% Ticker: TRAD.L
   Comment:  Formerly known as QXL and a serious competitor to EBAY in Eastern Europe, QXL's stock was supported by takeover rumors all year, which turned out to be true in December when South African media group Naspers announced a deal to acquire it.
4. Acquantive
   Price Change: 168% Ticker: AQNT
   Comment:  Aquantive was acquired by Microsoft in the middle of the year after they scrambled to respond to Google's acquisition of privately held Doubleclick.
5. Priceline
   Price Change: 163%% Ticker: PCLN
   Comment: Last year's #10 performer, Priceline is back again, a very impressive performance for what was thought to be a mature company.  Priceline continued to school the rest of the online travel field, especially with its expansion into Europe.
6. Omniture
   Price Change: 136% Ticker: OMTR
   Comment: Last year's #7 stock moves up one spot to #6.  After a successful IPO in 06, Ominture grew quickly in 07 and announced the acquisition of its main public competitor (VSCN).
7. Amazon.com
   Price Change: 135% Ticker: AMZN
   Comment: The granddaddy of online retailing flexed its growing muscles in 07.  Thanks to growing revenues and somewhat decreased tech spending margins expanded quickly and earnings accelerated.
8. SOHU.com
   Price Change: 127% Ticker: SOHU
   Comment: One of China's largest portals saw impressive growth and benefited for investor appetite for all things China.
9. Gigamedia
   Price Change: 92% Ticker: GIGM
   Comment:  Last year's #2 stock, holds on to a  Top 10 position.  Unlike  other gambling stocks, Gigamedia's focus on Asia as well as its casual games help it buck the trend and keep growing without regulatory interference.
10. BlueNile.com
    Price Change: 84% Ticker: NILE
    Comment: The Internet's largest jewelry retailer saw its stock take off in 2007 and it reached critical mass and began to drive impressive margins.