Acquire vs. Innovation

Litigation over Marketing

Build to Sell rather than Build an Empire

Eyeballs over Transactions

If you are not following these trends, you can’t make money in tech. Problem is to be involved in these trends, you were likely a venture capitalist the last 3 years – or owned Google and Apple.

The best way for Sony, Dell, Google and/or Microsoft to have made money off the iPod was to purchase Apple. They blew it. Stop chasing the myth. When I read anything about Microsoft’s KILLER plans – I get a headache. ARGO, x-box, Live, MSN, all gloriously working together in a iPod killing machine. Can’t wait to get me some of that stock! Obviously, Wall Street is as cynical as me.

Take a look at the QQQQ’s (Nasdaq 100 tracking stock) when you have a moment. This once great security does not have a pulse. It is dead. I see no signs of life. Maybe 10 rate cuts will get them going. Maybe it will be Intel (LOL), Microsoft (bigger LOL), DELL (R.I.P) Qualcomm (I believed until recently), Google (Doubtful), Apple (lot’s of battles to contend with as the new leader).

Maybe it will be the lovely and talented financial guru Suze Orman reversing her insightful 2001 advice when she said:

“In the low 60s here, I think the QQQ, they’re a buy. They may go down, but if you dollar-cost average, where you put money every single month into them, I think, in the long run, it’s the way to play the Nasdaq.”

At $37 today, 6 years later, the QQQQ’s are down nearly 40 percent MORE. Nice!

This is not to pick on Suze at all – I have many awful calls.

It is about the new technology landscape. How the hell was Suze qualified or anybody for that matter, to call a bottom in a post Nasdaq BUBBLE environment. The real BUBBLE of the last 20 years.

Without leadership, there is no average to buy. To pick tech winners now is nearly impossible for the pile of crap to choose a gem is rather large and therefore, stinky!.

The most exciting area of tech is internet services and software. The problem is the space is highly fragmented because of the deflationary start-up costs – read TechCrunch for a month if you don’t believe me.

Our pool of next generation technology leaders are likely to be smaller, niche companies.

Those niche companies will bring a huge return for the smart venture capitalists and angels that funded them, but be gobbled up by large tech and media before the public can share and offer no real value to the shareholders of the giant acquiror.

That is the stage in the cycle we are on now. It is cheaper to gobble, than innovate. Venture investors have long realized this and have adjusted the valuations of the companies they fund. They are funded with the intent of making them digestible before you (the public) has heard of them.

The MOST discouraging issue in technology has to be PATENT LITIGATION. Talk about a quagmire. One of my investments is invloved in a patent litigation that has barely started and the lawyers on our side have billed $100,000 dollars.

Friendster has a patent issued on social networking ( asssphinctersayswhat? ). According to the US patent office, Friendster invented conversation. Whatever. Everything in web services was invented when humans learned to communicate. Friendster having a patent on anything other than fourth chances and the abilty to bleed venture money is a joke.

This battle is a waste of energy and is mucking up true innovation and it seems like TECHNOLOGY as a whole is lost.

Internet Services and tools are the last sexy sector and PATENT litigation will bring that to it’s knees as well if someone can’t lead us through this quagmire.

People a lot smarter than me are having deep discussions and getting nowhere on the issue. It is great that it is being discussed, but the venture guys discussing the issue have different opinions depending on whose start-up holds the patent!

Bottom Line – The downtrend in tech is firmly in place. Patents, Valuations, Deflation and different business models leave too much uncertainty to try and call a bottom, let alone the next boom. In the meantime, although the craze for hard assets seems inflated, liquidity, momentum and opportunity all point to you focusing on that area for portfolio growth.