2013-06-24
Microsoft and Oracle work together in Cloud Computing
SAN FRANCISCO/SEATTLE (Reuters) - Microsoft Corp said on Monday it would support Oracle Corp software on its cloud-based platforms, a tie-up aimed at improving the rivals' chances against nimbler Web-based computing companies chipping away at their traditional businesses.
The two industry leaders have competed for decades to sell technology to the world's largest companies. But they face growing pressure from new rivals selling often-cheaper services based in remote data centers, and they are rushing to adapt.
The two companies have long collaborated out of the public eye to meet customers' needs, Microsoft Chief Executive Steve Ballmer said on a conference call. "In the world of cloud computing, I think behind-the-scenes collaboration is not enough."
The tie-up does not resolve major competitive challenges the two tech pioneers face in the cloud market, but their cooperation was seen as a symbolically important step.
"Is it a game changer today? Not at all. It shows both companies are serious about their cloud endeavors. The fact that historical competitors are now friends speaks to how big the cloud opportunity is. And it opens up potential avenues of growth down the road," said Daniel Ives, an analyst at investment bank FBR.
Under the agreement, customers will be able to run Oracle software on Microsoft's Server Hyper-V and on Windows Azure platforms, the companies said.
Microsoft will offer Oracle's Java, Database and WebLogic Server to Windows Azure customers, while Oracle will also make Linux available to Windows Azure customers, the companies said in a news release.
Ironically, the pact means Microsoft is effectively promoting Linux and Java-based software, longtime rivals to its own Windows platform. But the software maker stands to benefit from getting any customer to pay for its datacenter services, regardless of the underlying software being used.
No. 3 software maker Oracle last week missed expectations for software sales for the fourth quarter, sending its shares plunging. Investors worried that the company may have trouble competing with software providers like Salesforce.com and Workday, as well as Amazon.com, which has also become a major player in cloud computing infrastructure.
Top software maker Microsoft's large-scale cloud computing initiative, called Azure, has failed to catch up with Amazon's cloud offering, called AWS (Amazon Web Services), which blazed the trail in elastic online computing services in the cloud.
The rivalry between Oracle and Microsoft dates back several decades and has been marked by a personal rivalry between the companies' best-known cofounders: Larry Ellison and Bill Gates.
In 1995, as the Windows franchise was taking off, Ellison began a high-profile but unsuccessful effort to promote a less expensive competitor to the personal computer known as the Network Computer. Gates began aggressively attacking Oracle's core database business in the late 1990s, infuriating Ellison as Microsoft's less-expensive SQL Server gained market share.
In recent years, both have come under attack from a wave of younger companies, like Workday and Salesforce, which charge a single subscription fee for software and support, at far lower margins than for Oracle's traditional products.
Ellison told analysts on last Thursday's quarterly conference call that Oracle had forged alliances with Microsoft and Salesforce.com, which uses Oracle's technology, and said he would announce details this week.
Over the past five years, shares of Amazon.com, which rents remote computing and storage to other companies, have surged 237 percent. Salesforce.com, founded by former Oracle executive Marc Benioff, has risen 105 percent.
During the same half decade, Oracle's stock has risen 38 percent and Microsoft's shares are up 21 percent.
2013-06-23
Larry Ellison in Haiwaii
HONOLULU (Reuters) - Billionaire Oracle CEO Larry Ellison may be interested in acquiring a second Hawaii airline after he bought most of the tropical island of Lanai last year.
Island Air, a Honolulu-based carrier with a handful of island-hopping planes that Ellison bought in February, confirmed discussions between Island and Phoenix-based Mesa Air Group, the parent company of Hawaii's interisland go! Airlines.
"We are committed to building a strong regional airline and part of that process is exploring all options including discussions with Mesa Air," Island Air Chief Executive Officer Paul Casey said in a one-sentence statement.
Honolulu's Star-Advertiser newspaper reported on Thursday that Ellison was arranging to take control of go! Airlines, citing an unnamed source familiar with the deal.
Mesa CEO Jonathan Ornstein was not immediately available for comment. A spokeswoman said the airline flies 40 flights a day in Hawaii using a fleet of five 50-seat CRJ-200 jets.
Oracle declined to comment.
Hawaii aviation historian Peter Forman said a deal for Island Air to purchase go! would not only secure more flights for Ellison's island of Lanai, but also could indicate that Ellison intends to become a player in the Hawaiian airline market.
Many industry observers have expected another airline to enter Hawaii to compete with Hawaiian Airlines for the tourist- rich interisland market. Combining go! and Island Air would give Ellison critical mass and a platform from which to compete.
"He's gaining the recognition that he is serious about becoming the second interisland airline in Hawaii. There has been a vacuum for serious competition to Hawaiian (Airlines)," Forman said.
In March 2013, Forbes Magazine listed Ellison, 68, as the world's fifth richest man, and the third richest American, with a net worth of $43 billion.
Ellison bought 98 percent of the 141-square-mile (365-square-km) island of Lanai, Hawaii's sixth-largest island, from billionaire David Murdock in June for an undisclosed price. He said he intended to turn the island into a "laboratory" for green living.
Ellison's Lanai holdings include two resorts and golf courses, a variety of commercial and residential structures, as well as vast acres of undeveloped former pineapple land. The island has roughly 3,000 residents.
2013-06-16
Google baloons Project Loon
Google Inc has launched a small network of balloons over the Southern Hemisphere in an experiment it hopes could bring reliable Internet access to the world's most remote regions, the company said late Friday.
The pilot program, Project Loon, took off this month from New Zealand's South Island, using solar-powered, high-altitude balloons that ride the wind about 12.5 miles - twice as high as airplanes - above the ground, Google said.
Like the Internet search engine for which Google is best known, Project Loon uses algorithms to determine where the balloons need to go, then moves them into winds blowing in the desired direction, the company said.
By moving with the wind, the balloons form a network of airborne hot spots that can deliver Internet access over a broad area at speeds comparable to 3G using open radio frequency bands, Google said.
To connect to the balloon network, a special Internet antenna is attached to buildings below.
The Mountain View, Calif-based company announced the project on its official blog http://googleblog.blogspot.com/2013/06/introducing-project-loon.html, and its website http://www.google.com/loon/.
The 30 balloons deployed in New Zealand this month will beam Internet to a small group of pilot testers and be used to refine the technology and shape the next phase of Project Loon, Google said.
Google did not say what it was spending on the pilot project or how much a global network of balloons might cost.
Google has also developed self-driving vehicles, which the company says could significantly increase driving safety.
Those vehicles are beginning to gain support from lawmakers in places like California, where a bill legalizing their operation on state roads was signed into law last by Governor Jerry Brown.
AmazonFresh Webvan
The online grocery start-up Webvan may have been the single most expensive flame-out of the dot-com era, blowing through more than $800 million in venture capital and IPO proceeds in just over three years before shutting its doors in 2001.
Twelve years later, though, Webvan is rising from the dead - in the form of an online grocery business called AmazonFresh.
Four key Amazon.com Inc executives - Doug Herrington, Peter Ham, Mick Mountz and Mark Mastandrea - are former Webvan officials who have spent years analyzing and fixing the problems that led to the start-up's demise.
Kiva Systems, the robotics company that Amazon bought last year for $775 million in one of its largest-ever acquisitions, was built on ideas and technologies originally developed at Webvan and is a key part of the AmazonFresh strategy.
Even Webvan's old Web address, webvan.com, is now part of the Amazon empire.
"We had a lot of Webvan DNA in the room and we drew on that experience a lot," said Tom Furphy, who helped start AmazonFresh with Herrington and Ham before leaving to become a venture capitalist. "That was a good formula for building the business responsibly."
Amazon declined to comment for this story, or make any AmazonFresh executives available for interviews.
Former Amazon and Webvan officials say Amazon drew three big lessons from the Webvan debacle: expand slowly, limit delivery to areas with a high concentration of potential customers, and focus relentlessly on warehouse efficiency.
The opportunity for Amazon is huge. The grocery business in the United States generated $568 billion in retail sales last year, with online accounting for less than 1 percent, and it's among the last major retail sectors that the online giant has yet to tackle.
But the risks are large as well. Groceries are a notoriously low-margin business, and the aggressive expansion of discounters like Walmart has made the business even more cutthroat than it was in Webvan's day.
And competition in the online grocery business is heating up. FreshDirect and Peapod have been plugging away for years, while traditional grocery chains like Safeway also do online ordering and delivery. Walmart is testing its own fast delivery service in some markets in the United States now.
SLOW EXPANSION
AmazonFresh now serves Seattle and Los Angeles, and it plans to launch in the San Francisco Bay Area later this year. If these cities go well, Amazon is eyeing 20 new markets for 2014.
But the big plans belie what has been one of Amazon's most cautious entries into a new business since founder and Chief Executive Jeff Bezos started selling books online in the 1990s.
The grocery service started in just two Seattle neighborhoods, Medina and Mercer Island, in 2007, and then slowly spread to other Seattle communities over the next five years. It didn't expand beyond Seattle until June 10 of this year, when it launched in Los Angeles.
The Los Angeles roll-out is similarly modest, covering only a few zip codes initially. "We know customers value this service but the economics remain challenging," an Amazon spokeswoman said when describing the L.A. launch.
Webvan - which ironically was also the brainchild of a book-seller, Louis Borders - expanded to nine major metro areas just 18 months after it began serving the San Francisco Bay Area, former executives recall. (Borders, co-founder of the now-defunct Borders Books & Music, declined to comment for this story.)
Webvan began its big expansion in Atlanta while the San Francisco service was still "wobbly," recalls Krishna Hegde, Webvan's vice president of deployment and systems engineering.
After the Atlanta launch in April 2000, Hegde said he recommended that the company slow down. But Mark Zaleski, president of operations, argued the company should press on because of promises made to Wall Street investors, Hegde said. Zaleski could be not be reached for comment.
Webvan "committed the cardinal sin of retail, which is to expand into a new territory - in our case several territories - before we had demonstrated success in the first market," said Mike Moritz, a Webvan board member and partner at Sequoia Capital, one of the company's venture capital backers. "In fact, we were busy demonstrating failure in the Bay Area market while we expanded into other regions."
DELIVERY DENSITY
Webvan not only launched in many cities, it also offered service across entire metro areas. That resulted in the company's delivery trucks making many trips where they only dropped off a few orders.
"The biggest failure of Webvan was delivery density," said Gary Dahl, vice president of distribution at Webvan from 1997 to 2001. In the Bay Area, he said, Webvan made money delivering in San Francisco and Oakland, but lost a lot of money delivering in suburbs such as Orinda and Moraga.
"Mean travel time between delivery stops is the key to success in the home delivery business," Dahl explained. "Travel one block in San Francisco and you have passed 200 people, travel one block in Moraga and you have passed about six people."
AmazonFresh has tackled this problem by only delivering to densely populated areas of Seattle, and it's taking the same approach in LA, according to Keith Anderson, an executive at consulting firm RetailNet Group.
"If you drive into certain neighborhoods in Seattle you will see a lot of front doors with AmazonFresh totes," he said. "That's because Amazon expanded gradually into specific neighborhoods and tried to deliver to lots of homes in those specific areas."
FreshDirect covers more than 80 percent of the New York metro area, but it took the company about a decade to expand its delivery network this wide. Last year, FreshDirect launched in Philadelphia.
KIVA ROBOTS PROVE KEY
Webvan also suffered severely from weaknesses in the design and technology of its giant warehouses. At its first facility, there was a single conveyor belt that snaked about five miles through the building bringing items to workers, who would then pick and pack the products into totes, Webvan Chief Technology Officer Peter Relan said.
When the conveyor belt broke, the operation would grind to a halt, he recalled.
Mick Mountz, an MIT-trained Webvan executive, oversaw the picking and packing process, along with Mark Mastandrea, and together they tried out lots of technology to make the warehouse run more efficiently, according to Relan.
For each $100 bag of groceries, it cost Webvan about $30 to pick and pack; the company had to get that down to $10 to make the process economically viable.
Mountz came up with a solution based on multiple robots that would bring products from different parts of the warehouse to human workers for picking and packing. Unlike a conveyor belt, if a robot broke down it could be fixed while the other robots continued their work.
However, Webvan had spent so much on its original warehouse - about $100 million, according to Relan - that the company was loath to completely change the process in favor of robots.
After Webvan went bust in 2001, Mountz founded Kiva Systems, which designed and built robots that now zip around the warehouses of retailers including Staples Inc, Walgreen Co and Gap Inc.
Amazon bought Kiva in 2012 for $775 million. Mountz is still running Kiva, while Mastandrea became director of delivery experience at AmazonFresh in March.
"When there are a large number of products and the shapes and sizes vary, as they do in grocery, you still need a human at the end to do the picking and packing," said Ajay Agarwal of Bain Capital Ventures, which was an early investor in Kiva. "The Kiva System is the best solution out there for that combination of warehouse technology and human workers."
Amazon has one other thing Webvan never had: a huge, existing customer base. While Webvan had planned to expand into delivery of other goods once it had developed a base of grocery customers, Amazon is going the other way, and can help defray the cost of delivering groceries by delivering books or electronics at the same time.
There are other advantages that have accrued over time. The spread of cloud computing services - pioneered by Amazon's Web Services business -makes it cheaper to run online businesses, while consumers are more comfortable buying online through faster Internet connections.
Online shoppers who type "webvan.com" into an Internet browser today will find a website selling more than 45,000 non-perishable grocery items. In the top right-hand corner, it says Webvan is "part of the amazon.com family" and consumers can use their existing Amazon accounts to buy.
"Amazon purchased the name a couple of years ago," Dahl said. "Maybe they will revive it if sales are slow in the Bay Area."
2013-06-10
Google plans to buy mapping company Waze
SAN FRANCISCO (Reuters) - Google Inc is finalizing a deal to acquire online mapping company Waze for $1.3 billion, according to a source familiar with the matter.
The deal is expected to be announced this week, though it was unlikely to occur on Monday, another source told Reuters.
"Negotiations are nearly final. There are a couple of details being worked out," the second source said. The source described the remaining details as "logistics" rather than significant sticking points.
Google and Waze declined to comment.
The deal with Google comes after discussions between Waze and social networking company Facebook Inc fell apart last month, according to a report in the technology blog AllThingsDigital. Waze was unwilling to relocate its Israeli-based engineering team to Facebook's U.S. headquarters, according to the report.
Maps and navigation services have become a key asset for technology companies as consumers increasingly adopt smartphones and other mobile devices. Waze uses satellite signals from members' smartphones to generate maps and traffic data, which it then shares with other users, offering real-time traffic info.
Google's existing maps service is among the most popular, which could raise antitrust issues for the deal.
The 4-year-old Waze, which has 47 million users, has raised $67 million in funding to date from firms including Kleiner Perkins Caufield & Byers, Blue Run Ventures and semiconductor company Qualcomm Inc.
Waze began looking to raise additional funding toward the end of last year, according to a third source close to the company. As the fund raising process got underway, Waze received interest from several companies about an acquisition, and it switched gears to focus its efforts on an acquisition, the source said.
There had been media reports earlier this year that Apple Inc was in talks to acquire Waze. News of the deal with Google was first reported by Israeli financial newspaper Globes on Sunday.
Waze Chief Executive Noam Bardin and a small staff now operate out of their U.S. headquarters in Palo Alto, California, while about 90 employees are based in home country Israel.
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2013-06-04
Amazon.com Inc is planning a major roll-out of an online grocery business that it has been quietly developing for years
Amazon.com Inc is planning a major roll-out of an online grocery business that it has been quietly developing for years, targeting one of the largest retail sectors yet to be upended by e-commerce, according to two people familiar with the situation.
While food is a low-margin business, Amazon could outperform similar online grocery services by delivering orders for higher-margin items like electronics at the same time.
One of the people familiar with AmazonFresh's expansion plans said new warehouses will have refrigerated areas for food, but also space nearby to store up to one million general merchandise products, in some cases.
The company has been testing AmazonFresh in its hometown of Seattle for at least five years, delivering fresh produce such as eggs, strawberries and meat with its own fleet of trucks.
Amazon is now planning to expand its grocery business outside Seattle for the first time, starting with Los Angeles as early as this week and the San Francisco Bay Area later this year, according to the two people who were not authorized to speak publicly.
If those new locations go well, the company may launch AmazonFresh in 20 other urban areas in 2014, including some outside the United States, said one of the people.
Bill Bishop, a prominent supermarket analyst and consultant, said the company was targeting as many as 40 markets, without divulging how he knew of Amazon's plans.
An Amazon spokeswoman did not respond to a request for comment on Tuesday.
Amazon is searching for new, large markets to enter as the company tries to maintain a growth rate that has fueled a 220 percent surge in its shares over the past five years. The grocery business in the United States, which generated $568 billion in retail sales last year, may be a ripe target.
Amazon's expansion plans are a potential threat to grocery chains such as Kroger Co, Safeway Inc and Whole Foods Market, as well as general-merchandise retailers Wal-Mart Stores Inc and Target Corp, which also sell a lot of groceries.
"Amazon has been testing this for years and now it's time for them to harvest what they've learned by expanding outside Seattle," said Bishop, chief architect at Brick Meets Click, a consulting firm focused on retail technology.
"The fear is that grocery is a loss leader and Amazon will make a profit on sales of other products ordered online at the same time," he said. "That's an awesomely scary prospect for the grocery business."
Kroger, Whole Foods, Supervalu and Safeway did not respond to requests for comment on Tuesday. Target declined to comment.
A successful foray into groceries could also help underwrite the development of a broad-based delivery service employing Amazon trucks to deliver directly to homes, which could have implications for UPS, FedEx and other package delivery companies that currently ship Amazon goods.
Still, groceries have proven to be one of the most difficult sectors for online retailers to crack. One of the most richly funded start-ups of the dot-com era, Webvan, was a spectacular failure as the cost of developing the warehouse and delivery infrastructure proved overwhelming.
Roger Davidson, a former grocery executive at Wal-Mart and Supervalu, said Amazon will struggle to make money from AmazonFresh because fresh produce can easily go out of date in storage warehouses and get damaged during delivery - something known as "shrink" in the business.
"Will it work? I would bet against it," Davidson said. "The reasons these businesses have failed in the past have not gone away."
COMPETITION
Still, Amazon is not alone in wanting to expand in the online grocery business.
Wal-Mart is testing same-day and next-day delivery of online grocery and general merchandise orders in the San Francisco Bay Area and operates a grocery delivery business in Britain.
"We are ready and able to expand grocery delivery in the U.S. as the market demands," Wal-Mart spokesman Dan Toporek said.
FreshDirect delivers food to homes and offices in some parts of New York City and its trying to expand its service into the Bronx.
Peapod, owned by international food giant Royal Ahold NV, says on its website that it is the largest Internet grocer in the United States, delivering more than 23 million orders across 24 markets.
Davidson, who worked with Peapod for several years during stint at Ahold USA, said Peapod struggled to make money for most of its existence. But he believes it now turns a small profit due to supply chain efficiencies, population density in Chicago and its connection to brick and mortar stores on the east coast.
Davidson favors a strategy he called "Click and Connect" which is being used by Harris Teeter, a food and pharmacy chain on the East Coast of the United States. Customers order food online and choose a time to pick up the produce from designated areas outside the company's stores. There is a $4.95 service fee for this.
"Traditional grocery retailers will likely fight back against Amazon with Click and Connect," he added.
It is not clear whether AmazonFresh in Seattle is profitable because Amazon does not disclose results from the business.
Amazon Chief Executive Jeff Bezos was asked about the business during the company's annual shareholder meeting last month and he said that the team had "made progress on the economics over the last year."
"They've been doing a lot of experiments and trying to get the right mixture of customer experience and economics," he added.
COMBINED ORDERS
If online orders also include higher-margin general merchandise such as digital cameras, then AmazonFresh has a chance at profitability, said Manfred Bluemel of Zeitgeist Research, who was head of market research worldwide at Amazon until late 2010.
"Grocery is a frequency business. If Amazon can deliver to consumers' homes two or three times a week, they can up-sell other items," he said.
Bluemel said AmazonFresh's expansion will likely focus on areas where Amazon already offers same-day delivery, or will do so soon.
Amazon offers same-day delivery in several cities including New York, Washington D.C. and Chicago, and since last year the company has been building new distribution warehouses on the outskirts of the Los Angeles and San Francisco Bay areas.
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