I get a lot of email.  I get a lot of newsletters. There are few I look forward to as much as the Mercator Capital Newsletter. The February issue is now online.

Here are the highlights and my reactions

Apple’s iPhone – Why Launch Now?

The New Year has already started with a number of notable deals and developments, but perhaps none as big as Apple’s iPhone launch on January 9. Despite the massive scale of the 2007 Consumer Electronics Show – their 40th – the biggest tech story of that week took place elsewhere at Apple’s own event, MacWorld. Marketing savvy has long been part of the Apple mystique, and the iPhone is no exception, especially considering that the product will not be available until June at the earliest.

I've been pretty openly denigrating of the iPhone. I think it's NOT going to reinvent telecommunications. It will have some impact on the user interface. And it's going to have little impact on the other manufactures. I think the iPhone is the greatest iPod killer imaginable. Given the density of mobile phones that are driven into operation for business, Apple won't dent the space. But they've surely sounded the death knell for their cash cow iPod. The Mercator view takes a broad look at all the players in the space and is well-thought and on the mark in my view.

Consolidation Trend Continues

Only one month into 2007, the consolidation trend has already become well established. In addition to the Arris / Tandberg TV deal covered later in this issue, we have seen five other notable acquisitions during the month of January. In the last newsletter, we  assessed the 11th hour approval of the AT&T/BellSouth merger just as 2006 closed out, and believe that this has set the stage nicely for 2007. With the U.S. service provider landscape largely settled now (but not entirely), it is not surprising to see such a healthy flow of deals as vendors either bulk up or acquire strategic pieces to keep pace with their key customers. Here is a brief snapshot of these five acquisitions.

Goes on to mention Cisco's acquisition or IronPort (or big fish swallows another small fish). I agree that monetarily it's a big deal. Strategically, I have my doubts that Cisco will smoothly integrate IronPort into a cohesive fit in their larger product mix. I like IronPort as a company. I like their solution. I generally like Cisco, but this smells as beneficial to IronPort as AT&T was to Olivetti's personal computer.

Avaya and Ubiquity is another big deal. I think the strenght in this one is the obvious support it lends to SIP as the protocol of choice for unified communication. Strategic to keep Ubiquity away from Cisco, and strategic to leverage SIP.

The other deals didn't interest me as much, but made for good reading.

Current Developments in Video

Aside from the strong deal flow so far in 2007, we have seen an unprecedented level of activity in the video sector in January. We use the term “video” loosely here, as it includes several areas that are rapidly  evolving, are having a significant impact on their target markets, and represent exciting potential for deals in the near term. Below is a short summary of four different video scenarios we are closely following.

Video is probably one of the top three hottest industry segments this year. Nobody denies that. Mercator starts off looking at Telepresence with the Cisco spin, but quickly brings Tandberg and HP into the picture, then Polycom and the RPX telepresence upgrade. I don't know a lot about the latter deals, but my view of Cisco's Telepresence as smoke and mirrors fluff aimed at two percent of the customer base holds. Cisco's talking the talk, but I don't believe they'll walk the walk on this one. I hope the others play out as the successes they could be.

Brightcove getting funding to the tune of $59.5M was big news. That's third round, so they continue to show investors they've got something to deliver.

Joost and Skype. Well, I'm not as high as Mercator or anyone else on either one. I believe Skype is rapidly turning into an irrelevant phone company, ignoring mobility and raiding their own customer base. They're eating their young and I see tough times ahead. I don't think they learned the big lessons from Kazaa. Skype's P2P flaunting of evasion technologies to get through corporate firewalls and their mealy mouthed kissing up to corporate needs is irritating more and more people. Joost is already viewed as a security threat to the enterprise space and will be squashed far more fervently than Skype. They're painting themselves into a corner, and it's shrinking. I project some dire times ahead for the Skype family. Not immediately, but they're out there on the far horizon.

There's plenty of other really fascinating analysis in there. I encourage you again to subscribe and read it (and no, I don't write for them at all. Never have.



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