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E.piphany should change its Business Model to survive

Posted on Wednesday, Apr 6th 2005

What does an erstwhile star company, with a stock price now stagnating between $3-$6 and a ~$250M market cap do next? Revenues have fallen from $125M in 2001 to the $80M 2004 sales number. Maintenance and Professional Services account for more than two-third of the company’s sales.

If you look around in the CRM space, E.piphany is still better than the other fallen stars like Kana, eGain, and so forth. Siebel is still the remaining pure-play CRM leader with $1.3 Billion 2004 sales, and a $4.7 Billion market cap, and the top acquisition target in the category.

It looks like E.piphany’s destiny will depend somewhat on who acquires Siebel: SAP or Oracle? If the Retek drama is any indication, I would say, Oracle will win the bidding battle against SAP. However, there is a potential wild card: IBM. Siebel’s current CEO is an IBM alumni. IBM has so far not entered the business application space. Acquiring Siebel would change that.

In any case, under all the above scenarios, E.piphany looks like a lonely, passive girl at the ball who doesn’t get asked to dance, but keeps hoping she would be. Meanwhile, she ages and withers.

Here are some ideas to dress her up and give her a make-over, so that suitors come flocking:

* Turn E.piphany into a technology-enabled services play, with an India-based BPO operation.
* Develop core competency in delivering business intelligence as a service, using the product suite as enabling technology.
* Build, Operate and Transfer (BOT) world-class off-shore business intelligence operations on behalf of Fortune 1000 / Global 2000 customers.
* Engineer a potential CRM roll-up in conjunction with private equity investors, using the story of such a business model change that warrants a much improved P&L structure.

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Chip VCs: Enhanced “nerd” factor needed

Posted on Wednesday, Apr 6th 2005

I mentioned Chip Scale Packing (CSP), which I should also explain further. In simple terms, for these miniaturized consumer devices, Printed Circuit Board (PCB) real estate is a big problem. CSP is a packaging technology that allows chips to be packaged “at the scale of the chip” with marginally more area requirement.

In recent times, a company that has monetized CSP technology really well is Tessera (TSRA). Tessera’s µBGA® technology enables many of the miniaturized device vendors’ high volume products, creating a lucrative royalty stream for the company. The stock shows a 52-week range of 15.64 – 46.28 this morning, steadily increasing in the last year, following a late 2003 IPO.

For VCs looking for new investments, the IP licensing model that Tessera has used is a good one to consider. VCs should also look at the periphery of the core component business – towards packaging, interconnects, thermal and power optimization techniques for new investment opportunities.

SiP is a major discontinuity

Posted on Wednesday, Apr 6th 2005

Okay, so I should explain what is the big deal about System-in-Package (SiP) …

You must have noticed the trend in cellular handsets of packing in dramatically diverse functionality? Samsung’s latest model has a 5 Mega Pixel camera, and if this is any indication, consumers will further reap benefits of such integration trends in the coming years.

What makes this possible? For a miniscule gadget to pack in various kinds of RF modules, DSP blocks, memory modules, etc. – the technology being used is SiP. It is at the heart of electronics miniaturization, along with Chip Scale Packaging (CSP). The differentiating phenomenon in very fast turn-around, affordable hyper-integration is SiP.

And what’s even more attractive for the IDMs is the fact that the SiP design paradigm allows them to mix dies from different process nodes. They can mix three 130nm modules with one 65nm module, thereby amortizing the old processes.

Finally, SiP will put a further brake in the slowdown of Moore’s Law. Now that old processes can be mixed in with the new, IDMs should rethink their entire product strategies, and Foundries should do capacity planning assuming that not all parts of a chip will require the newest process.

By all measures, SiP is a major discontinuity in the semiconductor business. Those chip houses who will figure out the implications and take advantage of it, stand to win big.

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SiP versus Structured ASICs

Posted on Tuesday, Apr 5th 2005

Semiconductors and Electronics have invaded every aspect of our lives in fairly extensive ways. During the last quarter of the twentieth century, this segment received enormous attention, venture investment, and duly provided some amazing vision, thought leadership, and innovation.

Now, in the first decade of the 21st Century, the industry is showing signs of hitting the wall. Cost structures are out-of-whack, the need or desire to go to the next node down is no longer as burning after 90nm, and VCs find it difficult to extract value from their chip investments.

New design paradigms are emerging as a result.

This week, Vinod Khosla reinforced his stake in the ground by putting in an additional $7.5 Million into eASIC, targeting the market segment defined in between FPGA and Standard Cell and dubbed Structured ASIC. LSI Logic has been going after this space for a few years now with the RapidChip initiative, and it does not look like a runaway success so far – certainly not enough to deliver LSI out of its persistent miseries.

Now, Ronnie Vashista of RapidChip has become the head of marketing for eASIC. I am curious as to why Mr. Khosla believes eASIC will succeed where LSI (and all the others) have failed.

Other players to track in this space are Tabula, Cradle, Tensilica, as well as a bunch of internal initiatives at large IDMs including NEC and Toshiba. Lightspeed Semiconductor has also been around for a long time, attempting to address the opportunity, without seeing light at the end of the tunnel.

On the other hand, the design paradigm that LSI Logic has not looked at and absolutely should – is System-in-Package (SiP). LSI has a large library of Silicon Intellectual Property, which they also call SIP. So, Mr. Corrigan ought to think about SIP in SIP as his potential deliverance strategy.

My bet, if I had to choose a design paradigm, between Structured ASICs and SiPs, would certainly be the latter.

Financing non-mainstream films

Posted on Monday, Apr 4th 2005

Recently, we saw the documentary Born into Brothels by Zana Briski, filmed in the brothels of Calcutta. The film has won the 2005 Academy Award for Best Documentary – a deserving recognition. It’s a beautiful film about a handful of children of prostitutes whom Zana Auntie decides to teach photography, and subsequently tries to lift out of their otherwise doomed future.

The Academy also nominated Hotel Rwanda this year for Best Picture, although it did not win.

Both films tell stories that most people do not want to hear. They are too disturbing, too depressing, too complex, and in the end, too challenging.

The question, from a business point of view, is how does the new business model of lower marketing / distribution costs affect such artistic endeavors?

I think, the answer is, thankfully, that it’s a good step forward, opening up lots of opportunities for lots of voices to be expressed and heard.

It’s okay that Hollywood’s coveted middle does not want to see these movies. Producers would do well to understand the game of online marketing to efficiently market their low-budget independent films.

As for financing, if Zana Briski were a savvy business woman, she would probably not have missed the opportunity to distribute Canon cameras to her children in the Brothels, and have Canon bank-roll the film. As for Terry George, did the Hotel Des Mille Collines participate in your financing?

Disney and Globalization

Posted on Monday, Apr 4th 2005

The Media and Entertainment Industry is already going through a huge overhaul, and will continue to do so over the next decade, as Broadband finally becomes mainstream and ubiquitous, and other disruptive technology forces like Video-on-Demand (VOD), Blogs, Online Advertising, etc. start to establish stronger foothold. In this section, I would like to discuss issues and opportunities that are relevant for the evolution of the industry.

Bob Iger has just been named the new CEO of Disney, replacing Michael Eisner. Iger will preside over the evolution of a new generation of children and parents – Disney’s key customers – who need a different way of consuming his products.

I like Fairy Tales, Folk Lore, Mythology, Epics – all those colorful, vibrant, dramatic stories that make up Disney’s legacy. Disney has, in the past, produced major films based on such stories from various cultures. From Hans Christian Andersen’s Little Mermaid to the Chinese little girl Mulan, Disney has encompassed an international spectrum.

However, with VOD, the opportunity opens up to become widely more pervasive, larger, and accessible. Where a large multi-million dollar investment in a feature film like Mulan required assumptions about expensive distribution and marketing budgets, with VOD, the entire collection of Hans Christian Andersen’s Fairy Tales can be built into a series of 30-45 minute films, distributed efficiently and affordably via Broadband download or streaming, and advertised on Yahoo or Google.

The economics of film-making can now change. For an animation studio such as Disney, it is feasible to use a very large-scale production unit in India to roll out collections of magical stories from Denmark, China, India, Greece, Japan … and add an enormous amount of color in the lives of children all over the world.

So, while Mr. Iger negotiates with Mr. Jobs to put the Pixar partnership back in gear, he should also not lose sight of the non-blockbuster market that will soon be within his reach, and one that does not follow the rules of the legacy film business. Perhaps, it is just as important for Mr. Iger to negotiate with Mr. Semel, to figure out how to market this sort of content through online advertising.

Looking to create a signature as a fashion designer?

Posted on Monday, Apr 4th 2005

I used to work with a small New York Designer called Lafayette 148 in the 1999-2000 timeframe. It was (and still is) a beautiful designer that wanted to use the highest quality fabrics but make the clothes available at relatively lower prices. [In the fashion business, the terminology would be Designer merchandise at Bridge prices.]

One of the design concepts I saw during that time was a striking red pant-top ensemble in silk, with a flowing red embroidered scarf made out of an Indian sari fabric. That design had to be abandoned, even though it was spectacular and original. Lafayette 148 could not source enough of the sari fabric under consideration.

With a bit of work with a segment of our 4 Billion pool of resources, many designs such as this could be brought into fruition. There are extraordinarily talented artists and artisans all over India.

If you are a fashion designer looking for an original concept, fabric, texture, embroidery … go travel in the villages of South Asia and look for expertise in weaving exclusive saris. In the Dhakai muslin from Bangladesh, or the Chanderi from Bengal, you will find resources to position and shape your signature.

And if you do it right, you would come out with an efficient, high gross margin business model, that may even allow you to sell Designer quality merchandise to the mass markets, profitably, and abundantly.

Issac Mizrahi at Target, Nicole Miller at J.C. Penny and others are catching on to the trend of famous designers designing for mass market retailers. All through that supply chain, there exist opportunities for massive leverage from the bottom of the pyramid.

Target, J. C. Penny – go high-end in your imagination and design concepts, but go to the bottom of the pyramid looking for the supply chain.

Sick of Campbell soups?

Posted on Monday, Apr 4th 2005

India is a paradise for delicious candies and other edibles: sweets, snacks, pickles … Trader Joe’s has made Mochi ice-creams now a household name in North America.

The women in the villages almost always cook, and many of them could put the fanciest chefs in top restaurants worldwide to test.

In Bengali cuisine, one of the most sophisticated of the Indian cuisines, there are concepts such as Mocha (made of the banana flower) and Thor (made of the banana bark). You don’t get such delicacies at restaurants. Nor do you get them in Trader Joe’s.

But why not?