The Network Garden - Mark Sigal's Blog

Phoenix Energy readies first Biomass-based Power Generation Site in California

 

This picture is what is known as a gasifier, which is where the biomass material is input in, then heated to the point of 'gasification' for the purposes of creating both heat and electricity.  

The solution, in terms of carbon footprint, is actually carbon-negative*, which is to say that it actually reduces the mass of carbon on the planet. 

Beyond green-friendliness, the system enables the deployment of decentralized power utility services, whereby the adjacent or on-site business can purchase electricity below the rates charged by the local utility provider (PG&E in Northern California), and excess electricity can be sold back to the utility on a guaranteed, long-term contract, making it an exceptional, annuity-producing investment.

After a long period of trials, followed by exhaustive permitting and entitlement processes across local, state and federal government bodies, our first site in California (the first of any such site in California) has broken ground, with an expectation of coming online in Q2 of this year.

(disclosure: I am a board member and advisor to Phoenix Energy).

* The reason biomass gasification gets counted as carbon negative from a lifecycle perspective is because it utilizes waste wood (orchard prunings and other ag residues) that is currently being landfilled. 

For instance, in the county where Phoenix is currently constructing its plant, over 14,000 tons per year of wood chips are buried in a landfill, where they decompose, releasing equal parts of carbon dioxide and methane (about 25x more potent than CO2). Even with a modern methane capture system, the release of greenhouse gases from landfilling is around 4x CO2 equivalent. So rather than release its CO2 anyhow without making energy, the company gets to make energy out of it.

Secondly, gasification is not combustion; it is a thermo chemical conversion process which leaves a bulk of potential CO2 in solid form as “biochar,” i.e. instead of sending 100% of the CO2 up the stack as in a combustion process. As such, a significant amount of the carbon is left in solid form, which when soil applied has a half life of around 1,000 years. 

Finally, the Phoenix approach adds two things to the equation that enhance its green-friendly proposition. One, for every KW produced with this waste product, we don’t need to produce it from anthropogenic sources (i.e. fossil fuels).  

Two, because the Phoenix system is distributed, there is no loss of electricity in transmission to the consumer.  By contrast, a centralized utility, like California's PG&E loses between 7% during off peak hours and 10% during peak hours (according to Cal ISO). An interesting corollary here is that that means every pollution stat you read about power plants is underestimated by up to 10% since not all of the power is productively used.

Sidebar: What is not even added to this calculation is the savings of CO2 from the transportation process, i.e. how much energy/emissions is spent hauling wood chips from their source to the landfill or how much energy is spent shipping coal from its source to the power plant. By keeping the fuel local and the use of the power local, the Phoenix approach avoids additional trucking emissions and the loss of power due to our inefficient transmission grid. 

Check Mate: Apple's iPad and Google's Next Move (Guest Column @ O'Reilly Radar)

"I think this will appeal to the Apple acolytes, but this is essentially just a really big iPod Touch," said Charles Golvin, an analyst at Forrester Research, adding that he expected the iPad to mostly cannibalize the sales of other Apple products. - The New York Times

There is an axiom that the biggest game-changers often result from ideas that, at first blush, seem easy to dismiss. So it goes with yesterday's launch of the iPad, Apple's entry into what they call the 'third category' of device -- the middle ground that exists between smartphone and laptop.

Why is the iPad (seemingly) so easy to dismiss? Well, for one, it is an evolutionary device when conventional wisdom suggests that it needs to be a revolutionary device to find a wedge into a new market.

After all, the iPod and iPhone that came before it were truly revolutionary devices, offering wholly new functionality, delivering new value chains, and fundamentally changing the relationship that consumers had with, first their media (in the case of iPod) and then their communications (in the case of iPhone).

By contrast, the iPad truly does look like a really big iPod Touch, and given its evolutionary nature, it begs the question of who buys this thing and why, especially if you already have a smartphone and a laptop?

Read the full post HERE.

Related Posts:

1. Rebooting the Book: One iPad at a Time
2. iPad: The 'Boomer' Tablet
3. It's in the Bag! The Apple Tablet Computing Device
4. The Chess Masters: Apple versus Google
5. Holy Sh-t! Apple's Halo Effect

Ruminations on Apple Q1, 2010 Earnings Call and Investor “Dead Zones”

“Ah. Yes. Don't you see how clear it is? Not only can you see the future, you can ...” 

“…I can change it.” – from the ‘The Dead Zone’

They still don’t get it. You know, the folks who saw Apple as a consumer-dependent, overpriced house of cards that was destined to collapse when the economic downturn hit.  

The same ones who dismissed the iPhone, couldn’t make heads or tails of the iPod touch, never “got” the platform play or the importance of the App Store, let alone parse through the earnings impact of Apple's subscription-based accounting relative to its mobile peers (RIM, Nokia, et al).

And don’t even get me started on how totally these same folks are dazedly staring into space as they contemplate Wednesday’s Apple Tablet announcement, and how it feeds the next leg of Apple’s growth, while throwing a lifeline to print media.

Listening to Apple’s earnings call today, then the chatter across a number of technology, investing and Apple-focused sites, and finally, watching the stock go up, down and sideways, I am reminded that when you are working from the wrong narrative, faulty storylines are destined to emerge.

Worse yet, when you are attempting to tidily bucket the gravitational force of emergent ecosystems using simplistic and dated logic about markets, makers, consumers and value chains, you can’t possibly hope to see the full picture. 

This leads some to under-factor the impact and durability of the new market innovation, such as seeing Apple in terms of old Windows v. Macintosh paradigms, with the outcome pre-ordained (Apple has to ultimately lose, doesn’t it?). 

Others, view the company purely as a widget maker with stylistic marketing and over-priced, high-end products, a growth story destined to reach rapid maturity, then stagnation, decay and finally, demise (the law of averages suggests that not everything Apple does will succeed, right?).

Finally, others see the company as only as strong as its weakest link (how long can iPhone grow before it's game over?).

The End (to End) Game: Apple’s Platform Vision

 

But what the Apple naysayers still don’t get is that not only can Apple and Steve Jobs see the future, but they are committed to changing it by reworking the communications, computing and media landscape with the digital consumer at the center of the equation.

No less, Apple is doing so with a coherent vision, clear tactics and an execution-oriented culture, something today’s earnings further bear out.

Ironically, the same company that is dubbed evil by some, too proprietary by others and too pricey by still others is actually winning in the market by democratizing the relationship between consumers and media, application & communication providers.

They are doing this by virtue of unbundling entire industries (e.g., mobile, music, apps), with the net effect of bringing down consumer cost, while enabling consumers to buy ala carte (if they desire to do so).

Only Apple is providing an end-to-end platform that yields consumers surplus access to application and media libraries, where artificial or logistical scarcity once existed, all the while giving application builders and media creators a guaranteed path to distribution, reach and monetization. It's a WIN-WIN-WIN proposition for BigCos, Upstarts and Consumers. That's the simple reason why the strategy is working.

When the Apple Tablet is announced on Wednesday, I believe that the premise will be one unified platform (derived from iPhone) that supports best-of-breed application creation (and soon advertising and media unit creation), inclusive of developer tools, marketplace and retail presence/support for mobile, desktop, on-the-go and in the living room.

Moreover, I am guessing that a significant reboot of Apple TV is imminent, as it represents a natural piggyback on top of the media-centricity of the Apple Tablet, and Apple is all about leverage.

After all, this is Steve Jobs’ legacy on the line, his final act, so to speak, and that understanding frames why Wednesday’s Apple Tablet announcement should not be seen as simply iPhone redux or Netbook on steroids, but rather as the signature moment on a truly epic career.  I expect the product to deliver no less.

Apple Delivers All-Time Highest Revenue and Profit

Saccharin sentiments or not, numbers don’t lie, and Apple delivered (once again) mega-dollars and massive profits, a truth that is best anchored by Steve Job’s quote in the earnings release, "If you annualize our quarterly revenue, it's surprising that Apple is now a $50+ billion company."

In fact, the math is stunningly strong (almost) anyway you slice it, with the Company posting record revenue of $15.68 billion (representing 32% growth over the previous December quarter), a net quarterly profit of $3.38 billion (50% higher year-over-year, and $850M higher than the previous quarterly record), and generating an additional $5.8 billion in cash during the quarter. That means that the Company is now sitting on a $40 billion hoard of cash (or cash equivalents).

Apple did this with gross margins was 40.9 percent, up from 37.9 percent in the year-ago quarter. So much for the consumer squeeze.

Highlights:

• Macintosh Business: Apple sold 3.36 million Macintosh® computers during the quarter, representing a 33 percent unit increase over the year-ago quarter (beating consensus estimates by over 300K units, and besting industry averages by almost double).  In particular, K-12 and higher-ed in the US was up 16% year over and year, which represents the best growth rate the Company has experienced in this segment since before the recession. Of equal note, in response to a question by Piper Jaffray analyst, Gene Munster, is the fact that Apple COO, Tim Cook, noted that he saw no mitigating factor that suggests this type of growth (for the Mac) can’t continue.
• iPhone (Sales): The Company sold 8.7M iPhones in the quarter, representing 100 percent unit growth over the year-ago quarter (but below analyst estimates of 9.1M units).  For the first time, Apple revealed that the average sales price (ASP) for iPhone is $620, and also noted that their growth rate compares favorably to the 35% growth rate of the overall smart phone segment. Moreover, Apple CFO Peter Oppenheimer stated that enterprise demand for iPhone is increasing, specifically noting that “Business customers have ranked iPhone the Number 1 smart phone in the J.D. Power customer satisfaction survey for the second year in a row.” He added that 70% of the Fortune 200 is currently deploying or piloting iPhone (a doubling since iPhone 3GS debuted a year ago), and that the enterprise is a core focus for Apple, although in my opinion, Oppenheimer was fuzzy on the details relative to specific apps and strategies designed to drive market penetration and/or any halo effect for the Mac. 
• iPhone (AT&T Exclusivity): Is it ending? Well, Apple gave a wet kiss to AT&T, calling them a great partner, and emphatically stating that AT&T has a detailed plan to fix performance issues in the few cities where there are known issues, a plan which Apple has seen and believes in. More to the point, though, they sidestepped the exclusivity question, noting that the addition of iPhone carriers in markets leads to incremental sales gains, which is another way of saying that while more is better, it may not be world-beating better, since the trade-off for sacrificing exclusivity is lower subsidies, and likely, lower margins. The most likely outcome, in my opinion, is the Apple Tablet launching with multiple domestic carriers, and only then, an end to AT&T's exclusivity with iPhone.
• iPhone (Global Distribution): Apple now has iPhone distribution in 86 countries (and added 17 new carriers during the quarter, including China Unicom, although Cook soft-pedaled regarding expectations for China). Finally, Cook conveyed high confidence relative to channel inventory management, always comforting in such a high volume, rapid-growth segment.
• iPod Business: Apple sold 21 million iPods during the quarter, representing an eight percent unit decline from the year-ago quarter. This was in line with expectations, a trend that should only increase, as the traditional iPod segment is very mature, but which also represents a category being leapfrogged by the iPod touch.  In fact, a 55% gain in iPod touch sales, and their materially higher ASP (relative to traditional iPods) meant that revenue actually grew for the entire device category.
• iTunes and App Store: Apple continues to strengthen its position with iTunes as the deepest library of music, video, and apps, with an 11M song library, over 8,000 films and an App Store model that has delivered over 100K applications, and more than 3 billion application downloads to date.
• Apple Retail: Apple Retail remains strong, with same store sales of $7.1M versus $7M in the year ago quarter.  Same store sales is an important indicator of the effectiveness of a bricks and mortal retail strategy, and along those lines, a record 680,000 Macs sold at Apple Stores (half of which were to first-time Mac buyers), with 50.9 million visitors in the quarter, compared to 46.7 million in the year ago quarter.

 

It’s worth noting that this quarter’s earnings (and Apple earnings moving forward) were favorably impacted by the Company’s adoption of new FASB accounting standards that allow Apple to move away from subscription-based accounting (on iPhone and Apple TV) and recognize both income and reflect the majority of product costs on iPhone and Apple TV at the time of purchase (versus ratably over each product’s estimated economic life).

As such, about half of the impact of the upward surge in revenue and profits came from the company’s adoption of the new accounting standards, which I had previously blogged about here.  

The balance of the surge was a by-product of superior execution of the business.

In tandem, the Company retrospectively adopted the new accounting principles as if the new accounting principles had been applied in all prior periods since the launch of iPhone and Apple TV in fiscal 2007 (through fiscal 2009), an approach that should provide analysts and investors the most comparable and useful financial information from which to evaluate the underlying performance of the Company's business.

Stay tuned for Wednesday's announcement.

Related Posts:

1. Holy Shit! Apple’s Halo Effect
2. Apple Accounting Change: Why it Matters 
3. Rebooting the Book: One Apple iPad Tablet at a Time
   
4. Built-to-Thrive - The Standard Bearers: Apple, Google, Amazon
5. Android’s ‘Inevitability’ and the Missing Leg 

Patents, Trolls and ‘Sweatpants’ Sensibilities

"You know the message you're sending out to the world with these sweatpants? You're telling the world, 'I give up. I can't compete in normal society. I'm miserable, so I might as well be comfortable.'"

- Jerry Seinfeld in ‘The Pilot’ (Seinfeld) 

As John Paczkowski notes in today’s AllThingsD, Kodak has sued Apple (AAPL) and Research in Motion (RIMM) for infringing on its patents for previewing photos and processing images of different resolutions.

I am so sick of these lame patent attacks by failing companies, where the essence of the 'innovation' is something obvious. Let's see. I take a digital picture and want to preview it. Stop the presses, I have split the atom!

I mean really, is this what Kodak, the pioneer and one-time leader of photography has come to, a patent troll?  Is there no better indicator that Kodak is officially out of ideas?

Mind you, this follows Nokia, ostensibly the leader in mobile phone unit shipments, but looking mighty long in the tooth, also suing Apple for patent infringements related to iPhone.

If you can’t beat ‘em, sue ‘em.

But, it’s not just limited to the also-rans suing the BigCo Market leaders, for as Venture Capitalist, Fred Wilson (‘AVC’), notes (read the discussion thread in his post - it's great): 

“Almost a third of our portfolio is under attack by patent trolls. Is it possible that one third of the engineering teams in our portfolio unethically misappropriated technology from someone else and then made that the basis of their web services? No!”

We Need a New Litmus Test for Patent-worthiness

What we need is a new litmus test for what is patent-worthy. After all, it's pretty damn hard to credibly argue that society benefits when, for example, Amazon is awarded a patent for its "one-click ordering" business-process since gravity would have led to the same outcome in due course (i.e., it's obvious; the output of focusing on the best user experience, and the highest yielding path for converting an engaged prospect to a paying customer).

In other words, why treat patents like winning the lotto, with awards gained simply by virtue of buying a lot of tickets or being first in line?

Don’t get me wrong, though.  I am NOT arguing against the merit of patents in general, as by contrast, when Amgen spends hundreds of millions of dollars in R&D on development of a new cancer-curing drug, they NEED a patent to protect against cheap generic copycats that would otherwise obviate the incentive for making the risky investment in the first place.

But, what Kodak is doing by suing Apple and RIMM is the equivalent of wearing sweatpants; namely, telling the marketplace that, “We give up. We are out of ideas,” and the legal system shouldn’t give them a free pass to do so.

Related Posts:

1. Innovation, Inevitability and Why R&D is So Hard
2. The Pitch Man: Must Read for Product Nuts
3. Upward Mobility, Land Grabs and the iPhone Universe: Apple's mobile patent play and what it means to developers. 

Google Android's "Nexus": Is it Windows or Waterloo? (Guest Column @ O'Reilly Radar)

Watching Google's rollout of Android to date, including this week's announcements around the Google-branded, HTC built, Nexus One phone, I am left with two conflicting thoughts. Is it the beginning of their assent into Windows-like dominance or the fortnight of their 'Waterloo' moment? 

Why? Three reasons. One, so much of the Industry Prognosticators' analysis is to see the iPhone v. Android battle in terms of  Microsoft Windows v. Apple Macintosh, with the premise being that the company with the broadest base of hardware OEM support will inevitably outflank and usurp the market position of the integrated and more proprietary hardware, software solution provider (read: Apple then and Apple now).

Two, the analog forgets how much of Apple's playbook is TAKEN from Microsoft Windows; namely, build the biggest, most deeply engaged ecosystem, and start with the developers. 

Then build derivative products (iPod, iPhone, iPod Touch, Tablet, Mac, Apple TV) that leverage the core feature set, distribution, etc. (iTunes, App Store, SDK, Apple Retail) so that there is a good reason to standardize or buy multiple products from the same vendor.

Three, if anything, the better analogy is Microsoft v. Novell, where Novell, the one time network operating system leader was so envious of Microsoft's desktop position, that they left themselves vulnerable to the innovations around the Internet.

For Google, the obvious vulnerability is AdWords/AdSense, which represents 90%+ of their revenues; where most advertisers in my world are fairly disappointed with the quality of the ad unit, the contextual relevance of its placement (when's the last time you clicked on an AdWord?), the analytics/tracking richness (why does Google Analytics suck relative to all of the innovation in analytics/BI space?), and the general lack of transparency by "open" Google on what's the spread between what it charges/keeps, which sites perform better than others, etc.

Plus, publishers generally gripe about how the AdWords/AdSense model has undermined the value of their content, and the general economic proposition Google provides. Relative to the world that Google replaced, it was a big step forward, to be sure, but the innovation has been pretty weak there, and they seem potentially vulnerable.

Read the full post at O'Reilly by clicking HERE.

Update One: Engadget has written a fairly exhaustive review of the Nexus One, which while very positive, suggests no game changer.

Update Two:  Google touts a revolutionary new distribution model that isn't revolutionary in the US at least.  Dave Pogue of NYT spells out why, while issuing a collective Yawn on the announce. Daring Fireball mocks Andy Rubin's Q&A session with Om Malik, where Rubin instructs that people should focus less on the device (Nexus One) and more on the strategy behind the device.  Walt Mossberg of WSJ gives plenty of love to Nexus One, while stopping short of calling it a game-changer.  Tim O'Reilly offers some sage thoughts on how Apple's and Google's respective DNA lead them to manifesting different types of goodness, concluding that gravity tilts in favor of Android.  And the always readable, thought-provoking, Bill Gurley calls this an apples and oranges discussion, concluding that iPhone is for the high end, Android is for the masses, humorously intoning that the Apple is well-positioned to be the "Apple" of the smartphone market.

Related Posts:

1. Google Android: Inevitability, the Dawn of Mobile and the Missing Leg
2. Open "ish": The meaning of open, according to Google
3. iPhone, the 'Personal' Computer: The Future of the Mobile Web