[These are "raw" and unedited notes.]

Sanjay presented at the DB technology conference last night, and here are our notes from the webcast:

When asked about how it’s been in the last two years, he highlighted progress and reiterated that they are confident that they can be profitable in Q4 as a standalone business.

The focus is on the change in software development and the shift to “Internet style” methods. This is a big deal. Very different model. Much more work to do there. We think that means many more acquisitions.

The key markets are US, China and Latin America. Very strong brand recognition around the world. Intent to purchase is not great. It’s moving up rapidly though. [This is a key metric.]

Notes that they will “have to spend a lot of money to build the brand” which is a bit scary.

Variable data rates will start to create a mid-market for smartphones. Today it’s still all high end. Whether you pay $99 or $199 the data plans are the same and fairly expensive.

Wants to be in Europe by 2011. May make sense to do a deal there.

Motorola is a strong brand in China. Was early and strong there from the early days. Limitations on Google there make Motorola a key Android driver in China.

Lower end markets may be very accessible for Android-based phones in the near future. Probably more of a China, Latin American, South East Asia market. But still very large.

Usage model on tablets is very different than phones. Represents an incremental market. Probably a more natural evolution for a phone company like Motorola than for a computer company. See this as a threat to a computer manufacturers.

Question is how do you address the 20% of the time when the smartphone display and keypad is not enough but you still want to be able to take it with you. [If it is going to be in your pocket it will have to be projector based I guess. You can't put a 10-12 inch screen and a keyboard in a pocket.]

Q4 there is RIM V6, Microsoft Mobile Windows 7 with $400M in marketing behind it – what’s going to happen? Notes HTC has done well with devices.

[I'd be asking some better questions than these. What about the supply chain? MOT tends to be "sold out" at the beginning of a new cycle. Why? By the time supply catches up HTC seems to leapfrog. Doesn't seem like real leadership.]

Single component limiting supply is camera sensor modules! Interesting. Is it OVTI? Thinks that there has been somewhat limited investment in semiconductors. We need more capacity. It’s coming in the next few quarters.

If the iPhone comes to Verizon it could be an issue for Motorola volumes and profits. Nobody knows yet but it’s an issue to be aware of.

Will only deliver Android-based tablets when the experience is compelling. The hope is that is in early 2011.

How do they keep an edge over competition? Better physical design and software and services to make a better user experience. (2M motoblur users today.) Most consumer returns are over software rather than hardware.

60% of homes are HD already. More multi-room DVR equipment is being purchased. Wants to grow more outside the US. Lower cost set-tops that are more IP based is driving margins down a bit.

Might Motorola take advantage of converged devices in the home? Security? Other uses of those big screens? More powerful set top boxes with stronger processors and additional software could change the role of the “set top box” device.

You will need multi gigahertz processors to deliver performance in 2011 with dual and quad-core phones. (!)

In terms of spin off the company will have $3B+ in cash and the flexibility to do what they need to do.

Interesting question on balancing platform advance, compatibility and being able to differentiate.

12,000+ patents at Motorola Mobility is clearly an asset. Means they will generally pay lower royalties and also gives them more freedom.

The marketplace experience has to get a lot better. Unified marketplace may be coming. There are at least a dozen pieces of low-hanging fruit there.

Wants to create a media solution around the home but not clear where they are in terms of delivering it. There could be an ecosystems around the set-top box space as there is around mobile. Interesting idea. No idea where that’s going.

[Disclosure: Motorola shares are part of the R2 model portfolio and the author also has a long position in the stock at the time of this writing.]

Steve Jobs and Michael Dell recently met informally over lunch to have a chat without handlers, press or investment bankers. Dell reached out to Jobs with the idea of the meeting and Steve graciously accepted the invitation. Michael and Steve felt a kinship in that both were founders and pioneers in the technology business who returned to run their respective companies during times of turmoil.

As good fortune would have it, we were sitting at a table nearby and were able to create a rough transcript of their conversation, unbeknownst to either of them. Here’s what we heard.

MD: Hi Steve. Congratulations on all your recent success. Thanks for taking the time to meet and talk.

SJ: My pleasure, Michael. I was happy to see that you stepped back into running Dell. Your replacement was making a real mess of it there.

MD: Yeah, it was a difficult decision since I handpicked my successor, but my name is on the box, after all. There is no question many mistakes were made after my departure as CEO. However, we still have a healthy core business that people don’t really give us credit for and I’ve still got a great deal of energy and experience to bring to the company to get it back to prominence in the industry. I see you’ve done an exemplary job of creating a media halo for Apple since your return.

SJ: Halo?! I wouldn’t call it that! They jumped on us for using DRM in iTunes, for “stealing” the iPhone name from Cisco, for using AT&T as our carrier and for reducing prices too quickly. It’s murder out there!

MD: Come on, Steve, it’s just us here!

SJ (grins): Well okay, so people are in love with Apple again. Who can blame them? Have you tried our machines? (grins some more)

MD: I only use computers that I build myself. That’s how I got here.

SJ: Well then, why are we having lunch?

MD: Steve there’s no question Apple is on a roll. But there’s much more to do and Apple isn’t well positioned everywhere. I’m thinking we might be able to help each other.

SJ: If you’re talking about taking over our hardware business like those geniuses at Gartner Group suggested in 2006 you are out of your mind. And don’t take it the wrong way but I don’t think our stockholders would be enthusiastic about a closer association with Dell.

MD: Steve, I’m talking about much bigger things than making boxes; that’s done. We are at the beginning of a huge investment cycle that will be the result of the shift to cloud computing but also the convergence of the real and virtual world. More Apple stores will be visited by real people in virtual space rather than on 59th Street.

SJ: What do you think the iPhone is about? It will revolutionize how we live, work and play. At least a million people see this already but more don’t yet realize it. The operating system, interface and the massive application base that will emerge will change the way we interact with the online world in our daily life. We’re just scratching the surface with our technology. We’ve got a lot of great ideas and patents in the pipeline. Ten years ago the Blackberry was a specialized niche product. Now many people spend more time with their Blackberry than their computer. We’re going to pass RIM like they are standing still. It’s the key wedge that will separate enterprise users from Microsoft. Once that happens, it’s a free-for-all and we win big.

MD: That’s exactly on the path of where we are going. Apple is a strong position in the mobile and client space. But the heavy lifting is set to go on by the servers, storage and networks that enable very powerful cloud-based services. More real interaction is shifting to virtual worlds. The compute power and software required for this is an immense business opportunity.

SJ: We sell servers and online services! And we understand how to deliver technology and entertainment services like iTunes, AppleTV and MobileMe. Anyway, isn’t Google going to handle all that? Why would I want to compete with them?

MD: You may not have a choice Steve. You’re going to find your market limited if you allow them to own cloud-based technology services. Besides they clearly have their own vision of the mobile internet and are trying to drive Android into the picture. Not to mention the fact that after years of effort you’re still struggling with MobileMe.

SJ: My staff gives me briefings on all this stuff every day. At least you didn’t bring up Adobe; those guys bug me. We’re doing extremely well, the iPhone is a Trojan horse and we have a great pipeline of new products. What exactly are you talking about doing? (a little exasperated)

MD: It’s still early days in these markets Steve. Although the spotlight today is on the consumer space, the wave of enterprise adoption is going to be huge. Google still has a small footprint in the enterprise. We are big there in both systems and storage. You are largely absent from the high end gaming market but Dell is there. While Microsoft, Sony and Nintendo fight for the consumer market in gaming we can own the next generation of interfaces, interactivity and applications in the enterprise.

SJ: We’re making progress in the enterprise. Some very large companies are starting to roll out the iPhone now. That’s the first domino to fall and then we can infiltrate the base.

MD: Surely but too slowly. Industry data suggests that an amazing 25% of enterprises want to incorporate Apple hardware but only 8% have plans to do so. That’s a lot to leave on the table.

SJ: But we will be getting them faster than they think. Those numbers keep moving up. Of course, we’d love to have the full 25% that want to have Apple be able to do it. What’s stopping them?

MD: These guys aren’t buying computers to organize their music libraries and photo albums. (smiles)

SJ: Very funny. We make very powerful systems and do have large enterprises running on our infrastructure. Many of the creative industries have long had us as their standard.

MD: Steve, that’s true but I’m talking about companies like Federal Express, Citibank, GE and the rest of the global 5000. Many are installing the most advanced computing infrastructure in the world. But they need suppliers who fit with their business practices and operating model; delivery, support, escalation procedures, interoperability, management and a raft of things that require a focused approach. It’s something that we know well and rank near the top of the field.

SJ: Yeah okay so we can be more corporate. We know that. It’s not like we aren’t moving in that direction. We prefer to do it with radical new offerings like than iPhone rather than playing golf with executives.

MD: These days your golf game doesn’t really enter into it. Many of the big deals in the space are even done via auction. It’s a tough business but we know how to do it as well if not better than most of the players. In addition we’ve been investing heavily in technology that can run the modern interfaces and applications that you see in games today but will increasingly be a common feature in the enterprise. At the same time we are expanding into the SaaS and social computing space in the IT space.

SJ: I appreciate your prowess in some of these related areas but it doesn’t translate into why we should be working together. We have been working on quite a bit of this ourselves and you know there are other companies out there like IBM and Hewlett Packard that you may have heard of. (smiles)

MD: We overlap in some key areas, more so than we did in 2006 now that Apple is on Intel. We also complement each other very well. There’s a Yin and Yang here that could make up a potent whole.

SJ: I’m not Yin, and sure as hell no Yang. I hate all that corporate enterprise crap. Reminds me of guys like John Sculley. (winces, then drinks some water as if to wash a bad taste out of his mouth)

MD: Dell could help integrate Apple into the next-generation of enterprise infrastructure. It’s going to be a big wave of investment that will embrace not just service-based or cloud computing but also virtual reality. It’s going to have a dramatic effect on business. As partners we could do way more, much faster than companies like HP, IBM or Cisco even though they have a lead in some areas.

SJ: Yeah, I’m still listening.

MD: We’d have to work out the details, but my idea is to become the enterprise arm of your business. We would work closely with companies who want to incorporate Apple to provide the pieces they need. We’d also incorporate Apple technologies into our high-performance and corporate cloud computing solutions. And we would both work together to pioneer virtual stores in places like Second Life.

SJ: Okay so tell me Michael, what’s in it for Dell? And why do you think Apple should be interested?

MD: First of all we’d be selling your great computers. (smiles slightly sardonically) But seriously it would serve to further differentiate us from traditional enterprise vendors like HP, IBM or Sun. Secondly it gives us a way to participate more in the mobile internet space which is where most of the growth on the client side is going to be. I can certainly see the disruptive power of the iPhone and how it could well eclipse other offerings, but to do so it will need to do well in the back office of large companies, not just in the hands of a user. Lastly I think we are both leaders in what we do best but are facing some serious competition from the old guard. Together we can shake things up and bring them down more quickly.

SJ: Interesting. Go on.

MD: And it’s no secret that virtualization is now an enterprise strategy. Apple is now on Intel chips which means that the Windows OS and other components can run easily on any Apple HW. Of course I’d also like to get Apple SW components integrated on Dell HW. Doing so would mean a much bigger opportunity for Apple SW inside the cloud.

SJ: Alright, alright I can see that we may have something here.

MD: We can let Sony, Microsoft and Nintendo have the game console in the home but we can’t leave the business market to them. As more activity moves online into virtual worlds we need to be there to capitalize. The servers, storage, services and software should all be Apple/Dell.

SJ: You’ve got our names in the right order there. (smiles) We actually have some work and patents in the immersive virtual space around shopping that we picked up years ago. But until now there hasn’t been much of a market. We launched AppleTV because at least the video market is real.

MD: These things grow slowly for a long time and then all of a sudden they’re huge. We’re seeing real movement now and there are signs of what the future world is going to be. Look at the amazing success of devices like the Wii, the growth of social computing and online communities. These elements are coming together now. IBM and Cisco are already very active and investing here.

SJ: It would be a shame to let a big opportunity like this slide by.

MD: Let’s consolidate our individual strengths into a powerhouse. Apple is the only player who has major positions and assets in software, the mobile internet and online entertainment. Dell brings the enterprise-class capability along with scale, storage solutions, online services and immersive computing. We can exploit the movement to virtualization and the cloud to marginalize the impact of competitors like Microsoft, Research in Motion, Hewlett Packard and IBM. Maybe we will also be able to keep the great Google at bay.

SJ: For a guy who still knows how to use a soldering iron you have some good ideas. (smiles)

MD: We’ve both come a long way Steve. We’ve also both got much farther to go. (smiles back)

[This interview is purely fictional and has been produced purely for entertainment purposes. Any resemblence to an actual conversation between Steve Jobs and Michael Dell in the past or the future is purely coincidental.]

Outside of the dry statistics concerning the ongoing consolidation in the software market is our own readership and contact network.   Research 2.0 has always focused on the position and influence of clients and readers rather than sheer numbers.  The number of CEO research clients has been an important aspect to our business model.

We always loose some CEO clients to acquisition but lately the pace seems to have quickened and moved to smaller companies as well.  At first we lost Alfred Chuang as BEA got absorbed into Oracle and then Bernard Liautaud as Business Objects became part of SAP. 

Then today we saw ILOG get acquired by IBM after years of innovative management by Pierre Haren.  Just a week or two ago Datallegro was acquired by Microsoft and Stuart Frost dropped from our CEO list as well.

Fortunately we have picked up some new CEO reader/clients and our numbers around the number of technology CEO and institutional PM readers that we have direct input to has never been higher either in terms of numbers or market capitalization.

Still the velocity of change seems to be ever increasing and it further influences are thinking on approach and business model.   We also know that many of our prior-CEO friends will again be at the helm of even more interesting start-up companies.

One in the SaaS/Data space is Good Data which has just raised a significant round of financing and his entering very early stages of technology demonstration.  The company is led by CEO Roman Stanek who successfully piloted prior startups like NetBeans and Systinet.

As always the ratio of "what’s new and interesting" versus "what’s old and boring" is increasing every day at Research 2.0.  We all need to get used to shorter cycles.

Institutional investors are mostly not tuned into the Google zeitgeist even though they own major positions.  As possibly the most over-followed company on the planet Google investors will hear about every little ripple of information.

The weirdness stems from the Google culture where engineers can spend time doing pet projects and see the show up as offerings in Google Labs or even as "beta" products in the Google portfolio.

When Google comes out with something like Lively it gets looked at and generates not only puzzled looks but some concerned questions of whether Google has "lost its way."  The fact is that Google throws quiet a bit at the wall to see if it sticks.  Plenty doesn’t make the cut but none (or very very few) are like Microsoft Vista or Adobe Creative Suite.  For Google and other SaaS styled companies it’s not about product cycles.  New products, particularly strategic ones do have a role to play and bear watching closely.

The problem is that many mainstream investors have a hard time sorting out the important aspects of what’s going on at Google from the unimportant ones.  Offsetting the difficulty in separating the wheat from the chaff is a blissfully short memory that generally means any Google weak launches or eventual failures are forgotten quickly.

Google remains an essential portfolio holding as they are perhaps the best technology architecture for modern computing although they occasionally put out some stinkers.  (Requires Windows XP and Internet Explorer?!)

Developing a good feel for Google as an investment requires an ability to make more "doesn’t matter" decisions than we have seen with any technology company in the past.

There has been another small dust up of interest in eBay as the shares look cheap and some of their business opportunities, like PayPal, are mouth-watering.

Company management is making an effort to sell the story and Street analysts are taking their numbers up on the stocks.  Listings are more steady and the stock has languished. 

Giving it a fresh look this morning we could certainly see one thing.   If senior management were working in the kitchen they could make any dish taste like broccoli.  The recent presentations are available here but they come across as a dull corporate overview of three, basically separate businesses. 

Putting a presentation together for investors is a golden opportunity.  Even a mediocre company can often put something together which is compelling.  But eBay, with all their market position, cash flow generation, and opportunity delivers one that makes you start checking your email instead of paying attention.  Some may say that it’s "just a presentation" but we disagree. It is the essence of the understanding management has of their value proposition and their ability to mobilize interest, resource, investors, employees and customers.   It’s also something that a large chunk of time is spent on.  If one goes to an investor conference to present the company story the idea is generally to make it as engaging and compelling as possible. 

Over the years we have probably flicked through a few thousand corporate presentations and these are pretty dull.  But the opportunities for a company like eBay should be electrifying. Amazon certainly can demonstrate that many things are possible.  Like eBay Amazon has their share of failed offerings but the overall projection of the company is innovation, excitement and turning it into money.  We should come away with the same perception regarding eBay.

Given the market and the company it probably can only be one thing the management in general and Meg Whitman in particular.  We were unimpressed with Ms. Whitman when we met her early on when she took over at eBay. Our thoughts at the time were along the lines of "what a lucky break for her."  (The CEO record is still held by Eric Schmidt for moving from Novell to Google.)

As she nears the 10-year mark in the job some, notably Henry Blodget, are calling for her to step aside and turn over the reins. We have never owned eBay and are still not inclined given current management.  But if a change at the top occurred that was encouraging we would take another fresh look.

– Kris Tuttle

Tags: EBAY, Management, IR