And while it was something of a publicity stunt to put a sophisticated and specialized IBM computer in people’s living rooms, the fact remains that Watson is, well, a pretty sophisticated and specialized computer.

Since schooling humanity at “Jeopardy” — which was the subject of a book — Watson went on to get a real job working for the health insurance company Wellpoint.

Now IBM has decided it is ready to tackle something a little more involved. Watson is about to go to medical school, and will even study a specialty: Oncology. Sometime this year, after studying and even taking exams to prove what it has learned, Watson will be assigned to assist human physicians in the treatment of breast, lung and colon cancer.

If this seems like kind of a big deal, it is. Watson won’t be the first computer to serve as a reference tool, helping doctors do their jobs. But then there has never been a computer quite like Watson, which can learn so readily from natural language — and play TV game shows and win.

Last week, I talked with Manoj Saxena, general manager of the Watson program at IBM, to talk about what Watson will — and won’t — be doing in helping doctors treat humans with cancer, and what that might mean for the future of medicine.

My first question was about what Watson has been doing since its big win:

AllThingsD: So, Manoj, last I knew, Watson had been working for Wellpoint, which is a large health insurer. What exactly has it been doing?

Saxena: Let me bring you up to speed. In August, we announced the first commercial relationship of Watson with Wellpoint, one of the nation’s largest health insurers. They have 35 million customers in 14 different states. One out of nine Americans are covered by them. The first area was around utilization or approval. Let’s say you or I call up a clinic or hospital saying we have flu-like symptoms. Where Watson would come in is on the approval process, saying we’re covered. Then Watson looks at the history that the hospital has in its records. It might say that it’s early December, and I come in at this time every year saying the same thing; and the last two times it was a ragweed allergy, not the flu. And the medical journals say there’s a connection between ragweed and fever that looks like the flu. And by the way, the newspaper says there was an outbreak of ragweed in Central Texas. And then, in addition to treating for flu, also look for allergies. So Watson is considering the medical record; the patient history that the insurance company has; and third, the medical journal and news information about what may be causing a certain thing. So that’s what it’s doing with Wellpoint so far.

How then do you make the pivot to working with cancer?

We’ve installed another adviser — these solutions are called Watson Advisers. This one is called Watson Oncology Adviser, and this is a big one. As you may remember, medical information is doubling every five years. Doctors tell us that they are spending only five hours per month going through new information in medical literature. On one hand, you have all this medical information coming out. We’ve decided to focus first on breast, lung and colon cancers as the three to apply Watson to. And Cedars-Sinai has partnered with Wellpoint to help come up with the right cancer solutions. And the point is to build the expertise within Watson to help treat cancer.

So Watson won’t be directly involved with the treatment, but rather to build up its own knowledge base?

Watson doesn’t make the decisions. It’s a physician’s assistant. But before it becomes that, it has a lot to learn. Out of the box, Watson has the knowledge of a first-year medical resident. That is where it’s at today. With Cedars-Sinai and Wellpoint, we’re going to teach it all about cancer during the next six months. We’re going to show it actual cases that were solved in the past. And over time, we’ll tweak and teach it, using things we already know.

Is there a human analog to this process?

A good human analog is how we learn. As children, our teachers and parents sit with us and ask questions to understand how well we learned from what we read. And then, later, we learn by doing. This will address the first two phases. Watson will read on its own, and then oncologists are going to ask questions of Watson to understand how well he has learned and then understood. And then once we feel comfortable that it has learned enough, then we will let it begin working as a physician’s assistant, and then it will go from there.

Since, in the end, there are humans being treated, do you have to get any kind of regulatory approval to do this?

No. It’s very similar to how doctors refer to medical journals. Doctors might turn to Google or something like that to look up info from their medical journals. That doesn’t require any approvals. Someone else asked me what happens if Watson suggests a particular treatment, the doctor accepts it, and the patient dies. Or what happens when Watson suggests something and the doctor doesn’t take his advice. Our view is that it’s the same as looking up textbooks and information. The physician is the one who makes the final decision.

And that will always be the case?

That will always be the case, yes. We are far, far away from computers doing medical treatments. I don’t even see it in the forseeable future.

How do you actually go about feeding information to Watson? How does it learn?

It’s a good question. There are four different types of information that’s fed into Watson. At the base of the pyramid, it’s general information like Wikipedia and Google and general information like that. And a lot of that is general knowledge; and a lot of that is already in place, because we needed that to play Jeopardy! Then the second layer is the medical textbooks and medical journals and vocabularies, and those are fed in as natural-language information. It can be any scanned information or text information because Watson understands natural language. So that information is the second part. It can process text and tables, but it can’t process pictures and videos, but we’re working on that. And then there’s the actual test cases, the information on people with 30 years of cancer treatment history. We feed that into what are called “answer keys.” The fourth layer are new domain-specific information models that are specific protocols and procedures that the health insurance companies will want to feed into Watson.

Where do you draw the line? There is an accepted mainstream body of knowledge and accepted treatments for different cancers, and then there are newer things that may be controversial for some reason.

The way we approach it is in two parts. One is the body of knowledge that is already known. But it does not get applied and in context, and often doctors don’t have access to it in context. There are things like cancer treatment guidelines and well-understood things about radiation and effects on different cancers. Call them the known treatment pathways. The second are the emerging treatment pathways, particularly in the area of genomics. That is the one that can get added on. It’s the one our partners are looking at. In about a decade, most cancer treatments are going to shift to genomics-based treatments, rather than chemotherapy-based treatments. There’s a deluge of information about converting the knowledge about DNA into biological knowledge, and then converting that into treatment knowledge. That is the second part of what we’ll be doing.

Do you have other diseases that you think Watson can help treat in the future?

Yes. Diabetes and cardiology, heart problems are next on the horizon. We’ll also be applying Watson in financial services.

Ahead of the dinner, Anderson stopped by my office to let me have a peek at his 10 predictions, and we talked them over a bit. All 10 are below, along with some comments from Anderson that emerged from our conversation.

Before diving into the predictions, Anderson tells me there is a grand theme that unifies them all: “Integrating everything.”

What does that mean? “It means a whole lot of stuff that needs to be integrated. We don’t need anything new at all. There’s so much work that needs to be done with the existing tool sets. Steve Jobs didn’t really invent anything at all. But he was great at integrating things into a product. There’s a lot more of that work to do. We have to do it in the phone world and the TV world and the health care world. We have lots of devices and lots of chips and lots of operating systems and lots of content. The bigger question is, how do human beings use it all efficiently?”

As an example, he cites the collaboration between Nuance, the speech software company, and IBM, bringing the Watson computer of “Jeopardy” fame into the area of health care. “For the first time, the idea of evidence-based medicine won’t just be in a magazine article,” Anderson says. “A doctor will be able to pick up his phone and describe four symptoms, and find out what the likely diagnosis is, what the indications are. It’s fantastic.”

So here are those 10 predictions, with additional comments from Anderson:

1. TV becomes the new center of gravity in the tech universe. All the other devices find their niches in the TV galaxy. Microsoft’s attempt to integrate Kinect into TV is a strong if qualified success. Smart phone-TV integration software becomes a new category. Pad-TV integration becomes common.

“Apple will hustle to launch the next version of Apple TV, and it will be a roaring success and be seen as Tim Cook’s first great product success. But what it really will be is Steve’s last product.”

2. 2012 will see tectonic shifts in phone markets. “Nokia will fail to come back, which is pretty clear to everyone except the people in Finland.” Samsung, Anderson says, will retain its spot as the new global leader in mobile phones by volume, and will keep this crown despite the debut of Microsoft’s Windows Phone 7.

Meanwhile, Anderson says, Google will lose control over the Android operating system, mainly because unlicensed versions of Android will multiply in type and in installed base, especially in Asian countries. “It’s already a balkanized environment. Now Google loses control of the technology entirely. China is already running an unlicensed version of Android, and I think there will be more of that.”

Finally, the smartphone will finally emerge as the dominant category of wireless phone. “Why would you have anything else? And why would sellers of content and services want you to?” he says. “It doesn’t matter if you’re in a rich country or a poor country. This stuff is cheap.”

3. Clouds are for consumers, and for start-ups. Even as a large number of big companies move pilot projects onto external clouds, it will become clear that the real trend is for enterprise to stay away from clouds in all key areas, for reasons of both security and reliability.

“The cloud guys hate this because they want to sell to enterprises,” Anderson says. “But the security issues are becoming really intense. If you’re a CIO, it’s a terrible environment, and you’re a target, for sure, especially if you’re a company with a lot of intellectual property. I’m not implying that things like SAAS (software as a service) aren’t a big trend. But no one is going to put their valuable IP on the cloud.”

4. Security splits the tech world in two, finally getting attention from CEOs. Companies with real IP start to realize they have to “go big or go home” with their security response, and their spending on protecting their “crown jewels” rises dramatically.

5. Siri stuns the world. Siri, on Apple’s iPhone 4S, has sounded the arrival of Internet personal assistants, and the world will spend this year marveling at what Siri and its rivals can and cannot do — and what they can learn to do.

“I think we’ll see a bunch of these things,” Anderson says. “Siri will get much better. It will learn how you learn. We’ve never seen people have long-term relationships with machines before, but it will be a long-term relationship, and she will remember everything, but make good use of it. She will know you learn better by seeing than hearing, or that it takes three times to tell you something. All those things that you have to program today should be learnable. None of that has been done yet. That creates a real friendship. And I think we’re going to start seeing personal assistants not just for everyday life, but for professions like medicine or car repair. Instead of just having Siri be everything, there will be many Siris for different contexts.”

6. We enter the amazing world of Dave and HAL, as voice recognition comes of age. From hospital to car, mobile to home, Kinect to Siri, exercise to play, work to entertainment, remote control to direct action, from Microsoft to Apple, from Tellme to Nuance — the time has come for computers and humans to talk to each other. With lots of funny stories, big bloopers and amazing breakthroughs, humanity at the end of 2012 will be talking to machines in a normal voice, and it will not seem unusual, nor be the cause of unending frustration.

“The voice-recognition part is almost trivial,” Anderson says. “The important part is context-sensitive understanding. It used to be that all the researchers at Carnegie Mellon used to think that all you needed was more computing horsepower to do better at voice. It turned out that was wrong. It was right for a little while, but the real problem is context. And so, if you can build up that database where you can search it contextually for what to expect, that is where you get all the mileage.”

7. E-readers prosper, but pads continue to dominate what Anderson calls the “carry-along” market. Pads and tablets will come down in price and get closer to prices of e-readers. Meanwhile, Anderson says, Amazon’s Fire will move upmarket and evolve into a full-fledged tablet.

“If you look at the specs on the Fire, it’s a tablet, but it’s hobbled,” Anderson says. “So I think that this is part of the whole strategy: Come in and sell at a low price, and then later unveil a more complete tablet. Apple will stay ahead, though. A lot of people are asking me if Amazon will catch Apple, and the answer is no. The way it’s configured right now, there’s no way the Fire will catch up with the iPad.”

8. The consumption world explodes. Get ready for new devices, new content, new bundles, new connection techniques, new distribution channels, new aggregators, new tablets, new phones, new players, new self-published authors, new garage bands, new consumption models riding on social networks. There is nothing but high energy in the content consumer market. People are now ready to spend subscription money, and the publisher response will be huge. “It’s going to be a huge melee of stuff,” Anderson says. “We’ll invent more stuff to consume, and it will be very hard to figure out who the players are from week to week, and how they’re doing. They may not even know themselves.”

9. Governments and corporations focus on intellectual property as though it were their most prized asset. It is. This new global understanding leads to a reevaluation regarding giving critical IP away for nothing versus protecting it. The age of what Anderson calls “IP naïveté” is over, and the question of proper IP valuation is here.

What is IP naïveté? “When Jeff Immelt stood on the steps of the White House the day after he was named jobs czar, and handed the plans for GE’s most important jet-engine project to Hu Jintao in order to get the permission to be allowed to bid on maybe selling engines to China — that’s IP naïveté,” Anderson says. “Thinking that’s not going to come back and show up for sale in Houston from some Chinese company in about six months is IP naïveté.”

During 2012, he says, companies and countries will start valuing their intellectual property not for its replacement value, but for figures that are magnitudes larger. State-sponsored IP theft will shift from being considered a nuisance and more along the lines of an act of aggression.

10. Amazon gets it all. Between outdoing Wal-Mart online, to beating the booksellers and delivering groceries, and making new inroads in video streaming, Amazon will prove that one company can indeed have it all. Strong Kindle and Fire sales will only be icing on the cake.

So, why didn’t it win the hit-driven games company?

That’s a very good question.

Yesterday, Electronic Arts announced it purchased PopCap for $650 million in cash and $100 million in stock. The deal could soar to as much as $1.3 billion if PopCap hits some very aggressive revenue goals.

But, according to one source, Zynga’s offer exceeded that, and was worth $1 billion in cash. Another source added that EA’s offer only appeared greater because more cash was delivered upfront, although both bids were similar in nature over the long term.

A Zynga spokeswoman — as the company usually does on even the most minor and mundane of queries — declined to comment about its involvement in the PopCap bidding.

But, as of March 2011, according to documents it filed related to its IPO, Zynga had nearly $1 billion in cash and is expected to raise up to $1 billion in its public offering.

With all that money, as well as its own stock, Zynga clearly could have come up with sufficient funds to purchase PopCap, which is known for such games as Bejeweled, Plants vs. Zombies and Peggle.

And, bidding that much seems to make some sense, too.

That’s because PopCap would have given Zynga the scale and scope that it is looking for on other platforms, as well as a strong revenue stream, profits, a dominant headquarters in Seattle, which it has been looking for, and even a position in Asia, where Zynga has struggled and PopCap has been doing well.

More importantly, as it seeks an IPO, one of Zynga’s biggest risk factors is its dependence on Facebook, which takes a 30 percent cut of its revenues.

PopCap would have given Zynga some of the distribution diversity it needs, with its games installed and played more than 150 million times on a diverse range of non-Facebook platforms, including RenRen, Google, iPhone, iPad and Android. In 2010, about 80 percent of PopCap’s revenues came from these platforms.

It is no wonder, then, that Zynga was interested. The bidding represented its most ambitious yet, sources said.

In fact, the failure of Zynga to purchase PopCap calls into question why the San Francisco company, which is the darling of Wall Street and the largest social games company, has only scooped up small studios around the world and hasn’t land something as prominent as PopCap.

Just five days ago, in fact, Zynga announced the acquisition of the Toronto-based Five Mobile, which was its 15th acquisition in 13 months. Terms of the deal were not disclosed, including the size of the team.

But, like most of its other purchases, it was relatively small.

While Zynga would not talk about that, both EA’s CEO John Riccitiello and PopCap’s CEO Dave Roberts were willing to say that the bidding process was competitive.

Roberts said it was “a fully competitive process that took me by surprise.”

Riccitiello said in recent months PopCap has received bids from other game companies.

“Ultimately, PopCap chose EA. Their leadership team tells us that in the end, the decision swung on their recognition of our culture — the respect that EA shows for games and the teams that create them,” he wrote in a letter to employees.

One source said that there were several offers, some verbal and some via multiple written offers.

But, in the end, EA won, which one source describes as “a game-changer for EA.”

Ricitiello agreed. He told me that in a matter of months that he expects PopCap and EA’s combined traffic on Facebook to hit 20 million monthly users.

While that’s very far from Zynga’s dominant position, he said he wants to get EA within “punching distance.”

It’s still a reach, even with PopCap. That’s why to get to jab at Zynga, Riccitiello was willing to commit more than an eighth of the company’s market cap toward the deal.

So far, Wall Street has reacted negatively to the news. EA’s stock dropped 22 cents after the deal was announced in after-hours trading to close at $24.17. Today, it is now trading at around $23.48 a share.

The algorithm contest, the largest of its kind so far, is part of a trend toward using such prizes to help find the best answers to complicated data-analysis questions.

Data-mining competitions have been around for a while–most notably the $1 million Netflix Inc. prize awarded in 2009 for a model to better predict what movies people would like. But the $3 million health prize, which is sponsored by California managed-care company Heritage Provider Network Inc., raises the stakes. And the start-up handling the competition, Kaggle Pty. Ltd., is aiming to build a business by conducting even more.

Read the rest of this post on the original site

Nuance Communications, a software company best known for its Dragon Naturally Speaking line of speech-recognition software, today announced a research agreement with IBM to explore ways to use the Watson system and its deep analytics technology in the health care industry.

The agreement calls for the companies to combine IBM’s Deep Question Answering, Natural Language Processing and Machine Learning capabilities with Nuance’s speech recognition and Clinical Language Understanding, which is basically speech recognition tuned to the unique needs of doctors and other health care pros. They expect products resulting from the research to hit the market within two years. Researchers at Columbia University Medical Center and the University of Maryland School of Medicine are also getting involved.

The hope is that Watson’s ability to analyze the meaning and context of spoken language and quickly sort through the information in it to find precise answers can help humans arrive at decisions faster, and arrive at answers they might not have otherwise thought of. A doctor mulling a patient’s diagnosis could use Watson to quickly check medical literature and help evaluate a decision.

Nuance has a huge health care segment, accounting for a little less than half its sales. The division includes Dragon Medical–desktop software for doctors–and eScription, which docs use to phone in comments that are converted to text that’s entered into medical records. It’s also been building voice-recognition apps for Apple’s iPhone, both for consumers and for doctors. IBM and Nuance will jointly invest in the research project, and IBM has licensed access to the Watson technology to Nuance.

Nuance itself is an interesting company. Spun out of Xerox in 1999, it started out in the scanning and text-recognition software business, and then in 2001 scooped up the assets of the bankrupt Belgian outfit Lernout and Hauspie using a combination of debt and cash raised in a private placement from the state of Wisconsin’s investment board. It turned out that speech recognition’s time had come, and as sales of Dragon improved, it proceeded to roll up scores of other companies in the speech- and text-recognition game, including one founded by Alexander Graham Bell himself. Sales were north of a $1 billion for the first time in the year ended September 2010, and its shares have improved considerably over the last year, though given its size, the stock often moves on takeover rumors.

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“Computers are really here to make us happier,” Schmidt said, promising these devices will give people more time with friends and family, not less.

Schmidt, who gave up the CEO role last month, said that nearly all devices will get more interesting when they connect to the Internet. A music player that doesn’t connect to the network isn’t very interesting, he said, perhaps opening the door to the announcement of a long-talked-about, cloud-based Google music service.

The talk is just geting started. Mobilized got a really good seat in the front row, just two seats over from Andy Rubin, and has live updates below.

5:59 pm: Schmidt talking about things phones should be able to do, such as figure out better traffic routes and bridge language barriers. “You really can do magic,” he says, pointing to Google Translate, which lets you speak one language and have a language you don’t speak returned. “That’s done in a twentieth of a second or what have you,” he says.

6:01 pm: Brings out colleague to show an application on “an interesting new device.”

6:03 pm: The device is the Motorola Xoom tablet and the program is “Movie Studio,” an app built from the ground up for creating and editing movies on tablets.

He has a few images and videos from around Barcelona.

He creates a movie onstage and shows how it can easily be shared on YouTube. (This looks like iMovie and Windows Live Movie Maker so far–both of which also let you edit movies and share directly to YouTube.)

6:07 pm: Upload goes slowly, though, as Schmidt notes it is the problem of doing a demo at a mobile network convention where everyone is hammering the networks.

6:09 pm: The goal of many of Google’s products, Schmidt says, is to do tasks quickly so that people can get back to being human. “We ultimately believe that speed matters,” Schmidt says. Google Instant, he says, can save two to five seconds per search.

Search is also becoming more personal. With permission, users can get more information. Next up, he says, is autonomous search as information comes up as one walks or drives, and is driven by location.

“That’s just the beginning of a large number of new apps that use that infrastructure to make a big difference,” Schmidt says.

Schmidt says how much info to share will be up to the user, but those that opt in can get much richer results.

There’s also a trend, he says, to returning more structured data, such as travel.

6:12 pm: Stat time: 120 million people using Chrome, up three times from a year ago.

YouTube revenue doubled in 2010. Now just being able to monetize professional content at a rate that starts to make sense for content partners.

6:18 pm: Computer science can help all kinds of things, Schmidt says. With phones and tablets, “You never forget everything” which is precisely what phones are good at.

If you choose, you can remember the hotels you stayed in and the people you met, etc., “Humans forget,” he says.

Computers are also preventing people from ever getting lost. When I was a boy growing up in Europe “I was always lost,” Schmidt says.

Translation may not prevent war, but should at a minimum increase dialogue, Schmidt says.

6:18 pm: “Even better you are never lonely,” he sats, because computers can point you to nearby friends or connect you to distant ones.

You are never bored, Schmidt says. You are never out of ideas because we can always suggest what you can do next.

Other changes, include the self-driving cars that Google has been working on.

“It’s obvious that cars should drive (themselves),” he says, adding that there will be a “kill switch” in case there are bugs. And it will take time, he says.

“This is coming. It will be decades, I suspect–not a year.”

He also says these innovations will scale to the masses.

“It’s a future for the masses, not the elites,” he says.

6:21 pm: With that, on to Q&A.

6:23 pm: Talking about targeted broadcast quality ads as next frontier.

“Who wants to see an ad that is not relavent to them,” Schmidt says. And that leads to revenue, which Schmidt points out is the whole point of advertising in the first place.

6:24 pm: Question on Android fragmentation saying there is frustration among phone makers and developers.

“We hear some of this,” Schmidt says. “You’ve stated the problem more strongly than I would have, but I will take that as feedback.”

6:26 pm: Question about role of Google in financial services.

Schmidt quips that Larry Page and Sergey Brin periodically suggest that Google issue Google Bucks as its own currency, but Schmidt says he always points out the regulatory issues.

On a serious front, he talks about the power of near-field communications as a means to turn real-world transactions into electronic ones.

“In that are very large businesses,” he says.

(Google built NFC into its Nexus S device.)

6:29 pm: Are you interested in Twitter?

“We love Twitter and I like to tweet,” Schmidt says, eliciting laughter from the crowd.

6:31 pm: Why so many operating systems?

Sometimes these things occur because the teams move so quickly, Schmidt says.

People have been asking when Gingerbread and Honeycomb will come together. Schmidt: You can imagine the follow-on release will start with an “I” and be named after a desert and will combine the best of both, Schmidt says.

These releases occur on roughly a six-month cycle, Schmidt says.

6:33 pm: On Chrome OS, Schmidt says there will be an opportunity to merge that with Android over time, but better to wait for the operating systems to mature and a natural time than to push them together too soon.

6:34 pm: On HTML5, Schmidt imagines that some number of years from now, most apps–mobile and desktop–will be running on HTML5.

6:39 pm: Question on Google’s role in health care.

Phone should be able to, at a minimum, carry medical info. Several percent of queries on Google are health-related.

6:42 pm: Is Facebook with its “Like” button a main competitor?

Today our main competitor is Microsoft. Microsoft has a good product in Bing, he says.

“There’s a couple cases where it might be too good. We discussed that in a blog post.”

They have the cash, the scale and the reach to do good and amazing things.

6:44 pm: On Nokia-Microsoft partnership:

“We would have loved it had they chosen Android,” Schmidt says. “That offer remains open.”

Android would have been a good choice for Nokia, he says.

‘We certainly tried” to get them, he says.

6:46 pm: How do you approach the fact that Android going higher and lower in the market?

Schmidt says that the company tries to show the best in its Nexus line, while putting minimum specifications out there to set the bar for what developers can expect.

6:47 pm: Question on why Google is not more broadly used in the education market?

Schmidt says the company has funded a number of YouTube professors. “We’ve not yet come up with the killer [education] app,” he says.

6:49 pm: Asked about Google’s interest in the PC operating system market, Schmidt says that Google’s answer is Chrome OS. Sometime in the spring you will see a series of PC makers come out with Chrome OS devices. However, he adds they won’t run current PC apps, such as Windows apps.

“It does not run any of your current PC applications so you might think about it,” Schmidt said. That said, he adds there are, in most cases, cloud-based options that are roughly equivalent.

6:52 pm: With that, Schmidt wraps up.

Often they’ll turn to public cloud providers like Amazon or Google or Microsoft. Those are the three names that usually get mentioned in the same breath whenever enterprise cloud services come up. But what about IT giant IBM? It turns out it’s a significant player in the cloud game, offering both public and private cloud services. Last week I sat down with Ric Telford, IBM’s VP of Cloud Services to talk about how Big Blue’s cloud business is going and what its priorities are in the year just started.

NewEnterprise: Ric, let’s start at the top. Tell me how IBM sees the cloud business right now?

Telford: Initially the cloud is all about doing more with less. Suddenly you could deliver the same IT services for less. Fast-forward to today, and it’s not all about saving money. People are realizing they can do things they never could before with the cloud. I was recently met with a small aircraft engineering company, and the guy running it described how he competes with much larger companies for defense contracts. It used to be that doing all the modeling and simulations he needed required buying hardware and software and running it all on premise. Now he can go out to the cloud, pay for what he uses and be done with it. He can now compete for contracts he wouldn’t have been able to go after before. And we’re seeing a lot of examples like that in industry after industry.

Someone said to me the other day that the cloud is going to have to have all the parts of the mainframe. Do you agree with that?

There’s a lot of parallels between the cloud and the mainframe. IBM’s view is that we have a single-reference architecture. It’s the same whether we’re delivering the service or if we build it for you. We did a deal recently with France Telecom where they are going to be a cloud services provider to their clients. They already have the network connections. But they’re not a cloud company. So they’re using IBM’s cloud architecture to give them all the pieces in one easy-to-consume bite. So we have that architecture and we use the same blueprint in all the various permutations of the cloud. For some people it’s confusing, but for us it’s all the same whether you want to have it inside your firewall or outside.

Which do your customers tend to prefer–a private cloud or a public cloud?

We do surveys every year and right now we’re seeing about a two-to-one preference for private versus public. About 60 to 70 percent of respondents say they’re working on a private cloud, and about 30 to 40 say they’re working on the public cloud. To us it’s all the same. We offer a core set of services from the IBM cloud–development, test, compute, storage, collaborations, desktop. But we can also build the same thing inside your firewall.

How big is your public cloud business?

I can’t give you a revenue figure because different business units take advantage of it to deliver different things. We just opened up a delivery center in Research Triangle Park. It’s probably one of the most advanced data centers in the world. And now we’re rolling out a model that we are cloning around the world. We just opened one in Germany and another in Canada. And then we’ll just keep adding them. We manage about eight million square feet of data centers around the world.

How does a company typically get started with the cloud?

Usually I suggest they start with their develop-and-test operations. It’s usually not mission-critical, and there’s usually a lot of hardware that’s not being used. Usually that’s the group that buys hardware long before it’s needed and it ends up sitting idle 90 percent of the time. At IBM we put our whole research division on the cloud because they were the worst hardware hoarders, putting servers under desks and whatnot. They knew that if they needed a new server it would take weeks to get it. Now they go out to the research and compute cloud, and the services they need are usually ready to use in minutes or at most an hour. It just makes a huge difference in people’s ability to get going.

So what you are your priorities for this year?

One of the big things we started seeing last year was an uptake of cloud delivery in industry-specific ways. We’re working not just on the generic things like email and collaboration, but on the specific applications that are used in various industries. Health care, banking and government are a few that have complicated regulatory needs that vary state by state and country by country, and we have the deep understanding required to work with them. We also built a private cloud to help the 29 countries involved in NATO share data on logistics and troop deployments. We also have an initiative with the consumer electronics industry. Utilities is another, and it gets tied in with our Smarter Planet initiatives.

Will IBM be making deals in the cloud this year?

IBM will make a few billion in acquisitions. Cloud is one of the four key growth areas we’re focused on. The others are Smarter Planet, analytics and the growth markets. We’ve said that in those four growth initiatives we’re going for $20 billion in additional revenue by 2014. Four initiatives, five years and $20 billion dollars. That’s certainly not all going to happen organically.

Tucker is a 13-year veteran of Sun Microsystems whose last job was as Sun’s CTO of cloud computing. He was also VP of the AppExchange at Salesforce.com. He’s also known for “Lew’s Law,” which he describes as more of an informal observation about how far the cost of computing can realistically fall.

I caught up with him last week in New York City to talk about what Cisco, long the powerhouse of networking, plans to do in the cloud.

NewEnterprise: First off, what is Lew’s Law?

Lew Tucker: It’s just an observation, not a real law, that the price of computing will never be free, because it requires energy to compute. Computing is really about changing the state of physical bits, and that requires energy. It’s great that we’re driving the costs down. Moore’s Law is hammering the costs. But there is a lower limit. Right now the dominant cost is around managing software, operations and everything else. So we can take a lot of those costs out through automation.

NewEnterprise: When I think of Cisco I think of industrial-strength routers and switches. How do you get from there to cloud computing?

LT: Eight months ago I thought the same thing. I was with Sun for many years and then left to go to Salesforce.com to do software as a service. I became very enamored of the Salesforce model. I came back to Sun to build the Sun Cloud, which was to be a direct competitor to Amazon Web Services. I was an Amazon user myself and I loved how you could so easily spin up as many servers as you wanted without having to buy them, configure them and so on. Building a cloud is another thing entirely. When Cisco called me, I said to them, “You’re about routers and switches and I’m all about complex distributed computing systems.” And Cisco said they were really about networking and making distributed systems. I started digging into it and realized there was a really unique position at Cisco if you think of cloud computing as a fully automated system with different elements. Some of those are networking elements, and some of those are integrated boxes with computing and storage and networking all in one. Some are networking services.

NewEnterprise: When you think about how cloud computing works, you really can’t do anything without fast connections between one system or another, which is something that Cisco knows very well.

LT: The network has always been a shared piece of infrastructure. There are a lot of different applications running on different servers that are trying to reach either each other or their endpoints. So there’s an awful lot that’s going into the network to make that happen in a fair and efficient way.

NewEnterprise: So what hardware is Cisco building here?

LT: We build pre-integrated compute, storage and networking that we’re calling our Unified Computing Systems. You can buy a rack of these systems, and they’re driven by a set of APIs [application programming interfaces]. We’re not alone in that. Hewlett-Packard does something similar. Then the customers add in their own preferred storage environment, like EMC or NetApp, or they can build their own.

NewEnterprise: What kind of use cases are you seeing in companies? What are your customers asking for right now?

LT: Right now what they are asking about is collaboration services, the integration of video and voice and calendaring and messaging. We’ve seen consumer services like Facebook change what people expect at the office. We have a collaboration product called Quad that looks just like Facebook. WebEx is a Cisco service. We’re working on offering that as both a hosted form and one that runs inside the customer’s own environment.

NewEnterprise: So there are a lot of cloud providers out there already–Amazon, Google and Microsoft, which has its Azure platform. They’ve already deployed their services and have relationships with vendors. How do you see the market shaping up, and what is Cisco’s place in it?

LT: I think there’s going to be two or three large cloud providers, but then there will be many smaller ones who specialize in delivering specialized services. Take health care. In that industry, groups of companies are going to get together and offer a HIPAA-compliant cloud. You’ll also see something similar happen around financial services. Those are two industries that have very specific needs. The cloud will be dominated by a few large providers for sure, but there will also be many specialty cloud providers.

NewEnterprise: You’ve been on the job about six months. What have you learned so far?

LT: I’ve learned that there’s an amazing amount of technology within Cisco. It has the largest concentration of network engineers in the world. Part of my job is to go and align our products and roadmaps with this future world that we’re moving into and to uncover a lot of the new approaches to how we solve different networking problems. I’m an engineer, and I like nothing better than being in a room with a bunch of other engineers with a whiteboard as they all battle it out. I’ve also learned that building cloud infrastructure is a lot harder than everyone thought.

Palm-CEO-turned-HP-exec Jon Rubinstein and Qualcomm CEO Paul Jacobs faced off with Kara Swisher of All Things Digital at a Churchill Club event last night in an entertaining discussion on the future of mobile tech.

If you missed the live video feed of the event, check back with us–we’re working to repost the video. For those who want to read text, here is my liveblog of the event.

6:48 pm PT: We’re just finishing dinner. It was a chicken in some sort of puff pastry. Nothing is happening onstage, as if that wasn’t clear by the fact I am describing the meal. I think they will get started around 7:15 or so.

7:10 pm: Just about ready to go, with intros going on now. (And I just stole Kara’s seat at the head table.)

Kara: They’re both guys. Paul is taller and they work in tech.

7:14 pm: The plan is to talk about the future, but the event begins with a trip down memory lane as Jacobs holds up the Qualcomm PDQ–arguably the first smartphone combining a cellphone and Palm Pilot. For those who don’t remember, it it was bigger than a Palm Pilot and a huge phone strapped together.

7:20 pm: Digital device history continues. We’ve traced the last decade in digital devices, from the iPod through the Treo and iPhone. Don’t forget ringtones and cellphone bowling, Jacobs reminds us, referring to the Brew operating environment that Qualcomm developed.

The iPhone changed everything, Jacobs says, because it showed that the phone makers just weren’t putting enough work into the phone’s user interface.

7:28 pm: Talk is shifting to where we are today. What are the key things that are shifting? User interfaces, touch, etc. “The other things we are seeing is all of our lives are moving into the cloud,” Rubinstein says. On the limitation side, Jacobs points to the limitations of bandwidth: “We don’t have enough spectrum right now,” Jacobs says, adding that the industry and government are working on it. ‘We are just going to have to be more creative about how we get content to the devices.”

The other big limitation, Jacobs says, is battery life. You can do all this cool stuff on your phone, but then the battery dies three-quarters of the way through the day. He puts in a plug for Mirasol–Qualcomm’s low-power display technology.

Rubinstein concurs that battery and bandwidth are the two biggest issues. “Battery technology has not progressed at the same rate as all of the other things we are trying to do,” Rubinstein says.

7:38 pm: What about all the operating systems out there, Kara asks. Rubinstein: “There’s plenty of room in the market for multiple systems,” he says, adding it won’t be like PCs, where one operating system dominates. “It’s just different today.”

Rubinstein says it’s still the infancy of the major transition. Put on the spot to rank the operating systems, Rubinstein says that clearly Apple and Android are going gangbusters. The battle, he says, is for who is going to be No. 3. “We’d sure like to be that.”

Jacobs: “I agree. It’s very early days to be calling winners and losers.” He sees pretty wide diversity of operating systems, at least for the next five years, unless the operators really clamp down. Even then, there are some alternate distribution channels emerging. Either way, Qualcomm’s in good shape as an arms dealer, he points out.

7:45 pm: Discussion of carriers. While they are immensely powerful, Rubinstein says they won’t be the only distribution channel for every wireless device. “They are not all going to go through the carriers,” Rubinstein says.

More and more screens will emerge, Rubinstein says. If I fast-forward enough years, he says, the walls are going to be big displays capable of talking to other devices.

Jacobs notes that people will be able to use their device with any tool they have access to, from a big screen to a headset to a wireless keyboard. He says Qualcomm is working on a technology that would allow wireless headsets that could work in-ear like a hearing aid.

7:50 pm: Talk about some outlandish things. Rubinstein has already thrown out the idea of a headset in your pillow. Rubinstein points out that there will be a lot of sensors, pointing to the Nike+iPod as a really early example of what we can expect a lot more of.

7:55 pm: Augmented reality is also going to be big, the panelists agree. “The (StarTrek) tricorder is going to happen,” Jacobs says. Health care will also tap mobile technology, particularly in emerging countries where there is less regulation, carriers are trusted and there are fewer skilled health care providers available. “It’s a very efficient way to manage health,” he says. “Over the next few years we will see this happen,” he says. Eventually it will come back to developed markets, but today there is too much legacy and too much regulation in places like the U.S.

8:10 pm: Sorry for the delay–we were fixing some issues with the video coding, which hopefully should be solved now. Anyway, Rubinstein and Jacobs have been throwing out things that they expect in the next five years.

Jacobs’s list includes digital networked textbooks, cellphones as gateways for health care, as well as using augmented reality to translate all the signs and menus in a foreign country.

Rubinstein and Jacobs both see a digital wallet becoming a reality, with Jacobs throwing out the idea of an end to checkout lines as the phone could pay and the store could electronically disable the security on goods, allowing the whole transaction to take place without interaction with store personnel.

“Legal shoplifting, that’s interesting.” Kara says.

The technical hurdles aren’t that big, Rubinstein says. “Clearly NFC (near-field communications) is coming.” It’s more of a social problem than a technical one, Rubinstein says.

8:21 pm: Some good audience questions. One, on what does it take to deliver an Apple-like experience. Rubinstein, who has experience as part of Apple and trying to “out-Apple” Apple, says he thinks that the key is delivering an intergrated experience.

“I don’t think Apple is the only one that can do it, but I do think it is important to have all the elements,” he says.

Another question is on the future of mobile TV–a question that prompts Jacobs to cover his face (Qualcomm spent a bundle on its MediaFlo mobile TV service that saw very limited consumer uptake and Qualcomm is now evaluating what to do with it).

Too few people liked what the service had to offer, Jacobs says, referring to limits on content, screen size, etc. Jacobs said it appears that probably broadcast makes sense for live events, while streaming with TiVo-like controls makes sense for everything else.

“I actually believe strongly in mobile TV, still,” he says.

8:30 pm: Okay. That’s a wrap from me. Thanks for tuning in. If you want to hear more from Rubinstein, he will be speaking at next week’s D: Dive Into Mobile conference.

EHealth Inc., an online insurance broker, has won two new government contracts for insurance websites, and has established a separate unit to go after a share of the exchange business. Benefitfocus Inc., which makes software designed for enrolling employees and others in health plans, says it is in talks with nearly 20 states to run their exchanges. Xerox Corp.’s ACS unit is circulating a white paper to states to make its case for integrating exchanges into Medicaid systems the company already runs.

At stake is some $4 billion a year in revenue, according to an estimate by HealthConnect Systems, a tech company that aims to compete for the new business.

Read the rest of this post on the original site »

The enterprise space, though, is a different story, as Chief Software Architect Ray Ozzie, who joins Ballmer onstage today, will tell you. In enterprise, Microsoft is still the undisputed leader, though here, too, the company is under attack by new on-demand computing services from formidable rivals like Google (GOOG) and Amazon (AMZN).

Full video is below, followed by the liveblog:

Liveblog

8:09 am: Stay tuned. This morning’s interview will begin soon.

8:16 am: Before the main event, a few introductory remarks from Wall Street Journal Managing Editor Robert Thomson. Obligatory Steve Ballmer hoodie joke.

8:17 am: Thomson talking about Australia’s contributions to the technology industry. His top example: The Ugg boot, which solved Australia’s sheep overpopulation problem.

8:18 am: Thomson now drawing parallels between “Harry Potter” characters Harry/Hermione and Walt/Kara.

8:20 am: Walt takes the stage with a faux wand: “Expelliarmus!”

8:21 am: Ballmer and Ozzie take the stage.

8:21 am: Neither is wearing a hoodie.

8:22 am: This is Ozzie’s first appearance at D. Ballmer’s a veteran.

8:22 am: A first question for the pair: Where do you think the economy is these days?

Ballmer: I would say in the developed world, things have come off the lows for sure. I think our industry is even more revved up than others. But we’re in a good product cycle that has propelled the market. We’ve seen some comeback in business spending. What’s the old adage? Burn me once, shame on me [pause]–whatever it is. At least for now, we continue to see developed countries coming back. Emerging markets are a bit different.

Ballmer talks for a moment about China and intellectual property protections there, which are obviously problematic.

8:25 am: Walt asks about the cloud and the transition from the desktop. Microsoft has been the dominant company in local clients, but now you’ve said you’re “all in” in the cloud. What sort of opportunity is this?

Ozzie: I can’t remember a time when it’s been so exciting from the perspective of so many transitions happening concurrently. Now we’ve got everybody connected on the Internet…all devices connectible on the Internet. Now we’ve got companies around the industry coalescing around standards-based ways for storing data. We’re at a shift in the enterprise space and how it manages IT.

Ozzie talks about sharing-based operations in enterprise computing. How does the mobile phone connect to these scenarios? The real opportunity for us is how do we re-pivot to the cloud and make all these devices connect to the cloud.

8:29 am: Ballmer jumps in and notes that almost all players in the business believe the desktop will be important for some time, despite all that we’re hearing about the cloud and HTML5. At the end of the day, the world we’re talking about is driven from the cloud out, but it’s smart cloud talking to smart devices and apps that are controlled locally.

8:31 am: More from Ballmer–The experiences people want will almost always require some device with a reasonable amount of storage and graphics ability. The trend today is all about getting smarter on the client, not getting thinner on the client.

8:32 am: Ozzie says that regardless of what the device is, applications will feel more cached than installed, thanks to the cloud.

8:32 am: Walt–So the cloud isn’t a threat to you?

Ballmer: There’s nothing bad for us in the trend. It’s all good. But it’s a transition and as such, it’s a period of tumult. So we need to be smarter and more vigilant. But not because we’re moving from a world that’s fundamentally good for us to a world that’s not. We’re moving from a world that’s good for us to a world that’s potentially even more good for us.

8:34 am: Walt–Who’s your competition today?

Ballmer: The main ones are folks that people would guess: Google, Apple, Oracle (ORCL), VMware (VMW). And of course, we still always have the things that come out of Open Source–Linux, etc.

8:35 am: Walt asks about synching. He describes it as an unmet need. People need to synch their stuff across multiple devices, sometimes cross-platform. Why isn’t this just built into things today?

Ozzie: Right now one core synch tech is built into most devices these days. It’s called OpenSync. Synch is hard, but it’s a straightforward engineering task. What’s transpiring on the Net is unusual, because we’re spreading our data all over the Web. But we don’t really have a conceptual model for this that’s as clean as those of the past. I think at a high level, what we all want is how are we going to agree as an industry on some meta-data ways of how and where I keep my data. I don’t think we’ll end up in a world where all our data is stored in a single place.

8:39 am: Walt pushes ahead. Notes Zuckerberg’s appearance last night and the privacy implications of this.

Ballmer: There’s an innovation problem here. If you want to share some things and not share other things, you can wind up with something at a complexity level that people don’t want to or can’t engage. Getting the UI right is an innovation challenge.

8:41 am: Walt follows up, asks if competitors are coming together on a standard level.

Ozzie says they are, but not at an “experience level.”

8:41 am: Ballmer–Companies are going to try to get a differential advantage here and that means users are going to struggle with the privacy model for their information. Remember the cookie debate? Consumers didn’t understand what the cookie was. So how do you craft the discussion around issues like these so that they do?

8:43 am: Ozzie on privacy in the cloud–Businesses want to know that we’re not looking at their data. We’ve got to be very clean about this.

8:44 am: Ballmer–I think that the notion that there are different tastes in privacy and there are different opportunities to commercialize this is important, but there’s got to be a dialogue with the customer; the customer has to be allowed to make the choice.

8:45 am: Ballmer talks a bit about the differences between the consumer cloud and the enterprise cloud.

8:46 am: Walt recalls Tuesday evening’s Steve Jobs interview. Steve thought we’re on a course where fewer people will be using PCs and more portable devices (like the iPad). What do you think?

Ballmer: I think that people are going to be using PCs in greater and greater numbers for years to come. But I think PCs will look different…they’ll evolve. They’ll get smaller…they’ll get touch…their innards will change. The real question is, “What is a PC?” Nothing that’s done on a PC today will get less relevant tomorrow. I think there will exist a general-purpose device that does anything you want, because people don’t want multiple devices, or can’t afford them. I think the PC as we know it will continue to morph in form factor. So the real question is: Where do you push? Ballmer notes Jobs’s truck metaphor and says, “Windows machines will not be trucks.”

8:50 am: Walt circles back, notes that Ballmer uses the term “PC” to include things that most people don’t think of as PCs. Is the iPad a PC?

Ballmer: Of course it is. What do you do on it? Answer email. A guy tried to take notes on it at a meeting I was at yesterday–that was interesting [chuckles from the audience]. He suggests that the positioning of devices like the iPad as something beyond the PC is just a marketing tactic.

8:52 am: Walt talks a bit about Microsoft’s history in tablets. What’s the company doing in this area these days? Are there going to be tablets that look like the iPad that run Windows?

Ballmer: Sure. You’re going to have a range of devices over time that are light and don’t have a keyboard and will run Windows. Depending on what you want, there will be devices that offer a similar experience to Windows. There will be others that will be more customized, more optimized. This will be a real competitive form factor of innovation. We will, with our partners, drive innovation in form factor. Windows Phone, for example. Apple has chosen to do this as well.

8:55 am: Still more from Ballmer–Some people will want to have two different devices for two different purposes. But there has to be an option for an integrated device. The bulk of the market is going to stay with general-purpose devices.

8:57 am: A question for Ozzie–Do you think the tablet will have mass appeal this time around?

Ozzie: I think there’s going to be success in a number of form factors–in the pad form factor, in the tablet mode. I think there will be appliance-like screens that will be in our living rooms. This isn’t science fiction anymore; it’s possible. There are certain fundamental differences in productivity in consumption and creation experiences, though. Both must exist on these devices.

8:59 am: Ballmer says Microsoft and Apple will eventually “run into each other” in the market. Is the iPad really that different from the PC? No, it’s just a different form factor. The Mac’s got minimal market share; iPad’s got a surge of momentum. The race is on.

9:01 am: Walt–I think the Mac, while still at a low market share, has done pretty well for Apple.

Ballmer: Apple had a heck of a quarter last quarter, but their market share remains the same. He seems to suggest that the debut of the iPad is a signal that the Mac is going away. PCs running Microsoft software are not.

9:02 am: Conversation shifts to talk of the mobile space. Where are you now?

Ballmer: We had a good longtime employee who wanted to retire and he’s going to do so. And it doesn’t make sense to replace him. On the phone side of the business, we learned the value of excellent execution. We were ahead of this game and now we find ourselves No. 5 in the market. We missed a whole cycle. I’ve been quite public about the fact that I’ve made some changes in leadership around our Windows Phone software. We had to do a little clean-up. The excellence in execution is an important part of innovation. We’re driving forward in the phone business. But this is a very dynamic business; the market leaders here have shifted over twice in the past few years, and that’s an opportunity for us. So we’ve got to have great ideas and we’ve got to execute consistently.

9:05 am: Walt asks about rivals in the mobile space? Let’s talk about RIM (RIMM).

Ballmer: They’re obviously a good competitor. There’s this old myth that they’re primarily an enterprise company, but they’ve done quite well in the consumer market. As a general-purpose tech platform, RIM has less robustness than its competitors, but there’s a reason they’ve got such a huge following.

Walt: What about Nokia (NOK)?

Ballmer: I know they’ve got this huge global market share. But being in the U.S. skews your perspective because they’ve got such small share here. On the software side, they’re also trying to get their act together.

Walt: Apple?

Ballmer: They’ve done a good job of coming from nowhere a few years ago. They’ve done the best job on the browser. People focus on the apps, but the browser is really the thing that has distinguished their phones from others.

9:09 am: Ballmer–The irony of the situation is that the Internet was designed for the PC and then reoptimized for the PC. And partly what everyone’s trying to do with the phone is say, “Okay, I’m not a PC, I’m a phone–how do I plug into this?” So rivals like RIM that don’t have a PC business may be at a disadvantage. Or they may have better perspective.

9:11 am: Walt asks the pair’s thoughts on Google and its advances in mobile, tablets, etc.

Ballmer: On the phone, Android’s a real competitor. On the larger screen devices, who knows? I don’t know that these Android-based things will matter. But I don’t know that they won’t either. I don’t really understand why Google has to have two different mobile operating systems. Chrome? It’s like two, two, two operating systems–but they’re not in one! You want to know about Chrome, talk to them. (An odd comment to make considering Microsoft has at least 3 mobile operating systems that I can think of: Windows Mobile 6.x, Windows Phone OS 7.0, and whatever it’s got running on the Kin)

Ozzie: On the Android-versus-Chrome issue, Android is a bet on the past; Chrome is a bet on the future. When you install an app, you’re targeting a device. When you use Chrome, you’re looking at a cloud-based future.

Ballmer: So why do two? Why not focus on one? Having two OS’s is confusing. You need coherence.

Walt: Well, you have OS variations, don’t you?

Ballmer concedes this, but notes that Microsoft also has coherence. Do one. Make a bet and pursue it.

9:16 am: Walt–How is Bing doing against Google?

Ballmer: Well, we launched only a year ago, but we’re the first search engine to gain market share in a long time…but this is a long game. We’re up 54 percent in unique users year over year; our demographics are good. We overindex with younger crowds. We’ve done a lot to establish a name and to make a good product that delivers relevant results. But I think we have our work cut out for us in a battle with a very large behemoth.

Walt: Wait. You’re calling someone else a behemoth?

Ballmer chuckles, remarks on the Yahoo (YHOO) deal, notes that search is a scale business. Scale is important for improvement in product quality. The Yahoo deal will help with this, he says.

9:19 am: Walt–Is Microsoft taking an app ecosystem approach with Bing?

Ozzie says that it is. Suggests that the company is developing it with a plug-in architecture in mind. Talks about layering.

Ballmer: Rarely when you search do you want to search. You’re not looking for a list of Web sites. You want to find the Web site you’re looking for. You want to do something. If we can help the user take actions more quickly, that would be a great breakthrough.

Walt: You really could have a good encapsulate app in Bing.

Ballmer: That is what we have. The question is, is that extensible?

Q & A

Q: Is Apple right to dismiss the stylus?

A: Ballmer–We do think people want to take notes and draw. What’s the best way to do that? Well, there are different ways to do that and we’ll support them all. Today, we offer devices that do use a stylus. I certainly believe that people do want to take the things that they do today with pencil and paper and do them with new technologies.

Ozzie: The software here has not kept up with the hardware. With touch, we haven’t yet even figured what the control architecture should be. There will be slates you use a stylus on, there will be others that you use touch, etc.

Q: Talk about your degree of comfort in following the law in China. And how are you dealing with the security issues there?

A: Ballmer–Do we think there are hackers everywhere, including China? Yes. Are there professional hackers everywhere? Yes. Do we think that almost every government employs people to read things that they shouldn’t? I don’t know, but I suspect they do. I don’t find any of this amazing.

When it comes to China, if you’re going to stay and do business someplace, I’m not going to put my employees in harm’s way. The best way to make a difference in China and other countries is to stay in the country. We’re staying and trying to be part of a reformation process…and I think that’s the principled stand to take.

Q: Any advice for Apple and Google as they face potential antitrust troubles? [laughter]

A: [Ballmer grins] No advice. I just wish them the best in getting lots of good experience.

Q: Question about health care.

A: Ballmer–It’s a slow moving market. Certainly the money that was put into the health-care bill gives an incentive to have these things proceed a little more quickly.

Q: What do you want Microsoft’s role to be in media?

A: Ballmer–Media starts with what gets created, so we need great tools for creators to make content, and we need to make tools to help people monetize that. This is an area that the advantages Google has in search can and are being leveraged.

Q: Question about weak battery life in the laptop form factor.

A: Ballmer–We’re doing a lot with software. We’re doing work to support Intel’s (INTC) efforts to create chips with better power consumption. This is an area of improvement for us.

Q: What are your thoughts on cross-platform development?

A: HTML5 will show up everywhere. The question is, will that be enough to write great apps? Will there be folks that may have some things that run cross-platform? I think there will be. But developers are going to optimize for one platform.

Walt: Will Silverlight run on the iPhone?

Ballmer: It doesn’t. And my guess is that if it did, it would be blocked.

And that’s a wrap.

A note about our coverage: This liveblog is not an official transcript of the conversation that occurred onstage. Rather, it is a compilation of quotes, paraphrased statements and ad-lib observations written and posted to the Web as quickly as possible. It is not intended as a transcript and should not be interpreted as one.

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]]> http://allthingsd.com/20100603/steve-ballmer-ray-ozzie-session/feed/ 5 http://allthingsd.com/20100602/paul-jacobs-session/ http://allthingsd.com/20100602/paul-jacobs-session/#comments Wed, 02 Jun 2010 22:25:37 +0000 John Paczkowski http://d8.allthingsd.com/?p=480 Qualcomm may not be a household name, but it probably should be.

The company commercialized the CDMA mobile standard and its chips can be found in many of today’s smartphones. If things play out as CEO Paul Jacobs would like, Qualcomm (QCOM) chips will soon be showing up in a wide variety of consumer electronics devices as well. As Jacobs said at the Consumer Electronics Show earlier this year, “consumer electronics devices will essentially be phones inside–different shapes, different software, but fundamentally, inside they’ll be phones.”

With its latest chips, which ably bridge the performance gap between smartphones and larger devices like netbooks and tablets, Qualcomm is delivering on Jacobs’s prediction. And that is increasingly putting the company at odds with some formidable rivals in the ultramobile computing market–Intel (INTC), for example.

Liveblog

3:28 pm: Off to a bit of a late start here. The interview should begin momentarily.

3:31 pm: A few quick words of introduction from Walt, who notes that most of the folks in the audience have likely used Qualcomm products at one time or another, and Jacobs takes the stage.

3:32 pm: Walt–You make chips, right?

Jacobs: We ship 36 chips every second for cellphones around the world. These chips handle radio communications, Bluetooth, Wi-Fi, all sorts of things. They essentially run mobile phones.

3:33 pm: Jacobs–Does anyone in this room have a simple GSMA phone? [No one does.] Then you’re all using our intellectual property.

3:35 pm: Some discussion of licensees. Jacobs notes that Foxconn is among them.

3:35 pm: Walt: Typically, your technology is buried in these devices, but now you’re introducing something that will be out front.

Jacobs says the company is working on a new display technology that uses the same thing a butterfly’s wing uses to make color. Because it’s reflective in that way, you can see it outside and in bright light. It does color and it does video. This isn’t a lab project. We’ve got a fab [fabrication], and it’s being developed.

Walt wonders when we’ll see it. Jacobs says Qualcomm hopes to get it to its partners next year.

3:37 pm: The display is called Mirasol, and it employs a bunch of tiny mirrors to display images.

Jacobs has brought a demo with him, and the display does seem impressive, certainly a big improvement over today’s e-ink.

3:39 pm: Walt–Unlike a Kindle, this thing has color, plays video and better battery life.

Jacobs: If we’re using a still image outdoors, the battery will last for a very long time–it uses very little power. If we’re running stuff, animations for example, it won’t run quite as long. But it will still be a significant improvement over what we see in devices like the Kindle and iPad today.

3:41 pm: Walt–What about downsizing these screens? Will they work on cellphones?

Jacobs says they will. In fact, Qualcomm is working with someone to develop a watch that uses it.

Walt: And this can support multitouch?

Jacobs: Yes. The display, because its MEMS technology, there are other things we can integrate into it–antennas and whatnot.

3:43 pm: Walt–So will this be a Qualcomm reader or will you build it for someone else?

Jacobs: We’ll be developing this for partners

3:44 pm: So why did you get out of the device business, asks Walt.

Jacobs: Because we sucked at it. I just said, you know this is not our core competency. So today we’re focused on chips. Technology is moving so quickly these days that if you’re not focused, you just end up doing things badly. We’re very focused on the chip business.

3:45 pm: Walt–You’ve jumped into the brains of the phone business, yes?

Jacobs: Yes we have. It’s called Snapdragon and its a microprocessor that uses ARM. These are very lower-power chipsets.

3:47 pm: Walt–But these chips are going into high-power devices. They can’t have wimpy processors.

Jacobs agrees and notes that Qualcomm is developing multicore processors for smartphones. “You think about the phone, why do you need the phone to turn on to do stuff? You don’t need to turn on the entire user interface to do something like email. So we’re managing power very carefully to extend usage time.”

3:49 pm: Walt–Is Intel (INTC) your biggest competitor?

Jacobs: That depends. Intel is on the high end. There are other smaller companies though that are low-end threats.

Walt: Do you power BlackBerrys?

Jacobs: The Verizon (VZ) Blackberrys run our chips.

3:50 pm: Walt asks for Jacobs’s thoughts on Intel’s “Intel Inside” campaign, which made the company a known brand. Has Qualcomm considered doing something similar?

Jacobs: You know we have Qualcomm Stadium, says Jacobs. And sometimes people think we make beer, not chips. The truth of the matter is, I sell to the manufacturers and the operators, but we don’t sell directly to the consumer, so a big branding campaign like that isn’t a big concern.

3:53 pm: Conversation moves on to Qualcomm’s FlowTV service. Walt notes that it hasn’t really been successful, and Jacobs agrees. But he adds that it has great potential for the future, particularly in terms of broadcasting information to smartphones, a la PointCast.

3:56 pm: Jacobs: Today when you think about FlowTV, you think about cable TV on your phone. Tomorrow, it will be more of a data service.

3:57 pm: Walt–Obviously, we’re heading toward a bandwidth congestion problem. Is there a solution?

Jacobs: Fixing the backhaul problem already helps. We’re now going to more and wider spectrum, and that helps as well. Fourth generation will feel like you’re getting a better experience as a user. The big issue, though, is getting more access to spectrum, moving people off of it. Adding additional Wi-Fi access points that are integrated into the cellular network will help as well.

Walt: Is it a good trade-off in our country to reallocate the broadcast spectrum?

Jacobs: That’s a tough question because there are people who still use it.

Q & A

Q: Qualcomm seems to be involved in a lot of sensor work. Can you talk about that?

A: One of the things we’re involved in is the development of sensors, sensors that can be stuck onto your body and can talk to your phone. Glucose monitors, for example. But battery life is very important here. So we’re spending a lot of effort developing these technologies for health care with that in mind.

Q: Can you compare SnapDragon to Apple’s A4?

A: I don’t know a lot about that because we haven’t done a tear-down of Apple’s (AAPL) processor.

Q: Can you talk about your BREW [binary runtime environment for wireless] OS and where it might be heading?

A: We actually have a lot of demand for it now. In addition to Verizon, it’s going into AT&T (T) and into Chinese operators. HTC actually just built a phone that’s BREW-based. If you had asked me a couple of years ago, I would have said BREW was headed to emerging markets. Now I think it’s headed to the low-end of the high-end market.

Q: Do you think there are other areas in which your technology might be used, education, for example?

A: Jacobs notes an experiment in education where one classroom was given cellphones running Qualcomm tech and others weren’t, and the group with the phones showed a marked improvement in its grades. “The cellphone is humanity’s biggest platform. If we can’t use it to change education or health care, then shame on us.”

A note about our coverage: This liveblog is not an official transcript of the conversation that occurred onstage. Rather, it is a compilation of quotes, paraphrased statements and ad-lib observations written and posted to the Web as quickly as possible. It is not intended as a transcript and should not be interpreted as one.

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]]> http://allthingsd.com/20100602/paul-jacobs-session/feed/ 0 http://allthingsd.com/20100602/steve-case-session/ http://allthingsd.com/20100602/steve-case-session/#comments Wed, 02 Jun 2010 20:56:16 +0000 Peter Kafka http://d8.allthingsd.com/?p=472

Steve Case is most famous for building America Online, which became the Internet’s first mega-company, and for merging it with Time Warner (TWX), which became the worst corporate marriage in recent history.

But AOL (AOL) is 25 years old, and the AOL-Time Warner deal is a decade old. What has Steve Case been doing since then?

Investing, in a lot of different stuff. His Revolution holding company has stakes in everything from Revolution Health, a wellness/fitness/medical advice Web site, to Cacique, a Costa Rican resort, to Clearspring, a Web widget company. Late last year, Case sold Revolution Money to American Express (AXP) for $300 million. And Zipcar, another portfolio company, has just filed for a $75 million IPO.

Liveblog

“We meet again,” sighs Kara. “I just can’t quit you.” “We’re off to a good start,” says Steve.

1:58 pm: Kara–Let’s go back 25 years. Talk about the beginning of AOL.

1:59 pm: Case–Well, Zuckerberg was one year old.

I got into this when I was in college, reading Alvin Toffler’s “The Third Wave.” It was riveting.

We started in 1985, in partnership with Commodore. It was a total bet on community. We believed the killer app was community. Chat rooms, bulletin boards, etc.

On the road show, no one believed us. Which was fair, because we didn’t have many customers seven, eight years into it. Needed lots of technology to catch up a bit. And needed people to catch up, too.

2:01 pm: Kara–What put you over the top? All of those discs?

2:02 pm: Case–It wasn’t the discs. It was the content. By 1992, ’93, many more people had computers in their homes, connectivity was better. The Internet was evolving–it wasn’t legal for us to connect to the Internet until 1991.

It took a while before we were considered an Internet company. Even when we went public, we were an interactive company, or online services. Had to morph as market evolved.

2:04 pm: And at some point News Corp. (NWS) sued you?

2:04 pm: Yeah, in 1998. they were upset about an online game they thought we were excluding. There was a lot of antitrust chatter then. Those were the good old days.

Kara: Well, you proved them wrong, the idea that you were too powerful.

Case: “I’m not going to comment on that.”

2:05 pm: On the Time Warner deal: Made sense for us and our shareholders at the time. It made strategic sense. But as Thomas Edison said, vision without execution is hallucination.

I’m recalling, by the way, that one of our strategies was to buy Apple (AAPL), hire Steve Jobs and put him in charge. It was an idea that was floated.

Big point is that with the right leadership, which my group, including me, couldn’t provide, we were set up to succeed. Look at stuff like iTunes, YouTube, etc.–all of that could have come from that company.

2:07 pm: I stepped down after the merger. After a couple of years, I started making one-off investments. Then created Revolution as a holding company. Runs through portfolio, which you can see on his site.

2:09 pm: Kara–You were early on a lot of important trends. Oh, and tell me about your favorite device that isn’t the iPad (thanks, Kara!).

2:10 pm: I’m interested in the social media side, and there’s some stuff bubbling there that reminds me of the early days. Also, mobile and location-based stuff, really. But really, how the Internet can be a platform to change the world. Even companies like Zipcar and our resorts properties only work because of the Internet.

Kara: What’s the relevance of the Internet to a company that helps rich people travel?

Case: Booking tickets on the Web [hmm]. Health care is the one that can really benefit from the Web. Runs through Revolution Health portfolio.

2:13 pm: Case–Turns out I’m much more interested in businesses that touch consumers. Like Steve Jobs said, I like that better than enterprise.

And health care is really a wellness push. Because health care as we define it is really sick care.

2:14 pm: Kara–Talk about Twitter and Sarah Silverman.

Case starts to answer, but Kara interrupts and steers him somewhere else.

Case: I really didn’t want to do a blog in the last 10 years, because that seemed like work. But Twitter made sense. I signed up early, like three years ago, but like a lot of people, it didn’t make sense to me. About a year and a half ago it made sense. Less about what you’re doing than what you’re interested in.

2:15 pm: I’ve always liked that interaction part. I wish we’d thought of Twitter–we were headed in that direction with buddy lists, etc.

2:16 pm: Kara–Tease out the different big Web businesses: Facebook, Twitter, Foursquare.

Case: Facebook’s obviously a real company with real revenue. Twitter and Foursquare are much earlier, but they could be on the cusp of a real business with real revenue.

Kara: If you were a 19-year-old college student, what would you be looking at?

Case: I’m hoping that the Internet just becomes everyday life. You don’t call it email, it’s just mail. Etc.

2:18 pm: Big opportunity for Web integration in health: Wi-Fi pedometers, Internet-connected scales, etc. In most cases, remote diagnostics would be able to help you solve and correct problems.

And I think letting people know about healthier choices can solve a lot of problems, and the Web can help with that.

2:19 pm: Kara–Make some predictions. You’re a visionary!

On Yahoo (YHOO): Case pauses. “I don’t know.” This industry changes a lot. I don’t feel like I’m in a good place to make a judgment. Do remember that iconic brands, with large audiences: You should never give up for dead. Remember what happened to Apple.

On AOL: Obviously it’s not what it was 10 years ago, which is disappointing to see. But still a lot of revenue, cash flow, visitors. A lot of assets for somebody to take forward.

On Apple: Nobody would have imagined this 13 years ago, when Steve came back. Remember that it was worth $1 billion and left for dead. By the way, I’ve told Steve this–I’d love to see Apple focus on health care.

2:22 pm: On Facebook, social networking: Really big. Not going away. That kind of communicating is fundamental to human behavior.

On Hollywood: I do think it’s puzzling. We had a hard time getting VC money into the Internet, but Time Warner would spend $1 billion a year betting on movies. They were very comfortable with that, and so many fail.

2:24 pm: Kara–How do you want to be remembered?

Case: “That sounds kind of like a gravestone question.”

Kara: “Okay.”

Case: I want to be remembered, and my team to be remembered, as mostly a force for good, able to get tens of millions of people to take the Internet seriously and integrate it into their everyday lives. We helped get America online.

2:26 pm: A question from analyst Mary Meeker: Please remind us of the market value of AOL when you went public. And please talk about challenges you had when you were growing (“America offline,” etc.)

Case: We raised $10 million or $15 million, had about $30 million in revenue and were valued at $70 million.

As to the challenges–all of them were double-edged swords. For instance, regarding downtime, it took a better part of a decade to get people to take us seriously, and we let them down. Then again, the fact that people cared about our service problems made it clear that they took what we offered them seriously. It took us a year or so to work through that.

2:29 pm: We had a lot of ups and down. Mostly downs. It was a decade of building. One of my worries now, is that there are so many companies that are built to flip. I wish people took a longer view, and I wish VCs did as well.

2:30 pm: Case: I went to school in Hawaii with Obama.

Kara: How was he?

Case: I don’t know. I was a senior and he was a freshman.

A note about our coverage: This liveblog is not an official transcript of the conversation that occurred onstage. Rather, it is a compilation of quotes, paraphrased statements and ad-lib observations written and posted to the Web as quickly as possible. It is not intended as a transcript and should not be interpreted as one.

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]]> http://allthingsd.com/20100602/steve-case-session/feed/ 2 http://allthingsd.com/20100421/att-earnings/ http://allthingsd.com/20100421/att-earnings/#comments Wed, 21 Apr 2010 12:46:33 +0000 John Paczkowski http://digitaldaily.allthingsd.com/?p=38825 Reporting first-quarter earnings this morning, AT&T said it added 1.9 million new wireless subscribers during the period (see chart below; click to enlarge).

It was the biggest first-quarter gain in the company’s history and an impressive achievement, but it was undermined by a large health-care expense. A $995 million charge related to the new federal health-care law dragged AT&T’s first-quarter earnings down 21 percent. Even the 2.7 million iPhones AT&T activated during the period couldn’t offset the expense.

Pity. Because excluding that charge, AT&T would have earned 59 cents a share, five cents more than the Street had been looking for.

For the quarter, AT&T (T) posted revenue of $30.65 billion and profit of $2.48 billion, or 42 cents a share, well below the $3.13 billion, or 53 cents a share, the carrier reported a year earlier. A bit of a miss since the Street had been expecting earnings of 54 cents a share on $30.73 billion in revenue.

Still, as I noted earlier, the company’s wireless division is doing quite well. Sales there rose 8.2 percent to $13.89 billion, bringing the company’s total wireless subscriber base to 87 million. Not bad, considering that Verizon (VZ), the nation’s largest wireless carrier, claims about 91 million customers.

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