Stocks quoted in this article:
For Google Inc (NASDAQ:GOOG), spring cleaning has been pushed up to winter cleaning. Last Friday, Venkat Panchapakesan, VP of Engineering for the company, posted to the official Google blog, announcing the discontinuation of 11 services, including elements of Google Calendar, Google Sync, and Punchd, an app that keeps loyalty punch cards on your smartphone. Overall, this is not a lot of cutting, but the sentiment at Google is clearly that the tech company needs to simplify, like Apple Inc. (NASDAQ:AAPL).
As Panchapakesan wrote in the post, "Last January, we renewed our resolution to focus on creating beautiful, useful products that improve millions of people's live every day. To make the most impact, we need to make some difficult decisions." This systematic cutting of services and products began when Larry Page became CEO in 2011. Page seems to be following the lead of Apple, a company that has strongly profited from the business of simplicity. Page described his cancelation initiative as an effort to "put more wood behind fewer arrows."
Apple sells five computer models, five mp3 players, three tablets, three smart phones, some accessories, and some software. These products have led and continue to lead Apple's dominance of the tech sphere. Every product has a long, focused development period, and the marketing is carefully constructed, as if organically fitted to the devices themselves. People have credited this artful and productive simplicity to Steve Jobs' study of Zen Buddhism, and in fact the meeting of Zen and tech in Silicon Valley has certainly become a trend. There are even rumors that the original iPod's scrolling circle was inspired by the Zen notion of walking in circles while one meditates. Though this may be true, Steve Jobs, from what we know of him, was certainly not an ideal practitioner of Zen. But he knew what to take from his exploration of Buddhism, and that was focus and simplicity.
What does Google intend to focus on in lieu of the Calendar and Sync functions it its abandoning? Of course, Google runs one of the world's top search engines, online map services (an area where Google excels far beyond Apple), and so much more. But in pursuit of emulating and competing with Apple, Google will certainly be focusing on its line of Nexus products (it sells two tablets and one smart phone, compared to Apple's three and two, respectively). The latest is the new Google Nexus 4 smartphone, which was originally released on November 13 but sold out almost immediately. (It will be shipping again in four to nine weeks.)
Google will also focus more on providing content, making itself even more competitive with Apple, as well as other online content providers like Netflix, Inc. (NASDAQ:NFLX) and Amazon.com, Inc. (NASDAQ:AMZN). Google acquired the travel guide company Frommer's earlier this year, following its purchase of review website Zagat. Moreover, Google has begun paying for original programming on YouTube, and its Google Play app store is growing.
An even more important area for Google development will be in big data, with storage, management, and service for cloud computing. Google has 13 data centers worldwide. Apple has five with two more in the works. Both companies are experimenting with alternative energy methods to power their data centers; one method involves using methane collected from pig manure to power fuel cells. (See also: Are Apple and Google in Race for North Carolina's 'Black Gold'? ) According to International Business Machines Corp. (NYSE:IBM), 2.5 quintillion bytes of data are created every day (enough to fill 531 million DVDs) and production of information is continuing to boom (the past two years have seen the creation of 90% of the world's data). With this exponentially increasing flow of digital information, the storage of and ability to use data will become exponentially more valuable.
With the advent of more cloud computing, it is possible that the very nature of producing hardware will change. With the ability to store media and data on the cloud, computers will no longer need to hold that data. In effect, we could see computers become simple screens with which we connect to the Internet. In that vision of the future, Apple and Google are leading the way, with their intense focus on both big data and tablets (screens that connect to the Internet).
There is, of course, a lot of uncertainty surrounding Apple right now. Can it rightfully hold on to the position of the world's most valuable company? Will Apple's simplicity and focus help continue its dominance of the smart phone, computer, and tablet markets? Or was the monumental growth that led to a stock price high of $705 in September a one-time growth spurt? Whether or not Apple stock reaches or exceeds that stock price next year, it seems that Google is making a good choice (maybe it's only choice) to "put more wood behind fewer arrows" and follow Apple in the way of simplicity.
This article by Josh Wolonick originally published on Minyanville.
Below, find some more great content from Minyanville:
Disclaimer: The views represented on this blog are those of the individual authors only, and do not necessarily represent the views of Schaeffer's Investment Research.