All Things Digital

Microsoft (MSFT) started with a vision of a computer on every desk, and soon it hopes to put one on every wall as well.

During Microsoft’s 12th annual CEO Summit today, Chairman Bill Gates demonstrated TouchWall, a 4-by-6-foot multitouch computer that can transform home and office walls into computers. Gates calls TouchWall “the whiteboard of the future,” and it may turn out to be just that–if Microsoft can get it to market at a reasonable price. The company’s other multitouch computer, Surface, is currently shipping for about $10,000.

We see little to stop Google from reaching 70% market share eventually; the question, really, comes down to, ‘How long could it take?’ ”

–RBC Capital Markets analyst Jordan Rohan, March 2006

Not long at all, really.

They’re not the competition; they’re the environment in which you compete. The IT industry used to say that about IBM, but today the adage seems equally applicable to Google (GOOG), which dominates the search market just as IBM (IBM) once dominated the computer industry.

According to new metrics from Hitwise, Google’s share of the U.S. Internet search market grew to 67.9%–a 4% increase year-over-year. Google’s growth apparently came at the expense of rivals Yahoo and Microsoft. Though it claimed the second-largest share of the search market, Yahoo (YHOO) slipped to 20.28% from the 20.73% share it held a year ago. Microsoft’s (MSFT) Live Search, ranked third behind Yahoo, fell to 6.26% from 7.77% in that same period.

Seems the two companies’ recent efforts to differentiate their search offerings from Google’s haven’t done much to boost their respective market shares. Nor will they ever if the Google juggernaut continues as it has. As Credit Suisse analyst Heath Terry once noted, search is a natural monopoly business and there’s a decent chance that over time, Google will continue to gain share until it’s claimed most of the market.

And that may happen sooner than we think. Google’s closing in on 70% market share already. “By this time next year,” Silicon Alley Insider’s Henry Blodget writes, “Google’s search business will be larger and more profitable than the most profitable and legendary monopoly in history–Microsoft Windows.”

Hewlett-Packard’s (HPQ) acquisition of technology services giant Electronic Data Systems Corp. (EDS) will be the company’s largest acquisition since the $20 billion merger former HP CEO Carly Fiorina orchestrated with Compaq Computers six years ago.

Hopefully, it won’t be nearly as rancorous.

Valued at $13.9 billion, or $25 per share, the deal will more than double the size of HP’s consulting and outsourcing business. It will likely do the same to the $16.6 billion in revenue from services the company made in 2007 as well.

When the dust has settled around the merger, HP will be the second-largest provider of consulting and outsourcing services, behind IBM (IBM). But it will take some doing to get there. “It’s a very significant combination,” said Ben Pring, a research vice president in the IT Practices Group at Gartner (IT). “[But] people who are skeptical of big integrations will have a field day around this. It’s putting together two large businesses with two different heritages. It’s going to be a big culture clash.”

But if HP manages to pull it off? Well, as Fiorina would likely tell you, bigger is better if you can do it right.

“It’s somewhat amusing because we’ve seen this play before. I think this is sort of further evidence that HP really does see value at scale basically, at size,” said Illuminata analyst Gordon Haff. “One of the things we’ve seen very clearly over the last couple years is that Carly really had the right idea, she just couldn’t execute on it. She wasn’t wrong for saying HP needed to be bigger, effectively,” said Haff. “If (the merger) does go through we’re going to end up with an HP that looks a lot like Carly wanted it to look.”

EBay (EBAY) may yet find a way to justify the astonishing $2.6 billion it paid for Skype. This morning, the Internet phone service launched an aggressive new international calling plan. For flat fees of up to $9.95-a-month, Skype is offering unlimited calls to computers, landlines and some cellphones in 34 countries.

“For example if you live in London, for just 2.95 euros a month, you can call your grandmother in Poland, whenever you like, talk for up to six hours at a time, and not worry about how much it’s costing you,” explained Stefan Oberg, VP and GM of telecoms at Skype. “Your grandmother doesn’t need to understand the Internet. You just use your Skype subscription to make the call and she just picks up the phone.”

An interesting move, and one that comes just days after incoming eBay CEO John Donahoe said the company will consider selling Skype at the end of the year if it can’t find ways to use it to support its core business. “What we’re testing this year are the synergies,” Donahoe told the Financial Times. “If the synergies are strong, we’ll keep it in our portfolio. If not, we’ll reassess it.”

While consensus has long held that the synergies to which Donahoe refers are anything but strong, that may be changing. Last week eBay reported earnings, noting that Skype added 33 million subscribers in the first quarter of this year, boosting its total membership to 309 million. Revenue also hit $126 million, up 61% from the same quarter last year.

Our universe could be the hobby of some Cartesian Evil Genius who runs our lives the way one might play The Sims. That’s the gist of the argument proffered in “The Physical World as a Virtual Reality,” a new scientific paper from Massey University professor Brian Whitworth. “[L]ogically the world could be an information simulation running on a three-dimensional space-time screen,” posits Whitworth.

Sounds like someone’s been spending a little too much time with the Matrix RPG Society, eh? Either that or he’s the long-lost third Wachowski Brother.

That said, Whitworth’s argument does have its merits. Top among them: It offers a handy answer for troubling questions like: “What existed before the big bang?” Writes Whitworth:

… the virtual-reality hypothesis means the big bang is much easier to explain. No virtual reality can have existed forever, since it depends upon a processor to create it. All virtual realities come into being, or ‘start up,’ at a specific moment of time. They typically begin with a sudden influx of all the information necessary to initiate the virtual world. Whenever one starts a computer game or boots up a computer, such a ‘big bang’ happens. From the perspective of the virtual world itself, the creation is always from ‘nothing,’ as before the virtual world start-up there was indeed no time or space as defined by that world. There was nothing relative to that world, because the world itself did not exist. It is a hallmark of virtual realities that they must come into existence at a specific point in their space and time, which event also initiates the VR space-time fabric. Note that in a virtual world there is no logical reason why all initiating information cannot initially ‘point’ to a single arbitrary location, i.e. no reason why an entire universe cannot exist at a single point. In this view, then, the big bang was simply when our universe was ‘booted up.’ ”

If that is indeed the case, the world will presumably end with some sort of fatal error. What was it T.S. Eliot wrote in “The Hollow Men”?

This is the way the world ends
This is the way the world ends
This is the way the world ends
Not with a bang but a BSOD.”