From: Mike Linksvayer (ml@justintime.com)
Date: Fri Jan 21 2000 - 21:19:24 MST
Lee Daniel Crocker wrote:
> I love this idea. I could imagine doing it in the software
> field specifically, because the cost of engineering a piece
> of software with certain functionality goes down with time
> as tools and methods improve, the opportunity for adding
> features grows, and it is often cheaper to re-engineer a
> piece of software from scratch than to update it--yet many
> companies persist in updating software for non-technical
> reasons to their detriment. You also have the advantage of
> not having to support a user base with old hardware, etc.
It may be cheaper to rewrite equivalent/better functionality
from scratch, but it will be very very hard to create a
perfect substitute for an existing and very crufty piece
of software and do it well enough to have an impact on
the market for the old software and on the valuation of
the old software company. To get people to stop buying
the old software and start using yours (even if it is
free) you need to produce software that can deal with
the old data formats and any program extensions and
related tools seamlessly and not require retraining of
users. Nearly impossible I'd say.
> Here's how I'd do it: find one or more companies who have a
> large market share for a specialized software application
> that's horribly overpriced (AutoCAD comes to mind for some
> reason:). Create a substitute using modern engineering
> methods. Make it if not completely compatible at least
> easy to migrate to from the older system (requiring minimal
> data translation and retraining). Short the stock, and
> start selling it for the minimum price necessary to sustain
> advertising it. Short the stock some more, then start
> giving it away completely. Invest the money in startup
> user-support businesses that start springing up to support
> the free software, then retire. Simple plan, no?
Exactly the sort of thing I thought, but for the reasons
I mention above and marketing/mindshare hurdles, I think
it isn't so simple. I would give it a shot if I could
afford to risk several million dollars. And I'd pick a
target smaller than AutoCAD.
> You might not even have to create the software from scratch.
> Imagine, for example, just cleaning up something like GIMP
> and porting it to Mac and Windows to undermine Photoshop.
GIMP has been ported to Windows. GIMP is wonderful, but it
needs more work before it impacts Adobe's valuation, particularly
area of suitability for prepress work.
Even if GIMP were better than Photoshop in every way (and
it already is in may ways), profiting through options or
shorting Adobe stock would be a long term risk/investment.
The installed base rules. In the interim if Adobe is smart
it has plenty of opportunity to reinvent itself so that
even when Photoshop ceases to be such a dominant platform
its valuation will continue to be high. All considered, the
strategy is very risky.
However, as I said, if I had enough capital that I could
afford to risk, I would attempt this strategy. I would
attack a niche market with few customers who could be
evangelized relatively easily and very high priced software.
There would be two or three viable public companies in the
niche, mitigating the overwhelmingly dominant installed base
problem and making it more likely that my activity would
damage at least one of the companies' valuations
severely enough that I could profit handsomely.
Mike Linksvayer
p.s. Your mail's Date: header says that the date is
"Fri, 21 Jan 100".
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