Will Microsoft’s Silverlight Rule Web Video?

Stock Tickers: MSFT, ADBE, DIVX, CBS, GOOG, TWX

It is a little easy to get caught up in the earnings shuffle during weeks three through seven at the start of each quarter.  But some things that are not earnings related need covering, and the most recent video showing how Microsoft’s (MSFT-NASDAQ) release of Silverlight will power news.  It isn’t just news, its user generated content mixed with news and mixed with user-generated or professional marketing.  The president of CBS’s (CBS-NYSE) general manager of the Digital Media Group, Jonathan Leess, showed a demo of what it has in store down the road.  The first video is featured by Cnet.

Silverlight was launched in beta was rolled out a couple weeks ago, but much of the coverage this week is being demo’d more on the web.  This is from Mix ’07, Microsoft’s conference in Las Vegas devoted to web developers and designers.  Microsoft itself even showed how this can even target user-generated marketing.  Microsoft will host a streaming video service that stores and hosts video for its new Silverlight online media platform for web developers, plus it will ship Microsoft Expression Studio for graphic design and animation that will allow designers to create apps for the Internet and for Windows.  Silverlight is supposed to be available (beyond the current beta) for the public this summer, and Microsoft seems get the picture: it is compatible with Apple’s (AAPL-NASDAQ) Safri and even Mozilla’s FireFox.

Adobe (ADBE-NASDAQ) investors don’t seem to scared yet.  Shares closed up marginally by 0.4% on Tuesday at $41.73, just over $2.00 under the $43.95 highs (and way up from the $25.98 lows of last year).  The raw truth is that even a behemoth coming into a newer space has had a very hard time unseating the industry standard.  Even lower prices do not always assure victory, because retraining and downtime are major hurdles.  Michael Arrington of TechCrunch has an article full of praise, even by staunch critics, noting that some of the more interesting new web applications will be built on the platform.

The forward guidance ‘warning’ on Tuesday out of DivX Inc. (DIVX-NASDAQ) may have been growing pains more than anything tied to Silverlight, but it is awefully coincidental.  The company said its revenue guidance of $16.7 to $18.7 million is more seasonality, and analysts were expecting $18.25 million.  Its shares slid some 14% to $17.10 in after-hours trading, and this is now a new low for the shares.  Oddly enough, the president sold over 25,000 shares and the CFO sold 10,000 shares of common stock just last week, and officer selling immediately before earnings is often a red flag (even if it is part of a pre-set 10b5-1 trading plan).

Every year convergence is promised and we are "yet one year closer."  The old rule of thumb is that the more things change, the more they stay the same.  But if you throw off the skeptic’s hat you really do look much, much closer than ever before.  Now it might just boil down to how many different media players people are willing to keep on their desktops, and how many people are willing to create the mass content with little to no incentive for ‘most’ of it. 

Will Google’s (GOOG-NASDAQ) YouTube open up and allow this platform?  What about Time Warner’s (TWX-NYSE) AOL Videos?  What about all the other platforms?  As you can see there are more questions, but the consumer looks to score here even if the companies end up going into a platform war.

Jon C. Ogg
May 2, 2007

Jon Ogg can be reached at [email protected]; he does not own securities in the companies he covers.