Upon speaking with my contacts in the fuel cell business, it would appear there is nothing special about the Bloom Box. As one expert I spoke with noted, the materials, the approach, the geometry, the efficiencies, and the economics are very similar to what other companies in the space are doing or have done.  The current economics of $8,000 per kilowatt are still – even after $400 MM of investment in large scale production – an order of magnitude too high.

The economics, combined with the unaddressed questions regarding the cyclability of the system (i.e., how many times can a Bloom Box be turned on and off before degrading), the long term reliability, and the sensitivity to fuel contaminants such as sulfur (which exists in many hydrocarbons) have been issues for other SOFC companies in the past. The issues have prevented broad-scale adoption of the technology as an alternative to the grid.

One has to question the veracity and integrity of Bloom’s CEO when he describes his material as beach sand. That is pure PR and quite disingenuous. Anybody in the solid oxide fuel cell business knows full well that the material is a highly refined, chemically synthesized doped ceramic powder. It doesn’t even come close to the cost of beach sand, even if the underlying major compound is the same.

Furthermore, the company’s comment that its SOFC can be fueled by solar is just plain silly. Solar panels produce electricity. Electricity runs a hydrolyzer to produce hydrogen. Hydrogen, in turn, powers the fuel cell. Not exactly running on sunshine!

One thing is very clear about Bloom Energy. They invested a great deal of money in a terrific PR firm. But, as we all know, PR can only take a company so far. If the product(s) don’t stack up in the market, it’s just a matter of time before reality sets in.

One of my friends summed up Bloom Energy’s Box beautifully when he said “it’s big hat, no cattle.”  If we were asked to make a recommendation, we would be long Bloom’s PR firm and short Bloom Energy.

Speaking of Smartphones, Texas Instruments made an announcement at the Mobile World Congress last week that caught our eye. The company announced a technology called OMAP™ 4.  TI’s OMAP 4 platform includes applications processors, a comprehensive software suite and power management technology to bring next-generation Smartphones and Mobile Internet Devices (MIDs) to market. TI believes the technology will fundamentally change the way consumers watch and interact with mobile devices.

TI’s OMAP 4 enables a set of applications classified as Human Device Interactions (HDI).  One of the interesting things about the technology is that it enables touch-less gesture recognition, something we’ve been anticipating as the conventional computer interface seems antiquated and beyond tired. TI’s object-recognition software allows users to control mobile devices with their hands without touching the screen.

With OMAP 4-enabled mobile devices, users can point, click, drag, scroll, zoom and rotate images without touching the screen, thus taking the interface beyond conventional touch displays. TI’s technology reminds us of Microsoft’s Natal technology. It’s clear to us that the future of computer interfaces is touch-less and far more friendly in terms of human interaction.

The other interesting feature of TI’s OMAP 4 technology is that it enables 3D-HD viewing on mobile devices. According to the company, the OMAP 4 platform is the only mobile applications processor that can deliver stereoscopic 720p at 30 frames per second per channel or enable true 3D image capture today. The advanced display controller from TI supports auto-stereoscopic displays, creating a 3D image without the need for special headgear or glasses, as well as providing support for external 3D monitors.

TI’s technology fits nicely with the view Kris and I laid out in our GigaOM Pro report titled, “3D Untethered: A Look at Mobile 3D technology.” The company expects devices with its OMAP 4 technology to debut in the market later this year. TI is part of Research 2.0’s RealVR ecosystem. We’ll be taking a closer look at the stock in the days ahead for consideration into the Research 2.0 Technology Model Portfolio.

(Disclosure: Research’s 2.0 Technology Model Portfolio currently has positions in Apple, Research in Motion, Google and Motorola)

In the conclusion, Reinhart and Rogoff echo some thoughts we’ve made in previous posts. The authors note:

“The lessons of history, then is, that even as institutions and policy makers improve, there will always be a temptation to stretch the limits. Just as an individual can go bankrupt no matter how rich she starts out, a financial system can collapse under the pressure of greed, politics and profits no matter how well regulated it seems to be.”

Indeed, there is an arrogance among regulators that says, “If we only had a little more regulation, we could rid the financial system of crisis and collapse.” The problem with regulation is that it has a tendency to lay the seeds for the next financial crisis, which then begets more regulation, ad nauseam. As history clearly demonstrates, more regulation is not the answer.

Reinhart and Rogoff go on to state:

“Technology has changed, the height of humans has changed, and fashions have changed. Yet the ability of governments and investors to delude themselves, giving rise to periodic bouts of euphoria that usually end in tears, seems to have remained a constant. No careful reader of Friedman and Schwartz will be surprised by this lesson about the ability of governments to mismanage financial markets, a key theme of their analysis. As for financial markets, Kindleberger wisely titled the first chapter of his class book “Financial Crisis: A Hardy Perennial.”

It is hard to disagree with this statement. Delusion is one of the hallmarks of human nature, as all the great Avatars – Christ Jesus, Krishna, Buddha, – have observed. And government’s ability to mismanage financial markets seems to know no bounds.

The authors conclude their book with this gem:

“We have come full circle to the concept of financial fragility in economics with massive indebtedness. All too often, periods of heavy borrowing can take place in a bubble and last for a surprisingly long time. But highly leveraged economies, particularly those in which continual rollover of short-term debt is sustained only by confidence in relatively illiquid underlying assets, seldom survive forever, particularly if leverage continues to grow unchecked. This time may seem different, but all too often a deeper look shows it is ot. Encouragingly, history does point to warning sign that policy makers can look at to assess risk – if only they do not become too drunk with their credit-fueled success and say, as their predecessors have for centuries, “This time is different.”

Reinhart and Rogoff’s book is not an easy read, but it is worthy addition to an investor’s library. There is much insight to be gained from studying the dynamics of financial crises through history. If nothing else, after reading the book, one will be hesitant in ever uttering the words “this time is different.”

I’ve seen a few stories come through my email inbox recently about US Treasuries becoming junk bonds.  These stories have got me thinking about the implications of U.S. government debt getting downgraded to junk status. Needless to say, having U.S. treasuries become junk bonds would unleash a tremendous amount of creative destruction in the global economy.

I’ve been reaching out to several of my well informed and plugged-in friends on Wall Street to start a discussion on this topic. Michael Mauboussin, Chief Investment Strategist at Legg Mason Capital Management, passed along an article that appeared in the Financial Times earlier this week written by Niall Ferguson titled, “A Greek crisis is coming to America.”  Despite the scary title (typical of mainstream journalism), Ferguson argues that we are a long way from U.S. treasuries becoming junk bonds. As he puts it, “in the U.S., the day of reckoning still seems reassuringly remote.”

Ferguson may be correct, but it would be foolish – perhaps beyond foolish – to become complacent about the U.S. fiscal position. The long-run projections of the Congressional Budget Office, as Ferguson notes in his FT article, suggest today that the U.S. federal government will never again run a balanced budget. That’s right, never. The latest CBO projections of U.S. federal government outlays and revenues are shown in the graph below.

I can hear America’s founding fathers groaning and asking: “What has happened to our beloved United States of America? How in the world could the fiscal position of the federal government have deteriorated to the point where the country will never again run a balanced budget? Oh, my! The good Lord help us all.”

It may well take an act of God to get America – and the world – out of the fiscal mess it is in today. I suspect what is going on in Greece and Europe today is a wake-up call to us all. Apparently the collapse of the Soviet Union was not a big enough wake-up call. Let us hope U.S. policymakers are paying close attention. Winston Churchill was right on the money.

U.S. treasuries aren’t junk bonds today. That said, one can easily see the federal government’s credit rating is on a slippery slope.

To be continued…

Garmin was launched in 1989 after a brainstorming session. It has a number of successful stand-alone GPS units for various markets, including auto, motorcycle, and sports. The company is currently generating around $2 billion of revenue, $400 million of net income, and has over 7,000 employees worldwide.   The company has a market capitalization of $6.4 billion currently.

Garmin’s success has been impressive to date, but one wonders if the company has a future. Like pagers during the proliferation of cell phones, Garmin’s core product faces intense growing competition from smartphones.

GPS works only on devices with an embedded GPS chip. In 2008, one out of every three smartphones shipped with GPS embedded. Obviously, smart phones were not much of a competitive threat two years ago. However, the competitive landscape is shifting amid rapid growth in GPS-enabled smart phones. According to the folks at ABI Research, within the next 4 years nearly all new smartphones will ship with GPS embedded.  Put differently, by 2014 GPS will be a standard feature of nearly all new smartphones.

Nokia announced recently that it will offer a new version of Ovi maps for Nokia smartphones, which includes free turn-by-turn navigation and traffic information. The new Ovi maps are available for immediate download for 10 Nokia handsets and will be pre-loaded on all new Nokia GPS-enabled smartphones starting next month. We expect similar announcements from other smartphone manufacturers in the months ahead.

As we can see from the chart nearby, Garmin’s stock has been a big-time underperformer versus the NASDAQ index. Over the past two years, the stock price has fallen by 50%. Many analysts on Wall Street have grown increasingly bearish. Goldman Sachs’ analyst currently has Garmin on his focused sell list. If we were advising Garmin’s management, we’d be encouraging them to look for new markets and opportunities (e.g., Indepth Navigation’s unique GPS product). It would appear as if the writing is on the wall for the future of their core product.

One thing is for sure: It’s going to take some visionary thinking to navigate through the coming competitive challenges and keep Garmin growing and thriving in the years ahead.

We’ll see if the management team is up to the task.

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We can illustrate the convergence of the real and virtual worlds by looking at the evolution of Electronic Arts’ popular computer game, “Madden NFL.”   The first version of the game – titled “John Madden Football” – appeared in1989 for the Apple II series of computers. In 1991, a version was released for Sega’s Genesis machine. The picture at left is a snapshot from that game. Note the crudeness of the playing field and players. Suffice it to say that Madden NFL in 1991 was not realistic at all.

If we fast forward a decade to 2001 and look at a snapshot from that year, we can see that the graphics of the Madden football game have taken on a more realistic appearance. The team colors and logos are clearly visible (in this case, the Raiders and the Rams). We can see the images of the players are beginning to resemble real football players. The playing field looks more realistic as well.

It is evident from these two snapshots that during the first decade of Madden NFL, there was a significant increase in the realness of the game. We can jump ahead another decade (well, almost) and compare the realness of the 2001 game to today’s Madden NFL. Nearby is a snapshot from this year’s version of the game. Note there has been another large increase in the realness of the game. The players are beginning to resemble themselves (pictured in the snapshot are Arizona Cardinal wide receiver Larry Fitzgerald and Troy Palamalu of the Pittsburg Steelers, participants in last year’s Super Bowl).  The current version of Madden NFL makes the 2001 version look like a joke. There is no comparison.

The evolution of Madden NFL over the past two decades clearly shows the ongoing convergence the real and virtual worlds. Put simply, things are getting real. Given where we are today it is pretty easy to see that things will become even more real and life-like in the coming decade amid exponential growth of computer power.  We are moving into an age where increasingly, it will become difficult to discern real from virtual.

We can imagine in the not-too-distant future a time when our appearance in a virtual world like Second Life or Teleplace will resemble who we are in real life. Several of the companies we have spoken with over the past year are incorporating life-like avatars into their enterprise virtual worlds technology. The avatars are crude today, just as the football players were in the early versions of Madden NFL. But you can bet they will get more realistic in the years ahead.

As RealVR continues to evolve in exponential fashion, there will be many new opportunities for established as well as emerging technology companies. Much of the research Kris and I are doing today involves identifying the biggest potential beneficiaries of RealVR.  It is an important piece of our investment strategy today and ripe with potential. We believe the convergence of the real and virtual worlds will profoundly alter the dynamics of corporate growth and profitability and create some fantastic investment opportunities in coming months and years.

Speaking of RealVR, football, and the Super Bowl, it won’t be too long until Madden NFL will be available in 3D and people will be able to watch the real Super Bowl in 3D – in their living rooms or on their smartphones.

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One of my favorite books is called “The Experts Speak,” written by Christopher Serf.  The book is full of famous pronouncements by so-called experts that look ridiculous in hindsight. Here’s a gem from the book that appeared in Popular Mechanics back in 1949:

“Computers in the future may weigh no more than 1.5 tons.”

Another favorite of mine from the book comes from Ken Olson, President, Chairman and Founder of Digital Equipment Corp., who in 1977 stated:

 “There is no reason anyone would want a computer in their home.”

As I sit in my home office writing this blog post on a computer that weighs less than 4 pounds, I am thinking that Erik Sofge’s statement about 3D never amounting to anything more than a gimmick will end up looking as silly in the not-too-distant future as these two pronouncements.

As Kris and I have noted in our research with GigaOM, we are at the very early stages of a (r)evolution in 3D computing. Advances in digital computer technology are making it possible to render dazzling life-like 3D images and environments. Driven by powerful computing architectures, we are moving headlong into an era that will more resemble what we saw in the movie The Matrix and on Star Trek: The Next Generation with its Holodeck.

No disrespect to our friends at Popular Mechanics, but we believe 3D will amount to much more than a gimmick. In our view, 3D will become the de facto standard in computing. Looking out into the future, we find it difficult to say what won’t be 3D. We can already see seeds of the 3D (r)evolution that will make today’s 2D internet and web look like antiquated and crude technology. 

That’s not to say that there won’t be booms and busts along the way. To expect otherwise is not to understand the nature of technology and markets. We’ve seen a large flow of 3D announcements over the past year – from new 3D LCD HDTVs, computer displays, glasses, movies, software, TV programming, etc.  More capital is being invested in 3D technology and content and we expect this trend to continue in the months ahead. The fact that 3D movies have generated over one billion dollars in the past year during a difficult economic time is enough to raise a few eyebrows in executive suites around the world.

There is no doubt in our minds that a fair amount of investment activity in 3D will not generate a favorable return on capital and will be curtailed and shut down (witness Philips N.V. decision to pull the plug on their autostereoscopic display research lab not too long ago). Some 3D technology will be over-hyped and lead to disappointment. This goes without saying.

From our perspective, we are in the very early stages of 3D digital computing. This is a key point that should not be lost on investors. There are powerful advances in digital computer technology and software ahead that will create rich, immersive environments that we have never experienced before. These advances will make it possible to render far more life-like images and environments than we have seen to date. Mental Images’ Reality Server, OTOY’s Lightstage, and James Cameron’s Avatar are impressive, but they are just the tip of the 3D digital technology iceberg.  There’s much more to come.

I suspect there are a few kids right at this very moment envisioning a fully immersive, 3D future that would blow us all away.  And when they are grown up and have achieved billionaire status from pursuing and realizing their vision, they might discover the January, 2010 issue of Popular Mechanics on the 3D web with their 3D computing device, read it, and have a good laugh.

In our interview, Craig tells us about his glasses-free 3D technology and explains how it works and compares to other products in the marketplace. We also explore where and how content can be viewed, how close we are to be able to convert 2D content to 3D in real-time, as well as what markets are driving most of the new demand for 3D content.

There is no shortage of competing 3D technologies in the marketplace. What makes 2D-3D’s technology attractive for users is that 3D content can be viewed on conventional technology, whether it be smartphones, netbooks, smartbooks or LCD TVs. No special equipment is required.  The company also has the capability of converting 2D video into 3D in real time. Needless to say, real-time 2D to 3D video conversion has the potential to change the content landscape.

Readers can download the interview for free at the Research 2.0 website (registration required). Readers may also be interested in the free photo software Dr. Summers recently released that allows users to create 3D photos. The software can be downloaded at this link:

http://www.2d-3dvideo.com/NewSite/download.html

Also, iPhone and iPod Touch users can download 2D-3D’s mobile video player for free at iTunes at this link:

http://itunes.apple.com/us/app/2d-3d-video-player/id305666560?mt=8

Skype has over 500 million users currently. The company employs a freemium business model.  Skype-to-Skype calls are free no matter where you are located. The company derives revenue by charging competitive rates for people to call regular phone numbers and for add-on services like voice mail. Increasingly, Skype has been used for video calls. The company says video chats account for 34 percent of calls on the service today.

Skype has been thus far confined to computers, smartphones and iPods, but the application will be moving into family rooms in the near future. Two major manufacturers of TVs – Panasonic and LG Electronics – recently announced they are integrating Skype into their Internet-connected TVs (so called NeTVs). According to the folks at Insight Media, over a million NeTVs were sold last year. That’s just a trickle compared to what we are likely to see in the years ahead.

Skype’s CTO Jonathan Rosenberg notes that 2010 is the year when NeTVs will start to take off. He believes every TV that ships in the near future will have built in Wi-Fi, webcams and microphones. NeTVs will be equipped with web browsers, and widgets will used by TV networks to integrate their delivery models with NeTVs. Put simply, TVs will become part of the network in the home.

According to Skype, the service on a TV will work much as it does on a PC, but with some limitations. A TV program will stop playing once a Skype call is made or answered. Apparently, the processors in TVs are not yet powerful enough to allow people to chat while they watch a show. We expect this situation to change in the future with the development of more powerful processors.

It may take a while for NeTVs to penetrate family rooms in a significant way. That said, there is no doubt in our mind that NeTVs will become the norm in the future. We think Skype’s strategy makes a lot of sense. It will be fun to watch how this space evolves.

In terms of the bigger picture, we see NeTVs playing a growing role in the evolution of the RealVR Cloud.  NeTVs will be a gateway to deliver more immersive, 3-D viewing experiences in the home. This will open the door to more technological innovation and new products and services in the years ahead.

We are hearing that Skype may file for an IPO this year. If that’s true, we’ll be taking a close look at the deal.  We believe it could be a great investment opportunity at the right valuation.