Rami Alkarmi.Entrepreneur. Invest. Business Models

During a press conference on Tuesday to launch VMware’s new cloud, Bill Fathers, VMware’s top cloud exec, dropped a bombshell: VMware would be “the first and only cloud provider” to offer SAP’s popular and pricey software on a monthly subscription plan, including SAP’s Oracle-killer HANA database.

Monthly subscription pricing of its software is something that SAP doesn’t even offer its customers of its own brand-new cloud.

Fathers offered no other details and neither company released a formal press announcement. 

We just heard from SAP that the partnership, while good, may not be as epic as all that. Here’s the plan so far:

• The version of HANA is the same scaled-down one that’s been on Amazon since October. It’s called SAP HANA One and it tops out at 60 GB of RAM, or random-access memory, per instance.
  
  In comparison, a typical on-premises version of HANA begins with 64 GB of RAM and goes up from there—to terabytes. The amount of memory is important since this is an in-memory database, meaning it does all of its work on data stored in memory rather than on disk. The bigger the RAM, the more data it can process.
• SAP customers who already have traditional software licenses won’t owe SAP more money to use VMware’s cloud. They will need to pay VMware monthly cloud usage fees. That’s the same deal for running SAP software on Amazon’s cloud, too.
• Besides HANA, other popular SAP apps will be available for rent on VMware’s cloud, though we don’t know yet which ones. These will be “core” apps, SAP says, so presumably it will be the company’s bread-and-butter financial/enterprise resource planning software.
• There’s no word on pricing yet, or availability.

VMware says it will roll its cloud out to U.S. customers in Q3 this year, and to Europe and Asia in 2014. So perhaps the SAP apps will be available around then. 

SEE ALSO: 15 Enterprise Tech Rock Stars You’ve Never Heard Of But Should Know

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The Microsoft Store Online and Amazon are both taking sign ups for the new Xbox One console.

(Microsoft will give you $10 off if you reserve through them.)

Here’s what you do:

Head to either the Microsoft Store Online or Amazon and enter your email. You’ll be notified as soon as pre-orders are available.

Unfortunately we don’t have a price or release date on when Xbox One will be available, but Microsoft says you can expect it later this year.  

DON’T MISS:  Everything Cool About Microsoft’s New Xbox

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Microsoft’s new video game console, the Xbox One, won’t be able to play older Xbox 360 games. The news came out following the company’s big presentation this morning.

According to Todd Holmdahl, the Xbox hardware boss, the move was necessary to push the Xbox platform forward and enable more advanced games.

“We created a new architecture,” Holmdahl said in an interview. “It was too much of a burden for us to develop for both sets of games.”

He also said it wouldn’t be possible for future software updates to add backwards compatibility.

So all those Xbox 360 games you have sitting on your shelf? The only way you can play them is if you hang on to your old console. Historically, console makers have done their best to ensure new devices were compatible with older games. But it looks like Microsoft found it more beneficial to pack all those extra features in the new console rather than allow you to play older software.

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Twitter is increasingly popular with teenagers, according to the latest data from Pew Internet and American Life Project.

It found that 24% of teenagers are using Twitter, up from 16% last year. Facebook is still the most popular social network with 77% of teenagers saying they have an account.

One reason Twitter is growing in popularity is that teens are looking for relief from Facebook, which is filled with parents and “drama.”

A fourteen year old girl said, “I think Facebook can be fun, but also it’s drama central. On Facebook, people imply things and say things, even just by a like, that they wouldn’t say in real life.”

Another sixteen year-old girl explained her social media habits saying, “Instagram is mostly for pictures. Twitter is mostly for just saying what you are thinking. Facebook is both of them combined so you have to give a little bit of each. But yes, so Instagram, I posted more pictures on Instagram than on Facebook. Twitter is more natural.”

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David Sable is now more than two years into his post as global CEO of WPP Group’s Y&R, one of the original ad agencies on Madison Ave. On the eve of its move to a new address—3 Columbus Circle—Sable talked about the changes afoot in the business as well as the fundamentals that persist.

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I am often asked by prospective entrepreneurs how I got started and what they might learn from it. But my answer is: ?Don?t follow me.? Follow your own path by finding a problem worth solving that you are uniquely qualified to solve* and can get passionate about. Then have the persistence and patience to pursue it.

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Apple CEO Tim Cook testified to Congress about Apple’s tax-dodging today.

He did a superb job.

Within minutes, he had parried a few lame attacks from Senators Levin and McCain. And for the rest of the hearing, he had the rest of the sub-Committee eating out of his hand.

As Cook explained, Apple does indeed employ spectacularly successful tax-dodging techniques. But they’re all perfectly legal. So, as is often the case, if Congress is looking for someone to blame, Congress can start by looking in the mirror.

Not long into Tim Cook’s testimony, Congress began asking him for advice on how to change the tax code to encourage companies to use their cash to invest in the United States.

Cook said that Congress should cut the “repatriation” tax on cash earned overseas from 35% to a “single-digit” percentage. This cut, Cook suggested, would encourage so many more companies to repatriate cash that it would be revenue neutral. The government would reap less tax per dollar of repatriated cash, but a lot more cash would get repatriated.

This might actually be an excellent idea.

But the sub-text of the discussion was that, if companies repatriated more cash, they would use it to “invest in America”—hiring more Americans, building more plants, etc.

That’s a nice theory.

Based on historical precedent, however, it’s also a bunch of crap.

In 2004, you may recall, Congress gave companies a “repatriation holiday” that allowed them to bring boatloads of cash home without paying tax. The idea was that corporations would use this cash to invest in America.

So, did companies actually use the cash to invest in America?

As if!

According to a 2011 post-mortem unearthed by Anthony DeRosa of Reuters, here’s what happened after the repatriation bonanza:

• Companies reduced their American workforces
• Companies did not invest any more in research and development
• Companies increased their stock repurchases
• Companies paid their executives more
• Only huge multi-national companies benefitted
• Cash balances radically increased

1. U.S. Jobs Lost Rather Than Gained. After repatriating over $150 billion under the 2004 American Jobs Creation Act (AJCA), the top 15 repatriating corporations reduced their overall U.S. workforce by 20,931 jobs, while broad-based studies of all 840 repatriating corporations found no evidence that repatriated funds increased overall U.S. employment. 

2. Research and Development Expenditures Did Not Accelerate. After repatriating over $150 billion, the 15 top repatriating corporations showed slightdecreases in the pace of their U.S. research and development expenditures, while broad-based studies of all 840 repatriating corporations found no evidence that repatriation funds increased overall U.S. research and development outlays. 

3. Stock Repurchases Increased After Repatriation. Despite a prohibition on using repatriated funds for stock repurchases, the top 15 repatriating corporations accelerated their spending on stock buybacks after repatriation, increasing them 16% from 2004 to 2005, and 38% from 2005 to 2006, while a broad-based study of all 840 repatriating corporations estimated that each extra dollar of repatriated cash was associated with an increase of between 60 and 92 cents in payouts to shareholders.

4. Executive Compensation Increased After Repatriation. Despite a prohibition on using repatriated funds for executive compensation, after repatriating over $150 billion, annual compensation for the top five executives at the top 15 repatriating corporations jumped 27% from 2004 to 2005, and another 30%, from 2005 to 2006, with ten of the corporations issuing restricted stock awards of $1 million or more to senior executives.

5. Only a Narrow Sector of Multinationals Benefited. Repatriation primarily benefited a narrow slice of the American economy, returning about $140 billion in repatriated dollars to multinational corporations in the pharmaceutical and technology industries, while providing no benefit to domestic firms that chose not to engage in offshore operations or investments.

6. Most Repatriated Funds Flowed from Tax Havens. Funds were repatriated primarily from low tax or tax haven jurisdictions; seven of the surveyed corporations repatriated between 90% and 100% of their funds from tax havens.

7. Offshore Funds Increased After 2004 Repatriation. Since the 2004 AJCA repatriation, the corporations that repatriated substantial sums have built up their offshore funds at a greater rate than before the AJCA, evidence that repatriation has encouraged the shifting of more corporate dollars and investments offshore.

8. More than $2 Trillion in Cash Assets Now Held by U.S. Corporations. In 2011, U.S. corporations have record domestic cash assets of around $2 trillion, indicating that that the availability of cash is not constraining hiring or domestic investment decisions and that allowing corporations to repatriate more cash would be an ineffective way to spur new jobs.

9. Repatriation is a Failed Tax Policy. The 2004 repatriation cost the U.S. Treasury an estimated net revenue loss of $3.3 billion over ten years, produced no appreciable increase in U.S. jobs or research investments, and led to U.S. corporations directing more funds offshore.

So much for the theory that, if we cut companies a break to “repatriate” their cash, they’ll use it to invest in America.

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Halo is a much-loved franchise that leapt from the computer screen to books, comic books, and even a successful web series, Forward Unto Dawn. But now it’s going to be a television series, one produced by multi-award-winning (and Forbes-listed billionaire), Steven Spielberg. It’s an excellent choice.

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Back in 1975, while most desks were still furnished with manual typewriters, technology pundits were making their predictions on the future of computers in the workplace. Computers showed tremendous potential for word processing and automation, they said, but would they really ever be user-friendly enough for general use?

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David Karp is the face of Tumblr, a social content platform that was recently acquired by Yahoo for $1.1 billion.

But he isn’t the only person who deserves credit for the company’s success. Numerous executive and investors helped Tumblr grow and become the company it is today.

Four in particular come to mind.

Bijan Sabet - Sabet, a partner at Spark Capital, gave Karp his first term sheet. He helped convince Karp that Tumblr was a business, not just a side project. “I basically spent the summer of 2007 trying to talk him into starting a company around it,” Sabet told Forbes’ Jeff Bercovici in January. ” Spark led Tumblr’s first round of investment.

Marco Arment - Arment was Tumblr’s first employee. He joined Karp’s vision in 2006 and helped keep the passionate designer in check. “I was never the “idea guy” — in addition to my coding and back-end duties, I often served as an idea editor,” Arment wrote of his time at Tumblr. “David would come in with a grand new feature idea, and I’d tell him which parts were infeasible or impossible, which tricky conditions and edge cases we’d need to consider, and which other little niceties and implementation details we should add.”

John Maloney - Maloney was hired to turn Tumblr into a real business. He joined in 2008; he and Karp met while working for Urban Baby, a company that was acquired by CNET in 2006. “As a mentor he taught me, among many things, how to convincingly act like an adult,” Karp wrote to his team when Maloney left Tumblr in April 2012. Maloney was never replaced after his departure, although Tumblr actively tried to scout a new President. “I was also completely neglecting: our bills, our investors, our office, hiring, our lawyers, and the thousands of emails that were sitting in my inbox…John magically put everything in order…John was the catalyst for everything [Tumblr has] accomplished.”

Peter Vidani - Peter Vidani is Tumblr’s lead designer and he helped create the simplistic look and feel of the blog platform. He joined as the company’s 6th employee. 

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A study released today by the Pew Research Center has good and bad news for Facebook’s role as a teen destination.  The report, Teens, Social Media and Privacy shows that Facebook’s popularity with teens has actualy grown by 1% since 2011 to a whopping 94% of all teen social media users. The highest service is Twitter (26%) followed by Instagram, the photo-sharing mobile app that Facebook acquired last year. Tumblr, which was just acquired by Yahoo for $1.1 billion, came in 6th with 5% — actually below MySpace if you can believe that.

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In 2007, Bijan Sabet, General Partner at Spark Capital, urged David Karp, to ditch his consulting firm, Davidville, and focus on building Tumblr. 

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VMware’s software runs in pretty much every enterprise data center on the planet, and now VMware is setting its sights on a much bigger market. 

On Tuesday, VMware unveiled its vCloud Hybrid Service, which is a “public cloud” service that lets customers rent servers and storage over the Internet. It’s similar to Amazon Web Services, which dominates the public cloud industry. But VMware has tailored its cloud for enterprises. 

Lots of other competing cloud service providers are doing the same thing, including IBM, HP and Microsoft, who all have cloud services geared for big businesses.

But the vCloud Hybrid Service has an edge in one special way. It works well with VMware’s “server virtualization” software, which lets lots of apps and operating systems be packed onto a small number of physical computer servers.

With vCloud Hybrid Service, customers can easily move their apps from their own data centers to a vCloud service without having to rewrite their apps, or change their IT management software. 

“This, to us, is the magic that made virtualization real in the first place,” VMware CEO Pat Gelsinger said in a Tuesday press conference at VMware’s Palo Alto, Calif.-based headquarters.

Despite Amazon’s success, some enterprises still distrust the public cloud and think putting their valuable corporate data there is a recipe for disaster. Amazon also has a reputation for outages. That’s the sort of customer VMware is targeting. 

Another important point is that enterprises can run all their enterprise apps on vCloud Hybrid Service without a lot of testing. That will save them from “hidden costs” with other clouds, says VMware’s GM of cloud, Bill Fathers. This is a complaint customers have with Amazon’s cloud.  

vCloud Hybrid Service will launch as a private beta next month and will be available in the U.S. in the third quarter. It will be available in Europe and Asia in 2014.

There are two versions of the vCloud Hybrid Service: One where customers get their own dedicated hardware, sold on an annual contract with prices starting at 13 cents per hour for a 1 GB virtual computer with 1 processor.

The second is where customers share the hardware, known as a “multi-tenant” cloud. Customers will pay monthly for this option, and pricing starts at 4.5 cents per hour for 1 GB virtual computer with 1 processor.

Prices might still be adjusted. “We’re very focused on making sure we remain competitive,” Fathers said.

VMware is running vCloud Hybrid Service from four partner’s data centers, as opposed to spending tons of money to build its own. But it’s not naming its partners.

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