Winners and Losers: Tech’s Hot or Not List

Read more in the Wall Street Journal: http://online.wsj.com/article/SB10001424127887323809304578431211400776432.html?KEYWORDS=Tech%27s+Rust+belt

In this, my third post on the dramatic and fascinating developments, shifts, and impacts of the Multidimensional Mobile Market War, the precipitous decline of the leading personal computer industry competitors, has become even more pronounced than anyone suspected.  Last week, IDC and Gartner were in more or less violent agreement that the bottom had very suddenly dropped out of the PC market.

In my previous post I speculated that Michael Dell‘s attempt to take Dell Computer private was in major trouble. Carl Icahn and the Blackstone Group had already thrown a monkey wrench in Dell’s effort to buy back personal control of Dell. Then came the SEC disclosure statement that showed that Dell’s situation was more dire than previously known. This week the Blackstone Group announced that they no longer had an interest in Dell and were pulling out.  The final chapter of this may be that Dell Computer will run out of cash and simply be forced to shutter its doors.  Please keep in mind that Microsoft is a key strategic investor in Michael Dell’s privatization plan.

Then we turn to Microsoft itself and its problems. Microsoft has been grappling with major strategic problems as it attempts to transition away from personal computers into smart mobile.  Windows 8 has been a disappointment.  I gave my wife a Windows 8 laptop, and she immediately complained that the “Start” button was gone, and nothing was intuitive.  Microsoft has just announced that Windows 8.1 will include the return of the “Start” button. You can’t make up stuff this dumb. Nokia is struggling to re-establish a survivable market share in mobile using Windows 8 as its OS… IDC has been forecasting that Microsoft is unlikely to establish more than a 8% mobile OS market share by 2015. This is catastrophic for Microsoft.  Facebook‘s decision to implement an HTC Android device is yet another nail in Microsoft’s attempts to reinvent itself.

Some articles and blogs have argued that Intel is also at a “strategic inflection point,” as Andy Grove would have said, with its legendary reputation grounded in the PC business, as with Microsoft. While this is true, Intel’s short term results belie the  historically volatile and cyclical nature of the semiconductor market. What is clear, is that Intel saw the future some time ago, and that it has a coherent long term strategy. Intel has been diligently plowing its profits back into research and new market development programs. Most important in these new markets is the Atom low power chip for mobile, and perceptivity computing. The Intel Hillsboro facility we used to call “Jones Farm,” the Intel Labs, is famous for leading the industry efforts on the Universal Serial Bus (USB), Universal Asynchronus Digital Subscriber Line (UADSL), PCI bus, Bluetooth, and now a host of new market efforts, including energy harvesting technology.

I speculated last week that Lenovo must be rethinking the wisdom of it’s decision to buy IBM‘s PC business.  This appears not to be the case.  It has been reported this week that IBM is now in talks to sell its server business to Lenovo.  This revelation is also important in understanding IBM’s strategy. IBM appears to be completely disconnecting from its legendary past in computing hardware, and exclusively embracing “The Cloud”  and software as a service (SAAS).

Then we must consider the case of Hewlett Packard.  Over the last two years, HP has engaged in a schizophrenic death dance with the PC business, that has damaged the credibility of the HP brand, something many of us could never have imagined.  HP’s bizarre decisions to purchase the Palm OS for over $2 Billion, and British software company Autonomy, for over $11 Billion, which some have described as the greatest business blunder in history, surpassing Time Warner‘s blunder in purchasing AOL, leave observers shell shocked. But even more bizarre in my humble opinion (IMHO) is HP’s repeated blunders and reversals in the PC and tablet businesses.  HP has been in and out of the PC and tablet businesses so often that the HP brand credibility has been completely trashed.  With IBM now apparently getting completely out of hardware and concentrating entirely on The Cloud and SAAS, via IBM Global Services, it forces HP to yet again rethink its PC business, if it is to compete successfully with IBM.

Finally we must consider the situation of Oracle, a perennial big player in enterprise software and services. It’s CEO and America’s Cup sailor, Larry Ellison, recently acquired Sun Microsystems, its traditional hardware partner.  The logic of Ellison’s decision to acquire Sun escapes me.   Based on the fringe SPARC proprietary semiconductor architecture, Sun was never able to achieve the cost/volume advantages of Intel. Oracle should have focused on becoming hardware independent, as IBM seems to doing.  Instead, Oracle’s financial performance is under pressure, and they are lumbered with Sun hardware.

The spectre of a Silicon Valley Rust Belt seems to be one likely outcome of the Multidimensional Mobile Market War.  Who will be a victim and who will be a survivor is not yet clear.  If only from a historical point of view, I would put my bet on IBM and Intel, who both have decades long reputations for reinventing themselves. I would also be looking at the strategic directions both IBM and Intel are taking, as potentially good indicators of the future.