WHO WILL BE TECH’S NEXT WINNERS AND LOSERS?
By Michael S. Malone
Let’s take a moment and try to imagine the U.S. economy when this recession is over.
Needless to say, that’s a big “when”, especially when Washington seems to doing its best to extend this economic downturn as long as possible.
But let’s suppose that there is a sudden outbreak of sanity among our political leaders: they stop driving the nation’s CEOs in defensive postures, they abandon their attempts to destroy entrepreneurship and venture capital, and basically, they stop threatening onerous new taxes and regulations – basically, they just get out of the way – and let the economy finish healing itself.
What happens next? Who will be the big winners, especially in high tech, in the next boom? Here are my guesses:
Winners
Apple – I’ll start with the Big If. With the spectacular, and historically almost unprecedented, run of the iPod, iTunes and iPhone, Apple was the big winner in consumer electronics during the last boom. And I have no doubt that, with the talent the company has, the money it’s got in the bank, and the guaranteed sales it enjoys for any new product with its army of fans, Apple can rule the next boom as well . . . but only as long as Steve Jobs is around. With Jobs, Apple is not just brilliant, but fearless; a risk-taker, and a company that rewards pushing the envelope. Without Jobs, Apple may still maintain its momentum for awhile, but eventually it becomes Apple under Sculley, Spindler and Amelio. Which Apple will enter the new era depends entirely on the as-yet unknown health of Mr. Jobs.
Oracle – For the last few years, Larry Ellison has set out to prove that the conglomerate model, historically a disaster in high tech, can be made to work. Oracle’s purchase this week of giant Sun Microsystems is only the latest, and biggest, in this run of acquisitions. Can it really absorb all of these acquisitions without, as acquisitive electronics companies have done in the past, dying of indigestion? From what I’ve seen so far, Ellison and Oracle have figured out a way to make it work, and have the cash to buy potentially valuable companies on the cheap. If they can pull this off – and I’m betting they can — Oracle is going to emerge into the next boom as one of the biggest tech companies on the planet.
Tesla Motors. That is my vote.
There is also an all electric motorcycle that will be a winner. Sixty miles between recharges, and 60 mph to boot.
Don’t remember the company.
I am betting on Tesla and Apple but only if Apple can get out of the hardware rut and turn Leopard loose to run on non-Mac hardware. In my opinion it is the best OS out there but their hardware is just too expensive compared to generic stuff.
Agree with Malone on his view Apple with and w/o Jobs. I don’t see Tesla as a big winner because it’s more slick glamor than substance and in a niche market. There’s an open field for any Tesla competitor with a low cost mass market entry if battery costs drop and performance rises.
The Obama-Pelosi new capatalism may well kill this country in that they’re crippling venture capital investment and innovation. Although it would be well deserved since the oh so trendy Silicon Valley crowd was wildly pro Obama, the satisfaction of their receiving their just deserts would not outweigh the destruction of America’s leading innovation engine, startups.
I have to disagree on two aspects of this article.
1) Oracle. In taking on Sun they bought a hardware company. But Oracle has 0 experience in hardware. Not only that they possess a hardware segment that Sun has not been able to maintain for the last 5 years. The Intel multicore server juggernaut has creamed them on price points and will continue to do so.
2)Google. You totally miss the impact that will be Android. It is poised to not only be in cell phones but netbooks, coke dispensers, cash registers, scanners, kiosks, anywhere a very lightweight widget based platform is needed. Fully open vs the closed hardware open API model of iPhone.
Price points, adaptability and talent pool matter in tech. Android will be master in all three over the long haul.
“Attenuated” does not mean what you think it means, which apparently has something to do with a telescoping antenna.. I would hope that Washington was trying to attenuate the economic crisis, given that it means to weaken or lessen in strength.
cassandra lite:
I’ll defer to you. I meant the duration part of “attenuation”, not the diminishment. It’s been changed.
Mike Malone
“The Obama-Pelosi new capatalism may well kill this country in that they’re crippling venture capital investment and innovation.”
I can personally vouch for that. I’m the founder of a tech start up company and I’ve watched VC dry up since before the election. We are trying our best to build a valuable product that will help people and create good jobs with what we believe will be a good future. But VC is drying up – but only partly to do with the economy.
VC is always looking out two plus years and even in tough times will normally invest in promising companies knowing the economy will turn upward and demand increase by the time a product/service is brought to market. I don’t see much of that happening.
And a very bad leading indicator is that even companies that were funded in the last couple of years aren’t getting follow-on rounds of funding – which means the VC are really bearish.
I deal with some very, very experienced VC and serial entrepreneurs they believe VC as we’ve known it will probably disappear within two years if not sooner. The economy, tax changes are to blame but the capper was Obama’s threat to increase regulation on the VC industry.
Straw. Camel. Back. The risk levels for VC are so high even in the best of scenarios that sensitivity to regulation is exceedingly high. Those with the money are increasingly unwilling to risk it – at least in the US…
And therein lies the rub. American VC, the envy of the business development world, is being forced offshore to India and China.
The fact that The One has killed shale oil, offshore drilling, and nuclear power and left them bleeding on the altar of political correctness shows that he is not serious about helping the economy. Maybe we can go and find something to do in India until the Obama debacle has spent its fury.
Why do you think Ellison is good at integration? I’ve been developing enterprise software for fifteen years, often using Oracle products (not just db but also the app stack). I’ve never had any sense that even Oracle’s own products integrate that well. In fact, outside of the db itself (which is great), I’d just soon not have to deal with the Oracle app stack.
I’m very nervous about the Sun acquisition. Oracle has not shown any savvy for development tools, I’m worried they’ll undercut Java’s value.
“The fact that The One has killed shale oil,”.
One of the investors I’m working with come from the energy industry and a company they are funding has developed a microwave system/process for shale extraction that is profitable at $25 per bbl.
Talk about a double whammy. Obama hits those guys coming and going. Regulation against shale on the one hand and regulation against VC on the other.
Obama and Co. are intent on taxing away the money I and others planned to spend on products from these companies. Guess the software and hardware engineers will be able to work on open-source products, for no pay, don’t you know.
On Apple:
Steve Jobs has done a great job putting a well-oiled team that he can be confident in running Apple in his absence. That team has gone so many design cycles that by now they know how to make a great design without compromise. These people know what makes Jobs, Steve Jobs and what makes him a success. Tehy will emulate him. Do you recall that Jobs said many great tech companies were ruined (including Apple of Sculley-to-Amelio era) after the founders/leaders who understood technology left and were replaced by salesmen? He is not going to let that happen at Apple (again).
on Palm:
Palm is close to dead. Pre is a takeover bait and so far, no one is biting. Potential buyers will think twice buying Palm with a big potential lawsuit over its head. Apple claimed to have patented over 200 patents on iPhone and by what is known of it, Pre has infringed on some of those. Think about it, if Pre is such a great iPhone killer, why hasn’t big companies fighting each other to buy Palm?
On Intel:
Agree. Intel is pretty much it now if you are talking about chips. Additionally, with Apple pushing it from behind, Intel is bound to come up with great designs. Though Apple is small compared to the market, don’t discount their power to go to Intel and ask for chips to fit their design like they did with Macbook Air. Intel will be happy to work with Apple because like it of not, Apple products create lust and consumer hype and Intel gets the recognition as the chip manufacturer.
With regard to ebay: I am an ebay seller from way back (1998, IIRC). They could be ruling the entire online economy now if they’d just cut their fees as low as possible (cutting them as they grew), kept things simple, and got the hell out of the way of their vendors.
I can’t pay 8.75% on small lots in the things I sell. But I could afford 3% under the old system, and did, selling tens of thousands of dollars of stuff a year. Easy money for me, eBay, and big savings for my customers.
Requiring Paypal use (another 2.5-3% down the drain) was another terrible mistake.
These people got starry-eyed and thought they could just charge a ton of money and introduce crazy bells-and-whistles and we’d all just pay.
I think about a guy like Sam Walton, who woke up every single day of his career thinking, “How can I save my customers more money?” The eBay crowd has never once had that thought.
I think Google goes into the losers camp though, as with Microsoft, it may take a while before it’s obvious.
In fact, the description of them here sounds a lot like a candid description of MSFT seven or eight years ago. Off-putting arrogance coupled with increasing execution problems. MSFT looked like a juggernaut then too.
Google has another weakness. Most of its revenue is ad-based, and I wouldn’t be surprised by a huge contraction in advertising. My gut tells me our economy has way too much of an emphasis on retail right now, and that segment is going to shrink dramatically, taking ad dollars with it. The two segments with the greatest growth potential are (ugh) government services (and let’s face it, the IRS doens’t really need to advertise for “customers”) and manufacturing.
I second the vote on eBay. It hasn’t been worth a flip for years. Its just too big a full of garbage to be useful. And too complicated.
Google does show signs of fraying — I think it shows by their fooling around with their logo on the home page. Samll but indicative. However, I don’t see them going down anytime soon. They have another 10 years.