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:
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.
Twitter – A lot people still consider Twitter to be a novelty, just the latest tech flash in the pan. But a closer look at this new phenom shows that Twitter is a company that has yet to reach its peak – indeed, at the moment it is the hottest company on the planet . . .without a revenue model. But Twitter has just such a plan in its back pocket, and is management talent to execute it. Moreover, these guys aren’t your usual starry-eyed young entrepreneurs; but are coolly executing their long-term plan. My bet is that Twitter is the big, break-out, Apple/Netscape/Google IPO of the next boom (assuming there still are IPOs in the age of Sarbanes-Oxley).
Android – I’ll get to Google in a minute, but I’m betting that its Android smart phone platform is a huge success in the next few years. If nothing else, Apple needs its Microsoft, the open, multi-platform counterpart to Jobs’ inevitably closed, Apple’s way-or-the-highway strategy. This time around will be a bit different, because the iPhone is more open that past Apple products – and Google isn’t as lumbering as Microsoft. Still, I suspect that they will soon own opposing ends of the smartphone market, leaving Palm and RIM behind. That’s good news for all of those Android phone makers in the Open Handset Alliance: Qualcomm, T-Mobile, Sprint, Motorola, Toshiba, etc.
Intel – These guys have dominated the semiconductor industry for a long, long time, defeating giant challengers from Motorola to AMD to Samsung – and everybody in-between. But the chip giant right now may be in its best position ever: its competitors (like AMD) are crippled, it has a hot new line of mobile processors, and, as it always does, the company has held its R&D investments up even during the darkest days of this downturn. That means the company has a very good chance of emerging in the next boom as the most powerful manufacturing on Earth.
Cisco – From the hot company of the Nineties that nearly died when the dot.com bubble burst, Cisco has accomplished an amazing transformation from being a router company to be a Web infrastructure company – and has been amply rewarded for doing so. And though I think the current infrastructure phase of the Web is nearing its end, that industry is still going to need upgrades. And Cisco, now a tough, battle-hardened survivor, is going to dominate its market for years to come.
LinkedIn – Of all of the Web 2.0 companies, other than Twitter, my sense is that LinkedIn has the best chance of coming out of this downturn with a full head of steam. One reason is that the crash has driven millions of professionals back to working their networks. Another is that the Facebook generation is growing older and is going to be less interested in showing party photos and more interested in getting jobs. Finally, founder Reid Hoffman is a brilliant guy who appreciates that the future of Web 2.0 is monetization – and that LinkedIn is culturally better positioned to do that than the MySpaces of the world.
Some iPhone App – As I’ve written recently, I’m seeing more entrepreneurial fervor right now in Silicon Valley than perhaps at any time in my career. I literally can’t go into a local Starbucks or Peet’s Coffee any time day or night and not see at least one start-up team around a café table working on a spreadsheet on a laptop computer. Given the shortage of available angel and venture capital money these days, I can’t believe that all those start-up teams are plotting big manufacturing companies or social networks. No, my guess is that they are mostly targeting markets with a low cost of entry – and nothing fits that characterization better these days than applications for the iPhone. There are thousands of these apps at this point, but I can’t help but think that there is some killer application out there that will soon be discovered by all of this focused intellectual capital . . .and that a hot new company will be created around it.
IBM – Big Blue has gone from being the most change-resistant company in electronics, to one of the most adaptive. It will succeed in the new era because it will become whatever it takes to do so.
Hewlett-Packard – Mark Hurd has done a masterful job of navigating the world’s largest technology company through this downturn. The modern HP is tough, lean and intimidating in its competence. But long term, the real test of HP is always whether it can truly innovate . . .and for all of Hurd’s promises, we haven’t seen a lot of that yet. Discipline gets you through the hard times, but new products get you through the good times. Hurd better start studying his copy of Packard’s “The HP Way” again.
Google – It’s hard to argue against a company enjoying such massive success. But you can’t help thinking that Google has peaked. Android will help keep it in the game, as will its sheer dominance of Web search and the advertising revenues that come with it. But the off-putting arrogance of its employees and management, its increasing inability to execute on all of those thousands of new ideas the company generates every month, and the growing backlash by government and the culture that no amount of lobbyists and marketing can contain forever, suggests that Google is in for some tough times ahead.
Facebook – It may have a bigger population than Japan these days, but Facebook dominates a market that has exhibited little user loyalty. Worse, the ham-fisted tactics of Mark Zuckerberg and his team to wring revenues out of Facebook users – the same mistake MySpace made before it – is beginning to alienate those millions. Worst of all, Twitter has stolen most of Facebook’s cool. If Facebook can’t find its way back, it risks being the biggest loser of the new boom.
Palm and Blackberry (RIM) – One of the miracles of recent years is how the Blackberry has managed to remain the popular industry standard in the face of a growing challenge by the smartphone industry. One obvious advantage is that it holds the traditionally change-averse business market. But it is hard to imagine how it will continue to hold its own against the giant millstones of the iPhone and the various Android phones. As for Palm, it may well have in its hands the iPhone Killer, the Pre – but only if it finds the money to introduce it. And Palm has a long, sad history of snatching defeat out of the jaws of victory.
Tesla Motors – Elon Musk is really rolling the dice on this one. The roadster is cool, the coupe is perfectly priced . . .but this is a true paradigm shift, and in automobiles at that. How many times in the last fifty years has that worked?
Microsoft – Even if Windows 7 proves to be an improvement over Vista (which wouldn’t be hard), this is a company that has lost its ability to execute.
eBay – Having transferred the debris in every attic in the world to every other attic in the world, the world’s largest flea market has no place to go. And, it is spinning off Skype, which should have been its game changer, but instead has been a wasted opportunity.
Dell — Michael Dell is running out of time to get his troubled company back on track. If he isn’t ready to compete with HP and Sony when the market turns back around, it’s all over.
Yahoo! – Carol Bartz is one of the best CEOs in tech, but this is a company that has bled out most of its talent, and lost its purpose. If she can clean up Yahoo! and sell it, she’ll be a hero.