As we enter the last month of the first quarter of 2013, it’s clear that some of the stalwarts of the IT industry are struggling with a rapidly changing market and rapidly changing technological trends. Today’s IT landscape looks far different than the one we saw just a few short years ago and the biggest fish in the IT sea appear to be having issues adjusting to the constantly shifting market waves.
I have a few observations and opinions about three of the largest players in the space and I thought I’d share them.
Dell had a whirlwind 2012 that included a number of strategic acquisitions, including:
- Clerity Solutions
- Quest Software
- Gale Technologies
- Credant Technologies
Understanding that the PC market is beginning to level off, these solutions all fit into the broader context of helping Dell to become full-service provider of Information Technology offerings. At the same time, however, Dell’s core business of PCs and laptops, which provides up to 50% of the company’s revenue, has continued to suffer as the PC market begins to stagnate and the uptick in business from these acquisitions has not yet matched the downtick in the core business. In fact, in February 2013 reported a staggering 31% drop in profit.
In addition, the company’s attempt to go private, while it may shield the company from the whims of Wall St. and give the company breathing room to execute a turnaround, will have its own challenges to overcome. Private equity firms aren’t not-for-profit entities and will expect to see a return sooner rather than later.
Many are questioning whether or not Dell will stay in the consumer PC business as a part of their turnaround. Some believe that Dell will go the way of IBM and shed the PC business altogether in order to focus on higher margin, higher value products and services. However, I’ve always seen Dell’s PC sales as a wide open door to helping the rest of the company get a foothold in new accounts. If this door is closed, it could be more difficult for Dell to break into new accounts.
The aforementioned acquisitions, though, could be of great benefit to Dell in the turnaround, assuming that the company is capable of truly integrating all of these various offerings into a cohesive product line. While I believe that Dell will do just fine with many of the hardware acquisitions – the EqualLogic acquisition a few years, for example, went exceedingly well – I believe that Dell will struggle with the software acquisitions and will have to make some really hard decisions about what to keep and what to end.
Is it possible that Dell simply bit off too much too quickly? Yes. Is it possible that they’ve missed earlier turnaround opportunities? Yes. Is it possible that some of their acquisitions haven’t seemed to play well? Yes. But, the big players have all had their problems over the years – HP’s are well-known (the parade of CEOs) and IBM was able to get in front of the game a number of years ago. While Dell as a company will certainly survive the current market turbulence, there is uncertainty about how long the company will struggle and what they will do with everything they’ve acquired.
For decades, Microsoft has been synonymous with PC and has enjoyed the fact that the PC market continued to grow by leaps and bounds. That said, Microsoft has been known to make mistakes from time to time. They practically missed the Internet bubble way back when and today, even though Windows Mobile used to be a relatively popular choice in the mobile space, Microsoft’s modern mobility efforts are showing much less traction in an Apple-fied world. And, even though Microsoft has been playing in the tablet space for a decade or more, the iPad pretty much destroyed Microsoft’s to-date efforts in that space, too.
That said, with Windows 8 and the release of the Surface Pro as well as with Windows Phone, Microsoft is working hard to recapture lost market share and their efforts could pay off. The Surface Pro is seemingly flying off store shelves and getting reasonably good reviews. Microsoft has gone all-in on the touch-optimized Windows 8 operating system and is moving to a new annual update model a la Apple with their forthcoming Windows Blue.
Even this industry stalwart, though, has some major challenges facing it – some new and some not so new.
First and foremost, Microsoft is not known as an innovator’s paradise. Sure, the company has some truly innovative products, such as the Surface, but the Surface wouldn’t exist were it not for the fact that Microsoft needed to change its game to compete with the red hot iPad. Apple revolutionized the market and Microsoft is simply evolving in the wake of that revolution.
I will give Microsoft credit in one area, though: Cloud. Even though it appeared that Microsoft was going to simply take a “me too” approach with cloud, the company has really gone gangbusters in creating cloud versions of many of their most important business tools, such as Exchange, SharePoint and more. Further, they’ve created Azure, a comprehensive cloud environment that can help organizations break their IT chains. Azure and the other cloud offerings will undergo constant refinement for the long run.
When it comes to web-based apps, Microsoft has done a spectacularly poor job thus far competing with Google in a number of areas, although this is starting to show some signs of change. It took Microsoft an inordinate amount of time to react (again, react rather than being proactive) to Google Docs and Gmail, although the new Outlook.com and Office Web Apps do a good job these days. Gmail’s integration is still a bit more fluid, though. I see Microsoft catching up quickly in this area.
On the downside, there is, of course, Bing, which loses money on a pretty regular basis. This is one area in which Microsoft’s “everything has to be built here” mentality is working against the company. This might be the prime time for Microsoft to sell everything Bing to Yahoo and licensing it back rather than simply throwing more resources at it.
My Wikibon colleague David Floyer wrote recently about his thoughts regarding whether or not Microsoft’s seeming lack of internal technical talent was a cry for the return of Bill Gates. I don’t believe that Bill Gates needs to return, but I do believe that Steve Ballmer should consider giving up the CEO chair for someone that may be able to provide more technical leadership and vision.
Personally, I believe that Microsoft plays it safe far too often and that the company needs to infuse the culture with entrepreneurial spirit to regain the greatness that it once had.
In the past twelve months, Apple’s stock has traded as high as $705.07 per share. On the day this article was written, Apple shares closed as $448.97 after being buoyed by the rumor that the company may offer a stock split. That’s a drop of more than 35% in just a few short months.
Worse, as Apple releases new products into the world, critics are being, well, critical. The iPhone 5 was very much an iteration of the iPhone 4S with little innovation built in; the iPad Mini was a response to cheap Android tablets and cheapened the line. Some longtime Apple fans are upset that the Mac Pro line seems to be in limbo. Even though Apple products are still popular, many, many of the products that the company has released in the past year have been met with a much less enthusiastic reception than we saw with the first few iPhones and iPads.
Oh, yeah and… Apple Maps, anyone?
To be fair, I don’t see how Apple could keep inventing new markets in which to play. I expect that we will see future innovation from Apple, but for now, we seem to be in a release -> iterate -> release cycle in which Apple adds just enough new capability to a product to make it different from the previous model.
Perhaps the biggest innovation that we saw from Apple in 2012 was the introduction of the MacBook Pro Retina, a wildly popular – and expensive – laptop.
Apple is a unique case here. They make expensive products in a market that is looking for cheap. People have been willing to pay the Apple premium because of the Apple brand and quality and because Apple had features that set them apart from the competition. Today, however, it’s Apple playing catch up in many cases.
Hence the beating that the stock has taken.
For Apple to be Apple, the company needs to take risks, not just iterate its way through another Ives tweak and call it a day. The next iPhone needs to come in, say, 4 models, with screens sizes that enable some consumer choice; they need to create a near field communications market and use the iPhone as the leader in that area; they need to start thinking about the wearable computer market and what that could mean. There is so much opportunity that a company like Apple could exploit that it’s frustrating to watch them simply waste away.
Obviously, the death of the “heart” of Apple didn’t help the company’s long-term prospects especially since Jobs was so closely tied to pretty much everything the company did.
Three companies that have helped to shape today’s technology environment are all going through very different kinds of struggles and will emerge from these struggles as either has-beens, which all three are facing, or as powerful players in the technology market of the 21st century. To get to this place, though, all three companies need to evolve into a new form, a process that Dell is actively undertaking. The alternative is to watch these once-great players simply waste away as the Next Big Thing passes them by and is scooped up by smaller, more nimble companies that are hungry for the opportunity.