By Rick Sutcliffe
Hewlett Packard appears to have taken comments made here last month seriously enough to take defensive measures. But let's be realistic.
First, changing CEOs at this juncture (nearly 50% share value lost) is like tossing a single sandbag into the raging torrent pouring through a broken dyke.
Second, hiring Goldman Sachs Group to plan a takeover prevention strategy is a whistling in the wind. As the Spy said, they have transformed themselves from predator to prey. What remains to be seen once the various interested parties have done their due diligence is whether the takeover attention will come from a turnaround specialist, a breakup artist, or someone in the industry for whom the technology, talents, and patents have residual value.
Third, when you are but reactively defending against the consequences of your own errors and failures, you tend to create more new problems than you fix old ones.
Fourth, can HP (or whoever takes it over) really divest itself of its consumer products and go head-to-head with the now re-invented and well-positioned IBM in servers and services? The Spy suspects not. IBM saw a wave coming years ago, divested itself of small computers and decisively altered its entire business model. HP appears to be merely wallowing in doubt and indecision.
And fifth, it all seems too little and too late. The greatest damage is not so much to today's business, but to tomorrow's. HP has tossed away considerable assets of mindshare, trust -- faith if you will. As the Spy has said here many times before, marketshare lags mindshare by two to five years. That's as reliable a predictor on the down side as it is on the up side -- perhaps more so once the slippery slope brings out the vultures in the press to devour the weak.
The new CEO at HP is reputed to be making only a dollar in salary and the rest in performance bonus promises. She could come very cheap indeed.
Which brings us to RIM, Nokia, and MS, where the steady erosion of mindshare to Apple over the last few years is yielding the inevitable defection of customers and influx of short sellers today. RIM is in so much trouble that it appears ripe for a hostile takeover by a breakup artist. Perhaps Apple will buy the patent portfolio at auction. The only other asset of value there is the network and residual good will -- no longer much. RIM's tablet was ill-conceived, and the company did not itself know to whom it was being marketed. Colour it extinct.
Meanwhile, Nokia slides steadily toward oblivion, hurried along by the deadly embrace decision to adopt Windows in place of its own OS. Again, Apple could easily buy the whole company from spare change. But, why?
Microsoft was once able to get away with countering Apple's innovation by imitating its OS and pawning off an inferior product as the choice for business to run on "IBM-compatible" PCs. Even that strategy would not work today, for technology is now mass market and consumer driven. In the current arena one can only counter innovation by offering better innovation the next day (or, better yet, the previous day.)
With Apple seemingly having a lock on technological creativity (or at least the perception of same) the purely reactive competing enterprise is doomed. Worse than that, one could well argue that none of these three former leaders has lately been very good at executing even a reactive strategy.
Ironically, the now resurgent IBM saw its market cap surpass that of Microsoft this past week, as it pushed past its floundering and leaderless former ally into second place in the technology sector.
Winners, on the other hand can be found at Google (Android, now with over 40% of the smartphone market) and Amazon (the respected, if pedestrian, Kindle). In one sense, Google seems to be trying to imitate the once-upon-a-time Microsoft route--lever connections with sufficient partners and throw enough marketing muscle behind a fairly good imitation with a few bells and whistles of its own, and you may succeed for a time. Is Apple up to meeting that kind of challenge? Ask rather whether the Pope is Catholic, though the Spy does note some slippage in Apple's quality control over the last few years that might widen this small opening.
The case of Amazon is more complex, and for the longer term hinges around whether they can re-invent the Kindle -- the most successful eBook reader yet made -- as an iPad competitor. The Spy gives that prospect a definite maybe. Amazon has the infrastructure and the customer mindshare to pull it off. After all, no one else has come this close to a satisfactory electronic reading experience. But can they produce a superior product? Their first attempts at a kPad seem weak, but first attempts always are. Give it a year.
If they cannot trump the iPad in that time, they never will. On the the other hand, could the news reports that Amazon is interested in buying WebOS from HP really be credible? The Spy's first reaction is decidedly otherwise, but bizarre things seem to happen daily in the fantasy land that is the high-tech executive suite. Why would they want to? And on the final hand, Kindle is good but not great, so no one has yet gotten the electronic reading experience excellently right. Should someone else do so in the meanwhile, it is curtains Kindle.
That someone could be and should be Apple, but so far iCupertino does not seem interested in that market, for its software efforts on the iPad/iPhone/iPod have been anemic -- no way to build mind share in this market against such a lead. Too bad. The paper publishing industry is sick unto dying, and ripe to have someone issue the coupe de gras.
The stock market is passing judgement on more than just sovereign debtors and their misguided banks, but on the high-tech industry. Amidst a global rout, Apple's shares have held their value, even flirting with the $400 level, while those of their competitors have tanked. This too is a mindshare barometer, a harbinger of sales a couple of years down the road. Expect things to get better for Apple and worse for the others. One is tempted to make comparisons between the high-tech losers and the sick countries of Europe, excepting that a failure by, say RIM, would discomfit only stock holders, not bring down banks and other nations' economies as will that of Greece.
Other harbingers of note include Apple's decision to cease sales of boxed software for the download from its online store. This is more than a "create a new trend" decision -- it makes business sense, it is green, and it acknowledges the inevitable. Boxed software sold over the counter in a brick and mortar store is going the way of the passenger pigeon, as will the paper publishing industry as soon as someone gets the eBook reader right. True, it may mean the demise of many small stores, but it's a big win for both manufacturer and consumer, for costs will fall dramatically.
A mention of the (as of this date) upcoming October announcements from Apple seems in order for this section. Yup, first part of the month. Yup, iPhone products. You read it here some time ago. Right. consider it mentioned. Consider it doubtful it will be further discussed here after the fact, as such incremental upgrades to existing products, while they may further cash in mindshare to marketshare, do not fundamentally change a well-established market direction fed by previously earned mindshare.
Such would require a dramatically new market entry, such as an Apple television, an Apple network, an Apple telephone company, an Apple chip design and manufacturing facility, an Apple book reader done right (say, complete with a seven-inch iPad form factor product), an Apple e-ink touch screen foldable into one's pocket to obsolete newspapers and magazines, an Apple micro cloud for home and office (complete with a line of cloud enabled hardware of the kind that perhaps could be made by the remnants of what is today called HP), or an Apple foray into the services and server market (also purchasable via an HP break up auction or by merger with IBM if the anti-trust people would allow the latter.)
Oh, all right. That last crack was an ironic jibe at the company that could once have bought the whole of Apple for a song, but passed up the opportunity. 'Course, Apple would never have become what it did under the steady but unimaginative hand of the pin stripe suits.
Moving right along, the Spy was quite interested in the Thunderbolt announcement a while back, but notes that though it may operate at dramatically faster speeds than any previous interface, its actual arrival on the market is one of the slower advents in recent years. Indeed, before much has even begun to be sold, we learn it can support optical cables that could be even faster than the previously announced speeds. But when can the Spy actually buy a new pocket drive with a TB interface (among others), a cable to hook it up, and an adapter card for his existing Mac Pro? How about a way to connect it to his laptop?
Personal note PS
Last month the Spy mentioned running for the board of CIRA (the Canadian Internet Registration Authority), a non-profit corporation set up to run the .ca domain here in the frozen north. In the preliminary round of voting he finished about twelfth in a field of nearly seventy, but for good or ill it wasn't good enough as only eight or so will move on to the next round. Thanks for all the votes.
P.S. reprised from last month
What word did you use to fill in the title?
--The Northern Spy
Opinions expressed here are entirely the author's own, and no endorsement is implied by any community or organization to which he may be attached. Rick Sutcliffe, (a.k.a. The Northern Spy) is professor and chair of Computing Science and Mathematics at Canada's Trinity Western University. He has been involved as a member or consultant with the boards of several organizations, including in the corporate sector, and participated in industry standards at the national and international level. He is a long time technology author and has written two textbooks and six novels, one named best ePublished SF novel for 2003. His columns have appeared in numerous magazines and newspapers (paper and online), and he's a regular speaker at churches, schools, academic meetings, and conferences. He and his wife Joyce have lived in the Aldergrove/Bradner area of BC since 1972.
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