Wild and woolly couple of weeks in tech world ‘out with the old, in with the new.’
_ HP in disarray. Apotheker, their 3rd CEO since 2005, discontinued their mobile OS, which got OK reviews technically but was an initial flop, said they were looking at strategic alternatives for the PC division, and bought Autonomy, a UK enterprise software company. Communications were disastrous, twice now they had to rush out earnings after they were leaked, top PR guy took the fall and was sacked. Only a few months ago WebOS was going to be everywhere, and just like that it’s gone.
_ As James Stewart noted, it’s as if Ford hired Alan Mulally from Boeing, and 6 months later announced they would make airplanes. (You could take that a step further, and say it’s as if they hired an Airbus guy and said they would make airplanes in Europe. And HP is a foundation and pillar of Silicon Valley, the prototype of the startup in the garage.)
_ When the current HP was assembled with the Compaq merger and the divestiture of medical and instruments, it was sort of the new IBM, the only broadline hardware company with an end to end line: PCs, workstations, servers, printers, storage, network equipment. Workstation market went away (Itanium fiasco, market went to Linux high end PCs). Post-Vista, PC market is not where the growth is and is ultracompetitive. They haven’t made any inroads in mobile and cloud. They have more than held their own in printers and are players in networking and storage.
_ End of the line _ the integrated broadline hardware computer company is dead. Hardware gets commoditized fast, and no one can be a one stop shop. The new kings are software companies and services/integrators. HP bought EDS, Dell bought Perot.
_ One rumor was Oracle might make a play to buy HP _ former CEO Mark Hurd is president, and they own Sun. Another crazy one was Microsoft _ so Microsoft could start selling a hardware properly integrated with the OS, like Apple (ridiculous).
_ As we transition to the post-PC mobile/cloud era, old-line companies in crisis might become a continuing theme. Microsoft, RIM, Dell, Intel, Cisco, disk drive manufacturers are selling at decidedly non-tech PEs.
_ How do you tell a tech megacap that’s cheap from one that’s a value trap? I apply the hipster-Ivy-League-graduate-on-food-stamps test. (somewhat gratuitous link). If your modern hipster grad wouldn’t touch it with a ten-foot pole, and will view it as about as relevant as the technology in Mad Men, it’s probably a sell.
_ Cigar butt stocks _ might have a few puffs left in them at the right price, but irrelevant barring miraculous turnaround: Microsoft, RIM, disk drives. Might seem crazy putting Microsoft in here, and there might be value at the right price _ but Microsoft hasn’t executed in years, they have little to offer in the growth sectors, and their old playbook of eventually getting stuff right, and using their monopoly and muscle, simply won’t cut it.
_ Lost some mojo but still relevant: Intel (Mac chips, cloud server chips); Cisco (poorly managed but incorrectly lumped in with dinosaurs _ even a mobile/cloud world needs network equipment, Cisco is still dominant, incredibly cheap when you take out the cash on their balance sheet, and exposed to catalysts like IP video, Voice Over IP, and IPv6)
_ Big winners: Apple, Google, Amazon (Kindle and stunning cloud platform-as-a-service offering), Facebook, VMware. Of these Google looks not unreasonably priced, the others seem a little more risky.
_ Google _ huge shift with the Motorola purchase. The patent war went from a cold war to a shooting war, and munitions in the form of good patents got expensive. Google could be considered the technology leader, but Apple still wins on slickness, integration, and marketing. Android has suffered from carriers crippling it, different hardware and form factors meaning some devices were not as good as others. By integrating better and generating more revenue, they can subsidize carriers more. Are these the Droids Google is looking for?
_ Apple _ huge transition with Jobs departure. Can they keep pulling rabbits out of the hat after Steve Jobs? Android now ships more units. New phones out shortly. Rumors of a big TV skunk works program _ since they own iTunes and the iPad, could they build on Apple TV and make something that is the hub of the living room, Internet video etc.?
_ Amazon _ new Android-based tablet upcoming.
_ Some iPhone suppliers look pretty reasonably priced (STM, GLW), and smartphone growth has a long way to go, but hard to tell how big a moat they have. Samsung is an interesting story _ they provide a lot of the iPhone, CPU, flash chips. And they have the best Android devices in the Galaxy and Galaxy Tab series. But that success might make them lose their status as a favored Apple supplier. Meanwhile Google went with Motorola. (of course, Samsung does a lot of stuff besides mobile _ still, executing well and doesn’t look expensive).