It isn’t easy being huge as both Apple and Microsoft are starting to realize. Both companies are incredibly successful and I’m not here to say either is in real danger, but both are suffering major structural challenges that will hurt them in 2016. What’s key for these predictions is how they respond.
I’ll deal with Microsoft first because there the challenges and solutions are both clearer than they are with Apple. I’ve been very impressed with Microsoft CEO Satya Nadella who I think hasn’t saved the company, because it didn’t need saving, but he’s a real improvement over Steve Ballmer. Nadella has done the best he can to get Microsoft in order and reinvigorated, not an easy job. His major remaining challenges involve Windows Phone and Windows 10.
First a look at my predictions from one year ago and how they appear in the light of today:
Prediction #1 -- Everyone gets the crap scared out of them by data security problems. Go to the original column (link just above) to read the details of this and all the other 2015 predictions but the gist of it was that 2015 would be terrible for data security and the bad guys would find at least a couple new ways to make money from their hobby. I say I got this one right -- one for one.
Readers love predictions so for 15 years or so I’ve been making lots of them during the first full week of each new year. The first time I did a predictions column it was because I couldn’t think of anything else to write about that day and the reaction from readers was so strong that I’ve been stuck doing them ever since. What started as one column per year filled with about 10 predictions has expanded over time to as many as 10 separate predictions columns because as I age I am becoming ever more long-winded. Sorry. It’s reached the point this year where this introductory column won’t even contain predictions, just a guide to the several columns that will follow in the next few days.
They will begin, of course, with a look back at my predictions from a year ago to see how smart or stupid I was. Historically I’ve been about 70 percent smart and 30 percent stupid in my predictions with that number more or less dependent on how vague I can be. Sorry again.
It seems oddly fitting that this week -- a week scarred by the bizarre and violent mass murder in San Bernardino -- that I received a LinkedIn invitation to connect with someone who listed this as their job description:
Install, maintain, and repair GPS, Wi-Fi, and security camera systems on tour buses. In 2010, working with grant money from Homeland Security, I installed security systems on a fleet of tour buses and I have been maintaining those systems since then. In 2011, I helped install multi-language listening systems on tour buses and have been the lead maintenance technician. Currently, I am project manager for upgrading a fleet of 50 tour buses with new GPS systems using Homeland Security grant monies. This requires coordinating with engineers of service providers to solve unusual, complex problems.
Soylent Green is the punchline of a bad joke told to me at the breakfast table by Channing, my 13 year-old son, but in a way it is fitting for this column about women executives in danger of being chewed-up by their corporate machines. And kudos to you if you caught the reference to Edward G. Robinson’s final film -- about an over-populated world where people are recycled into cookies.
First up is Yahoo CEO Marissa Mayer, whom I’m told is rapidly losing the support of her hand-picked board. Mayer, who is expecting twins, will probably not be returning from her upcoming maternity leave and Wall Street has begun speculating about possible successors.
Earlier this year two different research reports came out describing the overall cloud computing market and Amazon’s role in it. Synergy Research Group saw Amazon as by far the biggest player (bigger in fact than the next four companies combined) with about 30 percent market share. But Gartner, taking perhaps a more focused view of just the public cloud, claimed Amazon holds 82 percent of the market with cloud capacity that’s 10 times greater than all the other public cloud providers combined. I wonder how these disparate views can be possible describing the same company? And I wonder, further, whether this means Amazon actually has a cloud monopoly?
Yup, it’s a monopoly.
A reader pointed out to me today that Yahoo, minus its Alibaba and Yahoo Japan stakes plus cash, is now worth less than nothing according to Wall Street. This says a lot about Yahoo but even more about Wall Street, since the core company is still profitable if in decline. If I were a trader (I’m not) that would argue Yahoo is a buy since there’s likely to be a future point at which the company will be free of those other riches and even Wall Street will be forced to give the carcass a positive value.
But when I heard about the negative value story the first thing that came to mind was something my old friend Joe Adler said long ago about one of my startups. "Your company is starting to have a stench of death about it", Joe said. And Joe was right.
In my last column I wrote that Dell buying EMC is a great idea (for Dell) and left it to this column to more fully explain why that is so. It takes two columns because there is so much going on here in terms of both business models and technologies. As the title suggests it comes down to Michael Dell against the world and in this case I predict Dell will win, Cisco, HP and IBM will lose, Apple will be relatively unaffected and I don’t really know what it will mean for Microsoft but I think the advantage still lies with Dell.
One thing that is key is every one of these companies except Dell is publicly traded and answerable to Wall Street while Dell is for now answerable only to the gods of Texas bidness who must at this point be giddy with greed. So all of these companies except Dell have essentially the same playbook -- cutting costs, laying-off workers and outsourcing like crazy all to pay for the dividends and stock buybacks Wall Street defines these days as prudent corporate behavior. In contrast to this defensive game Dell can use its free cash flow to transform the company and dominate the market -- what 20 years ago we would have thought of as the right way to build a company. How quaint.
The Wall $treet Journal carried a story last week about Dell Computer possibly buying EMC, the big storage vendor, and this morning Dell confirmed it, pinning a price of $67 billion on the deal. There’s a lot to wonder about in this combination, which I think is pretty brilliant on Dell’s part even if I’m not generally in favor of mega-mergers. But it seems to me most of the experts commenting on the deal have it ass-backwards as Wall Street once again proves it doesn’t really understand technology business.
EMC has this large but aging storage division and a valuable subsidiary in VMware, of which EMC owns 80 percent. Activist investors have been rumbling that EMC should spin-off VMware to EMC shareholders because that’s the best way to realize the value of the asset and share it tax-free. Michael Dell appears as something of a white knight except he is expected, too, to get rid of VMware to finance the deal. The only thing wrong with this picture is that all the people who want to spin-off or sell VMware don’t seem to realize that’s where the value of this EMC deal lies for Dell.
A longtime reader and good friend of mine sent me a link this week to a CNBC story about the loss of fingerprint records in the Office of Personnel Management hack I have written about before. It’s just one more nail in the coffin of a doltish bureaucracy that -- you know I’m speaking the truth here -- will probably result in those doltish bureaucrats getting even more power, even more data, and ultimately losing those data, too.
So the story says they lost the fingerprint records of 5.6 million people! Game over.
Alex Gibney’s Steve Jobs documentary is available now in some theaters, on Amazon Instant Video and, ironically, on iTunes. It’s a film that purports to figure out what made Steve Jobs tick. And it does a lot, just not that.
I’m not a dispassionate reviewer here. More than a year before Jobs died I tried to hire Alex Gibney to make a Steve Jobs film with me. At that point he suggested I be the director, that he’d coach me ("It’s not that hard", the Oscar-winner claimed.) We talked and met but didn’t come to a deal. Later Gibney decided to do a Jobs film on his own -- this film -- and he came to me for help. We talked and met but again didn’t come to a deal. Nothing is unusual about any of this, but it made me eager to see what kind of movie he would make and how it would compare to the one I originally had in mind.
I’ve been quiet lately, I know. My sons’ Kickstarter campaign has taken a toll on their Venture Capitalist… me. I never before appreciated the physical effort that goes into managing what is, for me, a significant investment. They do the work but I pay for a lot of it and that brings with it the need to oversee -- something I’ve never been very good at doing. You’ll see the result, hopefully, next week.
While I’ve been so preoccupied a lot has happened in the technology world. Apple introduced a slew of new products and Alex Gibney released his Steve Jobs documentary. I’ll comment on both of these shortly. Yahoo was denied its tax-free Alibaba spinoff and so has to go to Plan B. I have such a Plan B (or C or D) for Yahoo, myself and will explain it soon. There are some new technologies you ought to know about, too. There are always those.
Starting in 1977 I bought a new personal computer every three years. This changed after 2010 when I was 33 years and eleven computers into the trend. That’s when I bought my current machine, a mid-2010 13-inch MacBook Pro. Five years later I have no immediate plans to replace the MacBook Pro and I think that goes a long way to explain why the PC industry is having sales problems.
My rationale for changing computers over the years came down to Moore’s Law. I theorized that if computer performance was going to double every 18 months, I couldn’t afford to be more than one generation behind the state-of-the-art if I wanted to be taken seriously writing about this stuff. That meant buying a new PC every three years. And since you and I have a lot in common and there are millions of people like us, the PC industry thrived.
While the US Government has been remarkably opaque about the recently discovered security breach at the Office of Personnel Management (OPM), we know that personal information on at least 21.5 million present, former, and prospective federal employees was lost. The Feds claim Chinese hackers are at the bottom of it, which is disputed by the Chinese government. This, to me, raises a number of questions, especially about the possible role of IT outsourcing firms and implications for organizations beyond OPM. Does IT outsourcing make your data more vulnerable? Yes, I believe it does.
It’s easy to blame the Office of Personnel Management for its own troubles. Oversight was lax. The agency failed a security audit and didn’t seem to do much in response. When shit hit the fan and it became clear that the identity of almost every living person associated in any way with Federal employment had been compromised, the agency lamely offered 18 months of identity theft screening but then didn’t have the money to pay for it. Pathetic. Both the Obama Administration and Congress are to blame, the former for mismanagement and the latter for "starving the beast" by limiting the OPM budget, pushing the agency toward cost-saving decisions that at least to some extent led to the current crisis.
I’ve been working on a big column or two about the Office of Personnel Management hack while at the same time helping my boys with their Kickstarter campaign to be announced in another 10 days, but then IBM had to go yesterday and announce earnings and I just couldn’t help myself. I had to put that announcement in the context you’ll see in the headline above. IBM is so screwed.
Below you’ll see the news spelled-out in red annotations right on IBM’s own slides. The details are mainly there but before you read them I want to make three points.