Soylent Green -- Now made with more women!
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.
Hers would have been a tough gig for anyone. Yahoo is asset-rich while at the same time unable to execute on its re-spackled but essentially unchanged business plan of being a web portal (remember those?). Yahoo’s Alibaba and Yahoo Japan stakes make it a target for activist investors and Mayer’s desire to show she can run an up business in a down industry was probably a fantasy right from the start. Still, she was doing what she thought would work.
Well it didn’t work. Getting the activists off her back by spinning-off Yahoo’s Alibaba stake not only comes with a big tax bill, the board has finally started to realize they were spinning the wrong part of the business. What really has to go is the depreciating asset that has come to be known as Yahoo’s core -- all the parts of the company except Yahoo’s Alibaba and Yahoo Japan holdings.
But don’t expect Yahoo to just flip the plan, keeping Alibaba and spinning-off to investors those parts of Yahoo with a yodel attached. I suspect that ship has sailed. What I think more likely is an outright sale of the legacy business to one or more Private Equity funds. They’ll take private what we all think of as Yahoo, strip it mercilessly of under-performing businesses and luxury assets (bye-bye Katie Couric), load-up with debt that shriveled carcass which they will then sell piecemeal to the only two real players left in the portal business -- Google and Microsoft.
What remains of Yahoo after this process is complete won’t be an Internet company but rather a very wealthy financial entity worth $50 billion or so. In short, a completely different company and one Mayer probably wouldn’t even want to run. And that suggests a completely different type of CEO for the successor company which makes me suspect that the candidates being considered in Wall Street speculation are either short-timers there just to engineer the Private Equity sale or they are the wrong folks for the job.
My candidate to run post-Yahoo is Kleiner Perkins honcho John Doerr. This is just my opinion, mind you, and not based on any insider information or discussions with Doerr, who is probably as surprised as you are to read this. But I think Doerr could use a change of venue following the Ellen Pao mess and this would give him an amazing third act in his Silicon Valley career. Just imagine the impact on Silicon Valley and the technology world of putting a very smart billionaire in his own right who has nothing left to prove in charge of investing $5 billion per year in young companies.
The next female CEO in jeopardy is IBM’s Ginni Rometty. Given all the negative things I’ve written about IBM since 2007 this should be no surprise, but the story is more complex than simple mismanagement. I’ve decided Ginni really believes in what she is doing. It’s still the wrong plan and I think bound to fail, but I now believe Ginni has decided to take even bolder moves in the wrong direction -- moves that should very quickly prove that one of us is right and the other wrong.
I’ve been told another big Resource Action (IBMspeak for layoff) will be starting in January, ultimately costing the company up to 30,000 heads. This will be accompanied by a change in IBM’s 401K plan, either reducing or eliminating completely the company’s matching funds. The cuts will be coming mainly in IBM’s Global Technology Services (GTS) division which is responsible for 60 percent of the company’s revenue. These announcements will be accompanied, no-doubt, by additional cloud investments, the idea being to sell investors on the idea that IBM will make up in its cloud business what it inevitably loses in GTS.
This will represent a significant strategy shift for IBM. For one thing, it’s Big Blue essentially abandoning its largest current business. GTS customers are already unhappy with IBM’s quality of service so what will be the likely effect on those customers of taking 30,000 more bodies from their already lousy service provider?
There are three ways I can see IBM playing these changes in GTS. The BIG PICTURE will continue to be IBM committing to cloud and making necessary changes to go with that, but on the more tactical level IBM can: 1) simply say it is getting out of services over time, customers and employees be damned; 2) recommit to GTS but as a significantly smaller operation offering white glove service to only IBM’s highest-margin customers (in other words abandoning many accounts), or; 3) make the headcount reduction not through a Resource Action but by selling outright some or all of GTS, generating more cash to put into cloud. Expect any GTS buyer to be Asian.
No matter which course she chooses Ginni will piss-off a workforce that already distrusts her, but she’s so far down this path-of-no-retreat that it probably doesn’t concern her. 2016 is the year that will make or break Ginni Rometty as IBM’s CEO and she appears to be okay with that. I think it is going to be a disaster but you have to kind of admire her all-in attitude.
Remember IBM’s CAMSS (cloud, analytics, mobile, social, security) strategy? I think we can expect some strategic streamlining, rolling at least two or three of these letters together. IBM is all-in on cloud so that won’t change and their security business I think has good prospects, but analytics, mobile and social are all at risk because it’s difficult to show financial progress in those areas. IBM hasn’t been especially successful generating new analytics business, their mobile strategy is too dependent on Apple (a total loon in IBM’s view) and IBM still can’t even describe its social business, much less break out financials. Ginni will find a way to spin this change, too, hoping to buy time.
But the bottom line for IBM seems to be a future in cloud and security (and mainframes, as a couple commenters point out below -- that’s not going to change, but neither is it going to get any bigger). To do that with characteristic Armonk gusto, Ginni will use the 401K savings as well as division sales, if any, to bankroll a major cloud expansion, hoping to leapfrog Google and Microsoft and move into the #2 position behind Amazon in that sector. Alas that’s #2 in a business that’s nowhere near as big as what IBM is abandoning, so the company as a whole will continue to shrink. Share buybacks will continue, the dividend will continue to go up, but there will come a point when IBM is a $40 billion cloud and security company. Maybe that will be a good thing, but what it won’t be is a consequential thing. It’s the end of what used to be IBM.
And finally we have one more female executive on the hot seat -- Diane Greene, who was recently hired to run Google’s enterprise cloud business. My friend Om Malik has a good analysis of this move here and I agree with him that it won’t work, though I have a few extra reasons why that Om doesn’t mention.
When a baseball team is performing poorly one of the cheapest moves the owners can make is firing the manager. It shakes-up the squad, hopefully scaring the high-salary players into trying harder. And it almost always works, especially if you hire a new manager who is just as good or better than the old one while -- this is key -- being obviously different in some major way. Well Diane Greene, who comes from VMware, is clearly different from the usual Google executive hire. It’s not that she’s a woman but that she’s coming from a high position in a company with a very different corporate culture than Google’s. "This time we really mean it", is the message that is supposed to be conveyed by this hire.
But it still won’t work. Google’s enterprise cloud business performance has been miserable, Om points out that VMware pretty much missed the cloud boat, and Amazon Web Services has a huge lead while Microsoft has an installed base of loyal developers that Google simply does not. It will take a miracle for Greene to be really successful in her new job and miracles have been few and far between lately at Google.
Here I’ll throw a couple more logs on the fire. Remember IBM appears to be about to bet the company on enterprise cloud computing. Google will have a hard enough time making headway against Amazon and Microsoft, but throw-in a kamikaze Big Blue and it looks even worse. But the biggest problem Diane Greene faces at Google is Google, itself. The company’s heart is just not in enterprise cloud. It never has been.
If you’ve ever pitched a startup idea to a really successful tier one venture capitalist -- some billionaire who sits on the board of at least one iconic company they see themselves as having helped found and made successful -- you’ll notice that they tend to hear your pitch through a filter that emphasizes how the startup will impact their already-successful #1 portfolio star. Your idea can be new and fresh and exciting and truly world-beating, but if you are pitching it to someone who got really, really rich from Yahoo or Google or Facebook, they’ll concentrate first on what this means to Yahoo or Google or Facebook. That’s because their incremental upside in that unicorn is bigger to the VC than the risk-adjusted upside of your little startup is ever likely to be. And that’s exactly the problem Diane Greene has trying to get Google to see its enterprise cloud business as something important to the company.
What’s important to Google is search, ad sales, and YouTube. Cloud, to Google, is an internal service that enables these other revenue generators. Slugging it out with Amazon may sound exciting, but what impact will it have on search, ad sales, or YouTube other than to distract internal developers and put those services at some risk? That’s why Diane Greene will have a very difficult time succeeding at Google, because her very success will be seen internally as a threat to the company she is trying to help.
It’s not a job I would want.