Forecasts 2009, IT Companies: Intel, Apple, Microsoft
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Posted on January 13th, 2009 by Robin Bloor in IT Trends
It will not be surprising if every vendor I mention here sheds staff this year. Staff cuts and revenue reductions are poor ways to judge the success of companies in these parlous times. The economy is messing with our metrics. We should judge success by:
1. Movements in market share
2. Sustainability of business strategy
3. The profitability picture (not short term, but over the medium term - because there may be quarters where profits vanish into necessary restructuring)
Having said that, let’s consider the situation of Intel, Apple and Microsoft in that order…
Intel
Intel presents a mixed picture. It has done serious competitive damage to AMD in the x86 market. So in terms of market share, the situation looks positive, despite the fact that Intel’s revenues will inevitably suffer to some degree this year. The competitive challenge for Intel is that it must now compete with Nvidia and AMD’s subsidiary ATI in the graphics market. Graphics is where the action is on PCs, Macs and laptops, because the graphics card is doing most of the work. (To be honest you could put a puny cpu in many of these devices and as long as you plugged in sufficient memory and a powerful graphics card, the user wouldn’t notice.)
In theory Intel should be feeling the heat in the graphics market from both Nvidia and ATI, who appear to have superior technology. Nevertheless, Intel dominates the market and it actually increased its market share last year. It now has 47.3% of all desktop and notebook graphics, mainly because it has 57.1% of the notebook market - and that by the way, is the market that’s growing.
Aside from these competitors, there’s also IBM, which - just in case you hadn’t noticed - has about 100% of the home games machine market (if you only count the most recent consoles from Sony, Nintendo and Microsoft.) As far as chips are concerned, IBM, like Intel, AMD and Nvidia is all about graphics. Ultimately, a computer game is 99.99% graphics and the most advanced graphics applications from that perspective run on IBM chips. There can be little doubt that IBM will ultimately come into direct competition with these other players. The battleground for that fight will most likely be around the “home entertainment center.” It’s too early to know how that market will pan out.
In my view Intel is doing better than it could have expected and that may be due to the effective leadership of Paul Otellini. I don’t think we need be concerned for Intel this year, unless we witness its market share slipping in any of its important markets.
Apple
My coverage of Apple is on-going so I’ll just upgrade it a little here. In case you’re unaware of it, my view is that Apple has broken Microsoft monopoly irreversibly, with the consequence that it can no longer be stopped in the desktop market or the laptop market. Microsoft, Dell, HP et al will simply have to get used to Apple having a growing share of those markets (by revenue.) I’d go as far as to say that “the Mac is now a saloon car, while the PC is a small run-around.” The products are not really in direct competition. If you want a Mac then you don’t really want a PC - and vice versa.
The more interesting aspect of Apple is that the iPhone is a much bigger success than anyone (including Apple) ever expected it to be. Apple has single-handedly recreated the mobile phone market and recreated it in its own image. The App Store is a huge success that must be dispiriting for RIM and Nokia (the two also-rans in this market.) It was bad enough for them that Apple redefined what a mobile phone should be, now they’ve redefined what the business model should be. The mobile market is going to be important this year because preliminary signs indicate that it may not stop growing - at least in terms of corporate investment.
In a way it’s logical. There’s a technology revolution going on that reminds me a little of the application avalanche that occurred as the PC market developed. The old mobile phone is dying and now everyone and his country cousin wants to be in on the new device, which is at once (and by varyng degrees):
A mobile phone
A PDA
A geographical reference resource with GPS
A games machine
A web access device
A music/video player
An ebook reader
A camera
From here on in, it’s Apple’s to lose and there’s no indication that it will lose it. Most likely it will establish a monopoly that’s every bit as solid as it’s iPod monopoly has proved to be. The iPod is, of course, starting to fade, but the iPhone is much more powerful.
The recession will not stop Apple’s momentum, even if it succeeeds in holding down its share price.
Microsoft
Microsoft is looking very much like a sunset company these days. It was no secret in Redmond or anywhere else that it needed to go beyond the gushing revenues streams of Windows and MS Office and reinvent itself. It’s a rare event in industrial history that any vendor gets to be in such a powerful position as Microsoft achieved in the 1990s and it’s more than surprising that it has failed so clearly to carve out more territory.
Taking it piece by piece:
Server market: In the server market Microsoft has done really well. As far as business growth and technology direction is concerned, it has performed powerfully after a faltering start. This area of its business remains healthy, is populated by good products and is much to be admired.
The XBox: Had it not been for a surprising innovation from Nintendo, the XBox would now be the dominant games console and qualify as yet another stellar Seattle success. You cannot even accuse Microsoft of having failed to innovate. Microsoft has done well. It’s just that Nintendo did far better.
The Web: Microsoft has compeltely failed to dent Google’s dominance. Despite Ray Ozzie’s new initiative and his unbridled optimism, this is unlikely to change any time soon.
The Mobile World: Game, set and match to Apple.
That’s a mixed pciture and none of it would matter much were it not for the threatened state of the jewels in the Microsoft crown; Windows (as a PC OS) and MS Office (as PC Apps). Both of these are now under threat.
Windows Vista quite simply failed to compete with Apple’s OS X. This broke the Windows monopoly. So far it’s not as much of a disaster as it could be. Microsoft cannot compete effectively with Apple, because Apple does the whole business stack from the iron to the apps, including the channel to market. Apple can innovate at points in that stack where Microsoft has no position - and it does (think hardware design, think Apple Stores, think iTunes, etc.) The truth is that Microsoft cannot actually compete effectively with Apple at all.
This is not as much of a disaster as it might be, because Apple doesn’t want to own the PC market. But Microsoft’s partners (Dell, HP, Acer et al) are hurting. There is a possibility that one or two of them will hitch their wagon to PC linux in one of its varieties and head off in a non-Microsoft direction. Microsoft has played a very effective game of whack-a-mole (or whack-a-penguin perhaps) with Linux so far, smacking it down wherever it crops up. The more successful Apple is, the less likely that a whack-a-mole strategy will work against Linux.
The brightest jewel in the Microsoft crown is MS Office. There’s little doubt that MS Office in its various forms (Star Office from Sun, Open Office and Lotus Symphony) is drawing some users away from Microsoft and so are Zoho and Google Apps, but so far it doesn’t really qualify as a haemorrhage. If and when it does, there will be wailing and gnashing of teeth in Redmond. |
