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Strategies & Market Trends : Gorilla and King Portfolio Candidates
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To: Lizzie Tudor who wrote (53555)1/29/2003 4:36:47 PM
From: Mike Buckley  Read Replies (2) of 54805
 
Lizzie,

I wouldn't have predicted a shakeout quite like this in 2000.

Not too many people predicted the dramatic reduction in IT spending that was to occur. However, if any of us had, I suspect (I hope) we would have predicted that those that would have been affected the worst would have been the start-ups and the companies that were relatively early in their stage of development. In my mind, all companies in that relatively early stage of development by definition were not yet strong and thus were especially susceptible.

but in practical terms this recession seems to be letting some medium-strength companies from the 90s emerge as stronger while some former giants are falling. So far I have beas, Macromedia and Hyperion as improving their competitive position, while Siebel (still a question) and obviously I2/ariba as giving way to SAP, Oracle and Psft.

I'm confused. Within a particular competitive space, what medium-strong or weak company has become stronger and what giants' competitive position in that same space have become weaker? If you're making comparisons between strong and weak companies operating in different competitive arenas, I believe you're comparing apples with oranges. My comment about the strong getting stronger and the weak getting weaker applied to companies operating within the same competitive arena.

If you're using i2 as an example of a medium-strong or strong company giving way to a weaker competitor, it might be because our definition of strong is different. In my mind, a company such as i2 whose core operations fairly consistently generate increasing negative free cash flow as it increases revenue over long periods of time is not a medium-strong or strong company. By contrast, Siebel's core operations have generated increased free cash flow in record amounts in six of the last seven years.

--Mike Buckley
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