Posted on 12/22/2008 5:36:36 PM PST by SeekAndFind
On Sunday, Chris O’Brien of the Silicon Valley Mercury News wrote about four dying Silicon Valley icons. For some reason, it wasn’t posted to the website Sunday or Monday, but it’s there now. He aptly summarizes the problems of three of these companies, and I recommend anyone interested in innovation (or the Valley) to read the analysis.
In my reading, two of the companies are (effectively) single-product companies where their product is no longer compelling and increasingly no longer competitive. Advanced Micro Devices (AMD) once was threatening Intel (INTC) on the performance front, and now they are asset stripping in hopes of raising enough cash to stay alive. Palm (PALM) created the pen-based PDA and for a while was a leader in smartphones, but their Treo remakes have long since run out of steam and their last Hail Mary wasted precious time and money.
The other two companies are diversified systems companies which were built around the idea of integration and economies of scope. Their stories diverge somewhat, in that Sun Microsystems (JAVA) was the dominant firm in a category that’s been dying since the end of the dot-com era, while Yahoo (YHOO) is #2 in a category that’s still very much alive.
Still, there are important parallels. Sun has been cutting its way to greatness for years, and is still floundering in search of a strategy that will somehow make up for its loss of a raison d’être in a world of commodity Linux boxes. (Thank you, Intel).
Yahoo has only recently begun to emulate Sun by cutting its way to greatness — with cuts of 7% in February (announced in January) and 10% earlier this month announced back in October. Even their cutting is not being done well: pre-announcing them makes it like a water torture, and they are also cutting staff from its winners and not just deadweight.
However, Yahoo has been floundering for as long as Sun — ever since it hired Terry Semel back in 2001. Semel was cast off in 2007, but his successor hasn’t done any better.
O’Brien puts Yahoo in a separate category, because he thinks they will do a deal with Microsoft (MSFT) in 2009 that will pull them out of a tailspin. But I think Yahoo’s problems are systemic, and even if they make nice with Microsoft, that won’t substitute for a lack of a winning strategy.
So will Yahoo die in 2009? No, but neither will Sun: it has enough inertia (through enterprise sales contracts) to keep limping along for another decade or more, as did DEC and Unisys (UIS) and Cray (CRAY) and SGI and all the other computer systems also-rans.
Still, if Yahoo doesn’t get a better CEO and better strategy, all its point successes (like Flickr and mobile) will be for naught.
.
AMEN.
for the silicon valley ping list
I would have added IBM a generation ago, and they rebounded. Also, so has Apple. I think National Semiconductor is in a death spiral since they hired Halla. And Lockheed seems to be moving out of the area.
Things are so bad here that I’m scared to death my retirement fund will be tapped by the dems!
Did I mention that my retirement fund consists of aluminum cans?
Darn, posted too soon. HP. Hard to tell if it’s a death spiral or just a flat spin. But like Intel, they will not be building any infrastructure here nor adding jobs.
IBM as so much more depth that Sun. IBM had the OS, developers and a huge install base just for them. IBM was DOG backwards.
I have 4 pcs in my house, all of them have AMD processors. I never hear many complaints about them, what puts them in the death spiral category?
Computers, hard and soft are an aging technology.
Perhaps clean domestic energy is an attractive market.
I think you mean politically-correct domestic energy.
Palm’s product space has been taken over by BlackBerry and Apple. They were a lousy company even back when they had a good product. The company has managed to destroy over 99% of shareholder equity since their IPO. They are loosing $6 plus a share. I feel sorry for their employees but frankly, they deserve to die.
AMD could well be taken over by someone Chinese (like the PLA) who want their microprocessor technology and global footprint. Not sure that this is (as in ‘sure that this is not’) a good thing.
Sun will probably go out of the server business and try to reorganize as a much smaller software company selling Open Office and supporting some flavor of Unix. Not sure this will work.
Yahoo will flounder along and probably get taken over by someone.
Me too. I have built probably near 100 AMD computers too. The price to performance is usually excellent. All mine are stable and have run cooler than comparable Intel products.
Guess I will need to stock up on AMD processors before they pull the plug. What a shame, now Intel will have not competition and will be able to charge what they want (within the market).
Sun needs to wise up a bit but they do have consulting contracts, some decent server hardware, Java, government contracts, and Solaris has some pretty neat features. The ZFS filesystem is wonderful, truly a breakthrough as it gives commodity hardware and some disks the ability to become a pretty good fileserver, replacing a $50K dedicated hardware box.
Mr. West is mistaken. Though AMD has major problems on the processor front, it is hardly a “single product” company. AMD purchased ATI and is a major player in the graphics market.
Wasn’t it Yahoo that turned down a gazillion dollars from Microsoft?
Currently Intel processors are much faster and use less power. AMD hasn’t kept pace.
The only problem is they probably will.
Oh, crap. Now well all get stuck with that goofy ass Socket 775.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.