Four Dying Silicon Valley Companies

Seeking Alpha ^ | Dec 22, 2008 | Joel West

[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.

[sasquatch]

one more:

Mercury News

[martin_fierro]

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[antiRepublicrat]

I have 4 pcs in my house, all of them have AMD processors.

I was a long-time AMD fan for personal use, from the 486-100 through later Athlons. This was especially true in the days of the Pentium 4 architecture where Intel's chips truly sucked.

But for the last couple years Intel has been on the Core architecture, more powerful and efficient than any of AMD's offerings. AMD simply hasn't been able to keep up, and they're hurting because of it.

[antiRepublicrat]

Wasn’t it Yahoo that turned down a gazillion dollars from Microsoft?

IIRC, the yahoo who was running Yahoo at the time no longer works for Yahoo.