3 charts that show how HP, Microsoft, and Dell are losing the tech war
A day in the life of an average tech consumer in the late 90s might go something like this: Power up your Dell or Hewlett Packard computer with the Alienware stickers on it, then wait five minutes while your computer tower, powered by state of the art Intel chips, blinks and buzzes with mysterious anticipation until a blue, cloud-peppered sky opens up, a short orchestral interlude fills your den, and your journey is finally complete: You're ready to do all the Minesweeping and AIM-chatting that Windows 98 has to offer.
Fast forward to today: Microsoft has lost hundreds of billions of dollars in worth since 2000. Every HP business unit except one has been down in revenue year after year. Dell's earnings are down 72 percent from last year. Even Intel, once unbeatable in the chip market, shows signs of weakness.
The biggest and most obvious reason the tech giants of yesteryear have floundered is that PC sales, which drove the success of the first generation of computing companies, have stalled while mobile devices have soared:But how do these old mainstays compare to the tech darlings of today? The Apples, Googles, and Amazons that we all fawn over?
We made two more charts to put things in perspective. The first shows revenue for seven big tech companies over the past five years, four of them from the old school and three of them from the new school.
As you can see, hardware is still a big revenue driver, with HP, Microsoft, and Apple leading the pack. But the disconcerting trend, especially for HP, Dell, and Intel, is the rate of growth. All three companies saw shrinking revenues since 2011 while Google and Amazon, which both provide an array of software and cloud services, have posted steady growth over the past five years. In Microsoft's defense, it's fared much better than HP and Dell, which supports Kevin Kelleher's claims that, as unfortunate as Steve Ballmer's reign was at times, it could have been a whole lot worse.
But revenue only tells one side of the story. Companies like Google offer many of their products for free so comparing its revenue to a PC manufacturer like HP doesn't make sense. For that, here are the same seven companies measured by net income/profits:
As you can see, HP is in serious trouble, having lost over $12 billion in the 2012 fiscal year. (Don't expect next year to be quite so bad: The main reason behind the huge loss was HP's disastrous Autonomy writedown). Meanwhile, Microsoft doesn't look so good either. Its profits were undoubtedly hurt by the $1 billion Ballmer spent on parts for unsold Surface RT tablets. Meanwhile, Intel and Dell are treading water; Google is experiencing modest growth; and Apple is absolutely killing it.
The one anomaly is Amazon. The company and its ambitious CEO Jeff Bezos are famous for running razor-thin profits, and during the last fiscal year, it even posted a tiny loss for the year. But as the previous chart shows, its revenues are still growing at a fairly impressive rate. And even if profits are low, the company has found a way to stay relevant in almost every area of the technology spectrum, from software to hardware to media to ecommerce.
So will these trends continue or is there anything Microsoft, HP, and Dell can do to reverse it? Krish Ramakrishnan, a former general manager at Cisco, tells the New York Times that a huge paradigm shift is needed to keep the old guard afloat: “They have to move from selling mostly hardware, to selling software, while all the sharks are feeding off them.”
Meanwhile, Intel needs to embrace mobile markets more aggressively. Almost three quarters of Intel's revenue comes from chips made for PCs, and the company can't afford to rest its fortunes on the back of a dying industry.
But while the future may seem grim for many of these companies, crazier turnarounds have happened. Don't forget a certain technology company in 1997 that ran losses for two straight years, posted middling revenues, and had no choice but to oust its CEO and replace him with a notoriously combative individual.
That company was Apple.
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