IBM, HP, Sun, Microsoft, Apple and the dot-com bust

Presented by Zach Stone, Brent Steinke and Richie Rich

Changing Times, Changing Companies



 

We will cover each of these companies product mix and strategies leading up to the 2001 dotcom bust. Then we will cover how the stock crash affected the firms and the changing environment. Lastly we will discuss how each company responded and what product and strategy changes they have made.

A Quick Look at the Stock History

Before the Bubble Burst

 Companies

IBM
Started as CTR, changed name in 1924  Antitrust lawsuit in 1969  Teamed up with skunkworks to build IBM PC  Loss of nearly 5 Billion in 1992  Shifting focus from components and hardware to software and services


HP
Started in 1939 by Bill Hewitt and Dave Packard  First product, 200A.  Invented many of the first calculators.  In 1980s they came out with printers and scanners as well as multi-use units.  In 1994 HP began outsourcing manufacturing.


Microsoft
     

Founded in 1975 by Bill Gates and Paul Allen In 1980s flooded the market with IBM PC clones, used IBM contract. MS-DOS dominated home PC market as a variant of UNIX. Marketed the Microsoft Mouse in 1983 and entered computer hardware market. Bill Gates began to promote OS/2 as the future of computing, declared OS/2 partnership over in 1991. In 1995 introduced Windows 95 and transitioned the company towards consumers. Followed with Windows 98.

 

 

Founded in 1982 in Santa Clara, Ca Products  o Servers  o Workstations Able to survive the Workstation Wars of the 1980s Mid 1980s  o Teamed up with AT&T for a short time  Came up with Unix System V Release 4  Sun version was called Solaris 2 Mid 1990s  o Aiming to build network appliances  Single function computers  Network computer (a diskless workstation)  o None of the business initiatives were successful Late 1990s  o Successfully transformed into a vendor of large scale symmetric multiprocessing servers

Sun Microsystems

Apple
 Founded in Los Altos, CA in 1976 in a garage  Apple I was delivered in June of 76 and a total of 200 were built  Apple II came in 1977 and stood out due to high quality and a number

of technical advantages
   

 Apple III came in 1980

o o o

Open architecture Color graphics Elegantly designed interface to a floppy disk drive

 1983 the Lisa team won a race with Macintosh and was released with a

o Started to struggle to compete against IBM and Microsoft o Lisa failed  high price tag  limited software titles

GUI


Apple Continued
1984 Macintosh was launched  o Initially sold well  o Follow up sales not so strong  o Sales did change due to intr0duction of the LaserWriter (first laser priingter)  1990s  o Greatly expanded its computer lineup  o Offered a mulititude of models  o Failed to adequately differentiate from one to another  Mid to late 1990s  o Attempted to reinvent them selves  o Formed an alliance with IBM and with Motorola  Trying to create a new computing platform


The Bubble Bursts



  

Perpetuated by firms believing that to succeed they simply needed to increase market share. The three reasons below are the main causes of the tech bubble burst Network effect- Increase users Speculative venture capital- A Frenzy of investments Changing business landscape- Cheap money, low interest rates. Workers investing in their own company stock.

Benefits of Bubble
 Rise

of e-commerce and tax free trade.  Individual investor empowerment.  Plentiful bandwidth for consumers

How Were They Affected?

    

IBM- Benefited from increase in use of Linux software and their hardware. HP- Moved into service sector. Microsoft- Forced to improve software because of Linux, but also because of antitrust suit. Sun Microsystems- Declined as a result of the rise of Linux. Apple- Stock dropped but the release of the iMac and iPod have spurred growth.

The Bubble and Linux grow

In 1999 there saw the rise of Linux, aggressively supported by IBM and HP created the prevalence of open-source software.  Linux put pressure on Sun who sells proprietary Unix and caused Microsoft to improve its offerings.


   

The massive push for the adoption of Linux by IBM pushed Sun (Unix) into a downhill slide. The adoption of Linux as an OS option spurred Microsoft to develop better software. HP began to focus on services instead of hardware and therefore buffered itself. Apple continued to sell proprietary technology and therefore saw very little computer sales growth. The advent of the iPod was a new driver for growth.

How did they affect each other?

After the Bubble

 Apple

was the only company to experience significant growth.

Sun Microsystems
 Very

aggressive company.  Changed strategy to specialization.  Allied with Fujitsu and AMD.  Sungrid.  Consistently produced losses.  Forward EPS -.15, P/E -30.1.

IBM
Very consistent company.  Changed focus into services and consulting.  Changed CEOs, grew patent portfolio.  Sold PC division to Lenovo Group.  Solid Financial Footing  Forward EPS 5.85. P/E 13.8.


HP
Good at being mediocre. Followed market at nearly every turn.  Supported Linux/FOSS.  CEO Carly Fiorina  Controversial Compaq merger.  2005 ApplQ acquisition.  Workforce reduction lead to profits.  Good growth prospects. Forward P/E 15.5.


Microsoft
 History

of success  Overcame Monopoly antitrust lawsuit.  Slow growth of stock.  Forward P/E 17.8  Stock has dropped 12.4% in last 12 months.  Windows Vista.

Apple Computer
    

iPod/iTunes Intel Processors Mac OS/Windows/Linux Boot Camp Financials- Forward P/E 31.1, EPS 2.08

If we had $10,000 to invest

 Split

IBM.  Apple- Intel/Mac, Innovative, high P/E, high growth.  IBM- Projected growth, consistent, strong dividend.

investment between Apple and

In a global changing environment

Firms need to innovate and address new technologies and issues if they wish to succeed.  Strong alliances can create new standards or disrupt old ones (Linux VS. Unix).  Firms must always strive to maintain a competitive advantage if they wish to succeed.


Thank YOU for listening!

 Questions/Comments?