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

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 dot-com bust.

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

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  1. IBM, HP, Sun, Microsoft, Apple and the dot-com bust Presented by Zach Stone, Brent Steinke and Richie Rich

  2. Changing Times, Changing Companies • We will cover each of these companies product mix and strategies leading up to the 2001 dot-com 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.

  3. A Quick Look at the Stock History

  4. Before the Bubble Burst • Companies

  5. 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

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

  7. Microsoft • Founded in 1975 by Bill Gates and Paul Allen • In 1980’s 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.

  8. Sun Microsystems • ｷFounded in 1982 in Santa Clara, Ca • ｷProducts • o Servers • o Workstations • ｷAble to survive the Workstation Wars of the 1980’s • ｷMid 1980’s • o Teamed up with AT&T for a short time • ｧCame up with Unix System V Release 4 • ｧSun version was called Solaris 2 • ｷMid 1990’s • o Aiming to build network appliances • ｧSingle function computers • ｧNetwork computer (a diskless workstation) • o None of the business initiatives were successful • ｷLate 1990’s • o Successfully transformed into a vendor of large scale symmetric multiprocessing servers

  9. Apple • ｷFounded in Los Altos, CA in 1976 in a garage • ｷApple I was delivered in June of 76 and a total of 200 were built • ｷApple II came in 1977 and stood out due to high quality and a number of technical advantages • o Open architecture • o Color graphics • o Elegantly designed interface to a floppy disk drive • ｷApple III came in 1980 • o Started to struggle to compete against IBM and Microsoft • ｷ1983 the Lisa team won a race with Macintosh and was released with a GUI • o Lisa failed • ｷhigh price tag • ｷlimited software titles

  10. 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) • ｷ1990’s • o Greatly expanded its computer lineup • o Offered a mulititude of models • o Failed to adequately differentiate from one to another • ｷMid to late 1990’s • o Attempted to reinvent them selves • o Formed an alliance with IBM and with Motorola • ｷTrying to create a new computing platform

  11. 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.

  12. Benefits of Bubble… • Rise of e-commerce and tax free trade. • Individual investor empowerment. • Plentiful bandwidth for consumers

  13. 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.

  14. 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 it’s offerings.

  15. How did they affect each other? • 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.

  16. After the Bubble • Apple was the only company to experience significant growth.

  17. 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.

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

  19. 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.

  20. 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.

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

  22. If we had $10,000 to invest… • Split investment between Apple and IBM. • Apple- Intel/Mac, Innovative, high P/E, high growth. • IBM- Projected growth, consistent, strong dividend.

  23. 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.

  24. Thank YOU for listening! • Questions/Comments?

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