It is a financial engineering project. When you see it through that lens all of this makes much more sense.
Would you mind sketching the case for Apple as an example?
There is a sense they've given up on everything but the iPhone. Arguably, Apple keeps producing Mac computers only because iPhone devs need to run XCode somewhere.
The iPhone was introduced in 2007. It was very innovative at the time, though now it has dozens of Android clones. Total sales of iPhones seems to have peaked -- increases in Apple's profits have come from raising prices and managing margins.
This last bit would be the heart of the case that Apple is now increasingly financial in nature and therefore parasitic. They don't seem to be rolling out much in the way of new products, and certainly nothing as "change the world" as the iPhone was in 2007.
I think it is well known that Apple does not have the "division per product group" structure that almost all other large companies have. But Apple has an unusually narrow range of products for such a large company.
Even projects that Apple seemed excited about 6 or 7 years ago, such as home entertainment, no longer seems to be priority for them. I can tell you from personal experience, their Apple TV has been absolutely stagnant for years, and many of the problems, which I assumed they would eventually fix, have not been fixed.
Not true. They have three desktop form factors — Mac Mini, iMac and Mac Pro — and three laptop form factors — MacBook Air, 13" MacBook Pro and 16" MacBook pro. And each can be variously customised by CPU, memory, storage, etc. Most of these are updated with 1-2 year cadence.
Of course, it's much easier to make any case if you disregard the most basic facts within the first paragraph.
https://www.apple.com/mac/compare/?afid=p238%7CsboPJ4L5G-dc_...
> it's much easier to make any case if you disregard the most basic facts within the first paragraph.
Using apple marketing as a source of truth does not justify your snark. These "products" are small variations of grift.
With the AirPods, Apple has again managed to establish themselves as a leading player (in affluent market/segments). They did the same with smartwatches a while back. Their track record is strong. Probably will do the same with... $FutureProductCategory. Of course this is only partly due to engineering and product design - brand building and marketing also vital components. And I think it is fair to say, that while a strong engineering organization, Apple is not engineering-driven. They consider engineering as a means to deliver good product, not an end in itself.
Their newer MacBooks are going to be ARM based, which, I think, is mostly so that they have more people to develop apps for their phones and iPads. The rest of their customers will be buying them simply for day-to-day stuff wrapped in a pretty package.
I'm trying to think of a major Android phone manufacturer that does the same as Apple, but am coming up blank. Samsung, Sony, Oppo, etc, are all companies that have a multitude of products.
Maybe the only other comparison would be Google, but they were primarily a software company that is now making Pixel devices.So, not quite the same thing.
I think it's oversimplifying the situation to say "Apple wants ARM just for mobile", though. While that's certainly a benefit of having a single architecture to support in their product ecosystem, there have been plenty of threads on HN about how Intel's rate of chip improvements have been stagnating. The much-touted scaleup of their 10-nm chips ended up being delayed by 2 years, and their 7-nm chips aren't arriving until 2023, by their own (likely optimistic) estimate[1]. The more likely narrative is that relying on Intel became untenable both cost- and performance-wise.
1: https://www.theverge.com/circuitbreaker/2020/7/23/21336356/i...
When trying to surpass their last year's profit margins they shouldn't do it mainly by increasing the prices. Even though the frog doesn't leap when you increase the temperature slowly, shouldn't mean you should do it.
It is a hedge fund owned by apple, it has at least $237B under management.
They buy a business, it's black. They don't understand how the block works, but they need to to be more profitable, so they paint the IBM logo on everything, cut costs and headcount until it is green for a short while. Then it turns black, they rinse and repeat. They make it green a few more times and then finally instead of green, it turns red!
Then they combine some red blocks, bundle them together, make it look black or green and sell them off.
This looks like the biggest bundle jettison ever, but after acquiring Red Hat, that makes sense.
I hope Apple doesn't eventually succumb. Tim Cook's successor matters.
History is full of examples. Just look at the top 10 American companies by market cap, decade by decade.
1. American Telephone & Telegraph is now called AT&T and was in the top 10 within the last decade. 2. General Motors has dropped off the top 100 for a while, but was the world's largest automaker within the last decade. 3. E.I. du Pont Nemours dropped off the top 100 in the last few years, but was the world's largest chemical company within the last decade before selling off Dow. 4. Standard Oil Co of NJ is essentially ExxonMobil and has been the #1 largest company within the last decade. 5. General Electric has been in the top 10 within the last decade. 6. IBM has been in the top 10 within the last decade. 7. Texas Company is now called Texaco and is part of Chevron, which has been in the top 10 within the last decade. 8. Union Carbide had one of the world's largest industrial disasters, and its later history is involved with duPont above as part of Dow. 9. Eastman Kodak ceased being relevant in the last 20 years. 10. Sears Roebuck & Company has collapsed, last being the largest retailer in the 1980s.
tl;dr: Of the top 10 in 1960, half have been in the top 10 within the last decade (including the former #1) and one has been #1 within the last decade.
The claim about RCA seems unlikely. Radio Corporation of America stock grew very fast through the 1920s, peaking in September 1929 before the crash. However, even at the very end, it doesn't seem to even have been top 10 among industrials in the S&P index: http://piketty.pse.ens.fr/files/McGrattanPrescott2001.pdf#pa...
Instead, on that list we have companies like General Motors, General Electric, and Standard Oil of New Jersey that were still big in 1960 (and as mentioned above, some still so in the last decade).
Recently read "Lights out", about their problems in the last ~20 years, fascinating read, heartily recommended.
They sold trains and bought into oil & gas exploration. If high growth is what they're aiming for I'm not sure they picked the right horse.
Then again around here the rail lines are mostly owned by grain/grass farmer groups who ship product by rail and can load from their farm directly. Passenger lines that share the rails wait for those trains.
However, I'm not sure your conclusion about owning railroads is a nightmare is true. Berkshire Hathaway (Warren Buffet's company) bought Norfolk Southern in 2007 and it's done fairly well since. My understanding is that these are relatively stable businesses because the barrier to entry is large enough to stifle competition.
Just because it didn't retain the name "GE" doesn't mean the business is gone.
GE is an interesting example because, as a conglomerate, I would think it's better poised to strategically change the focus of it's business...maybe that's the point of the IBM spin-off.
I guess they will succumb faster than the old Xerox-age market leaders, because they are not focussed on consulting (= making other companies believe their constantly syphoning money from them brings value).
How is literally designing your chips to a point where they could be desktop class to replace x86 not innovation? What other company is doing this?
I can't imagine a "finance company on the out" deciding that they will bring all chip development in house.
That's more a sign that the company wants more profit by owning the top to bottom stack.
Perhaps they saw the existing chipsets as not delivering what they wanted or not scaling to fit demand, but it's still an investment not directly tied to product (their core competency).
Is bringing mobile/embedded and now desktop-class CPU design in-house really something one does as a cost-saving measure? Apple wants control over their entire stack, and sure, that relates to their business as a whole, but if this was solely about profit maximization surely there would be better strategies.
> it's still an investment not directly tied to product
I'm not sure I follow your reasoning here. Are you arguing it's not a direct investment because the CPUs aren't products in and of themselves, but rather components for other products? If so, I don't agree -- Apple's investment in, say, case tooling/manufacturing processes and equipment exclusive to their products is surely an investment directly tied to those products, right? The CPUs are likewise components exclusive to Apple products. That seems to me to be a pretty direct investment.
> but it's still an investment not directly tied to product (their core competency)
I don't even agree with this- Apple's core competency is the top-to-bottom customer experience, which they (almost certainly correctly) think they can improve by making their own silicon. But even if it was true, so what? Again, "investment not directly tied to product" doesn't make innovation "not count".
Heavily disagree, the only reason I would renew my mac in the next 6 month is because the ARM chip, and I will as soon as it comes out.
They pretty much had their hands tied. Intel failed to deliver for years now, and AMD never had a competitive offer on mobile and still does not.
Facebook, Google and Amazon are known to do their own server design; it wouldn't surprise me if any or all of them were doing custom processors (e.g. better virtualization features for their clouds, or processors that are more oriented towards their workloads). It doesn't sound like innovation, more like cost cutting; these processors aren't delivering a step change to end users, at best they're squeezing out a little more battery life. (By contrast e.g. that sapphire screen that was rumoured would have been innovative, because sapphire can do stuff that glass simply can't).
I'll be happy to praise Google or Facebook for advancements in CPU tech if and when they show us such a thing. Until then, publicly available facts are that Apple is innovating in that field and they're not.
They're designing CPUs - something that many companies have done and many companies will do. Big whoop.
IBM for one; https://en.wikipedia.org/wiki/Z/Architecture
I mean you asked, and it was obvious. Z is a more interesting architecture by far than the turd Apple is shipping.
Apple hasn't shipped their "desktop class" architecture yet.
Perhaps you are frustrated by the design constraints of low power mobile chips. Ok.
But if you're paying attention, architecture wise, it may be of interest to note that Apple's ARM chips, so far, have delivered good performance in their handheld applications by careful attention to sustained memory bandwidth. Competitors went with more CPU cores.
So there's some fun chip architecture to be had, even in 2020.
A desktop Apple architecture might use something like HBM for main memory, rather than DIMMs.
There's lots of room to innovate, out there in consumer computing.
Last time I checked, Z had 500gb/sec; more than 10x Apple's. Kind of wish IBM had won processor wars. Generally speaking whenever I look at their mainframe doodads, then look at the hot garbage being slung over at Amazon or whatever FAANG shit hole, it makes me sad. The company with the best engineers is an also-ran that mostly sells consultant hours. Maybe they'll sell off the mainframe business independent of the rest of the horse shit and it will undergo a renaissance. Doubt it though.
IBM has been building chips since day one. I'd expect IBM to divest their mainframe business eventually. The distinction you are missing is that usually "finance-driven" companies don't usually decide to pour billions of dollars into bringing in an already outsourced component in house that they hardly have experience in.
Furthermore, I don't see IBM using the Z to "innovate" - They aren't pushing the mainframes to anyone other than people who are already buying mainframes.
>Z is a more interesting architecture by far than the turd Apple is shipping.
The Z, an architecture for people who are pretty much already buying mainframes, is more interesting than a desktop class chip with what will probably be a completely unmatched in performance/watt? I don't see how the Z is more interesting than a chip that is finally attempting to challenge the 30 year x86 dominance in desktop computing.
Seriously though, some people just don't like Apple and they make a lot of noise about it.
Every Apple device I’ve purchased in the past few years has suffered from a defect: AirPods Pro, iPhone X, 2019 MacBook Pro, iPad. And this doesn’t include Batterygate.
> Apple is already on it's way to the trashheap.
That's why. Even if they're lost some of their lustre (and, if we're being literal, could be "on it's way" in the sense that it was the most valuable company in the world and might've dropped a few percentage points).
Not only the past few years, heck, they launched a phone you couldn't hold properly and people lapped it up. That's not stopped their offerings not only being the best in their class, but often the only products of note (AirPods, iPads, Watch...).
Apple doesn't have to beat Apple. They just have to beat the best of the rest - and apart from perhaps Samsung and Huawei in phones, they're looking pretty peachy still.
Furthermore, IBM has been in this state since the 90s, right? How are they still lumbering around? Why do companies fall for their sales pitch?
They deliver a good story to other inefficient companies. Those companies can tell their board that the "new Watson AI will optimize their operations in Q4"
Companies taken over and run by value extractors (finance/business/marketing) over the value creators (engineers/product/creatives) end up in this stagnated, picked apart state when the grace from the value creation or product wears off.
Value extractors need to learn that you must first create value before you extract it. The reason value extractors originally were attracted to the project/product is usually that it has created value.
R&D has very little value to an MBA so it is cut, but long term it is all the value of the company. Value extractors kill the whales before they even can grow up.
IBM is one of many, and their decline wouldn't really matter all that much in the grand scheme of things.
The changes could even be by the same people, I'm sure many from RH will not like IBM culture.
That said, Red Hat is doing well and I don't see them dying.
Disclaimer: I work for RH but opinions are my own
I would argue that this was never true--even from inception. HP was an engineering-first company--not IBM.
IBM was about sales and marketing--they would rent and finance equipment for you even way back.
Now, IBM had world-class engineering, but people forget that a lot of the major companies had great engineering until the 1980s.
It was always sales oriented and engineering was something they had to do to deliver some of the things they sold. This may be the first CEO that was actually an engineer.
Having worked for IBM and being a client of IBM in the past with large gov't agencies , i can also tell you that part of their success is liability perspective from the client. I know many of gov't big wigs who simply hired IBM not because of their talent but because if TSHTF they covered their arses with congressional hearing or lawsuits by saying what more could we do than hiring the vendor that made the product.
And that turning point is happening/happened.
IBM is old enough to understand the pitfalls of that approach.
In year zero it sounds great. Integration! Efficiency! And that works for a bit.
Then internal politics causes you to pass on opportunities that competitors take because taking them yourself would cannibalize sales in one of your other lines of business.
Then somebody else comes up with a better microprocessor than you, or better software, or lower cost manufacturing, and it's going to take your internal team five years to catch up. In the meantime all your systems are integrated with your in-house solution, so you can't switch, but the deficient in-house alternative makes you less competitive, so you lose all the customers who can switch easily.
Then you have to cut R&D because of the lost revenue and fall even further behind the competition, which leaves you in a death spiral where the most profitable strategy is to lock-in your existing customers and milk them as hard as possible as you circle the drain.
Or you can concentrate on doing one thing and doing it well, so that you don't risk sinking your entire operation as soon as you fail to execute flawlessly in any one of the six different major fields you've created an internal dependency on.
And in the areas where they do compete, they pour in top dollar to make actually competitive products.
And the opposite failure mode is just as bad -- you actually succeed in monopolizing the market and then get smashed by antitrust.
No one has the budget to compete
Apple TV+, Apple Music, Apple Arcade, Apple News+. Every single one of them were done to mask the profits of their Services Revenue. ( You could argue they provide decent value if you think they are competitive. )
I think that is where it all start to feel like Apple wasn't actually going in because they want to do better. They are doing it for numbers and finance.
And it irritates the heck out of me those money aren't being put or spend on better product and services ( on the actual product ).
They still make chips in the POWER architecture and the Z architecture for mainframes.
https://en.wikipedia.org/wiki/POWER9
IBM had the technical chops to create the likes of ARM, nVidia, or any number of big tech companies. They just never seemed to have the leadership capabilities to get out of their comfort zone. I understand the idea of keeping a business focused, but Alphabet and MS don't seem to struggle with managing a diverse portfolio of companies.
In the context of the thread, it's reasonable to say that both at 22 and 45 IBM had strong leadership (Watson Sr.) that successfully managed a diverse group of subsidiaries. Although in neither case are there any products like a modern digital computer involved.
Also doing business in Europe in the 1930s doesn’t mean that’s when they expanded. That business could have been decades old by then.
Some quick reading of the history of IBM and subsidiaries suggests they were doing business in Europe by the 1920s.
I suppose a z15 LinuxONE cloud offering would be attractive for them to offer because of all the built in observability, and also because those cores can be ridiculously oversubscribed before anyone notices.
As for pricing, they wouldn't need to pay their margins unless they eat into their other segments.
Full vertical integration isn't necessarily good business. Even Apple doesn't do its own manufacturing.
Motorola followed that path. They sold off their computer business in the early 1990's. Analog electronics (On Semi), and then the semiconductor business (Freescale, now NXP). Finally, they split the government biz (Motorola Solutions) from the phones, and that was first sold to Google, and what remained then went to Lenovo.
Motorola was a gigantic powerhouse, and through mismanagement, is a shadow of what it was. Such a shame.
And the value of Dell's business isn't in selling PCs, it's in other services around the PC.
Since ~2005 they have ~5x'ed their revenue. Which is pretty significant if you consider one of IBM's big problems has been declining revenue. Proving the problem with the business wasn't the business itself but IBM management.
https://www.forbes.com/sites/stevedenning/2011/11/18/clayton...
Unfortunately for Dell, anyone can make a PC.
IBM still designs chips - what they divested was their semiconductor manufacturing (fab) business.
Apple, Google, Amazon are all proving the value of vertically integrated product lines, while IBM chooses short-termism.
I thought the DoJ investigation stopped Microsoft from doing such things. What am I missing?
https://www.justice.gov/atr/case-document/file/503541/downlo... has the judgement. Read the following phrase and consider the size of the truck you can drive through it.
Nothing in this judgement shall prevent Microsoft from providing Consideration to any OEM with respect to any Microsoft product or service where that Consideration is commensurate with the absolute level or amount of that OEM's development, distribution, promotion, or licensing of that Microsoft product or service.
When IBM was competing with companies that got such "Consideration" and it couldn't, guess how that worked out?
On the other hand if any component is non-competitive, the other components in the stack are still obligated to give that unperformant component their business. Which reduces the pressure to perform and causes the overall company to gradually become less competitive.
I think a good example of this would be Intel designing chips and also owning the fabrication plants. It's no secret that Intel has been to fabricate their chips for a while now.
- Rometty (Chair): Technical degrees, held technical positions for first 10yrs at IBM, then in sales for the 90s, two decades working primarily with finance customers and she worked the PWC acquisition.
- Krishna (CEO): EE, Idea guy.
- Whitehurst (Pres): MBA
- Boville (SVP Cloud): Business degrees (UK)
- Browdy (SVP Legal): IP attorney
- Foster (SVP Services): Art degree, Accenture guy
- Gherson (SVP): Management degrees
- Gil (Dir IBM Research): EE/CS
- Kavanaugh (CFO): MBA
- Got bored
One trait is pretty dominant: decades at IBM
At IBM, to do anything you need to get permissions from 5 different semi-tech approvers. They have not done any real work in a while but read a few blog posts and come up with their own policies that contradicts each other. It is a pita to want to produce high quality code.
And that is just middle management. All those people higher up can define tech words but hardly anyone can actually explain the definition of those tech terms.
Also, Howard joined in May (which is an important one...because this press release is about Cloud not about HR/patents.)
"... Costco does not hire business school graduates—thanks to another idiosyncrasy meant to preserve its distinct company culture. It cultivates employees who work the floor in its warehouses and sponsors them through graduate school." https://www.bloomberg.com/news/articles/2013-06-06/costco-ce...
Their job is to make money; they don't care, and they are not paid to care about anything else.
Now... the question is, does someone with a different background care about the company vs making money in different proportions to the set of 'expert business administrators'?
I posit that yes, someone with a different background will have different priorities to simply 'make as much money as possible right now'.
Maybe even a chef.
And you lose power of market and economy of scale. Vendors can focus on developing their tech to be better, for everyone, as they get bigger R&D budgets, and you can just focus on improving things that are your true market advantage, not fighting in commodities market.
Note, that doesn’t mean that IBM is doing right thing. But vertical integration is extremely overhyped.
That z/OS has tens of millions of lines of code surprised me the other day. It's not like it needs to support 23 brands of mouse and dozens of GPU architectures.
They're divesting lower performing (but not money losing) ventures in order to not hide the performance of their higher performing pieces. This is so they can show the unsustainable growth that stock holders (still) demand from corporations.
They'll look great on paper for a while as you say, at least until their cloud business fails for some reason. When you average growth over a whole company, you do mask high performing parts with low performing ones... the same is true of cash flow and revenue.
If you get rid of parts of your company that are solid performers but aren't doing as well now, then you're getting rid of some of your safety net in the hope you won't need it.
IBM's most impactful business (in terms of wide use) is probably their research labs. Many, many chips today use SOI and copper interconnect technologies. That sort of research doesn't apply much to the cloud, but maybe they're hoping their AI stuff will.
No bets needed for what band of clowns will lead the hip, "value proposition" part of the company of course.
Plus this practice paints a huge target on your back for anti-trust action, as you are seeing now with the other monopolies. The bigger your monopoly gets, the more potential profit there is for whatever government agent can bust you up. This could result in promotion, christmas bonus, maybe even a corner office with a window. Very high stakes.
Staying at home, the best thing I found to play with is built "digital lego" MOCs using LeoCAD app + LDraw Parts Library.[0]
Seems like IBM CEOs, stayed at home for a long term, just found own "lego-like" game to joy ;)
Yes but I guess it was the IBM board whom decided that they could better invest in the money with various initiatives. IMHO, they are now (and for ~15 yrs) only choosing a safe route, not an innovative route.
Is it just me or does anyone else feel over the decades they've been divesting some of the best (long term) building blocks? A company with vertically integrated silicon, compute, networking, cloud, AI, Enterprise etc. seems like it could have such an edge if only they had focused those engineering capabilities on consolidated, high-margin end products.
I see the other big players going the opposite direction. e.g. Google and Amazon are building their own silicon for an edge in Cloud and AI.
So-called SexyIBM is just another cloud company without a distinguishing barrier to entry. Sure, their growth will look good on paper for a few years, but when Cloud becomes commoditized (which I think is already happening), the capabilities which could have created the kind of real innovation that opens up whole new industries will have all been cleaved away.