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

Presented by Zach Stone, Brent

Steinke and Richie Rich

Changing Times, Changing Companies

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.

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.

A Quick Look at the Stock History

A Quick Look at the Stock History

Before the Bubble BurstBefore the Bubble Burst

Companies Companies

IBMIBM 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

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

HPHP 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.

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.

MicrosoftMicrosoft 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.

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.

Sun MicrosystemsSun Microsystems ｷｷ Founded in 1982 in Santa Clara, Ca ｷｷ Products

o Servers o Workstations

ｷｷ Able to survive the Workstation Wars of the 1980’s ｷｷ Mid 1980’s

o Teamed up with AT&T for a short time ｷｷ Came up with Unix System V Release 4 ｷｷ Sun version was called Solaris 2

ｷｷ Mid 1990’s o Aiming to build network appliances

ｷｷ Single function computers ｷｷ Network computer (a diskless workstation)

o None of the business initiatives were successful ｷｷ Late 1990’s

o Successfully transformed into a vendor of large scale symmetric multiprocessing servers

ｷｷ Founded in 1982 in Santa Clara, Ca ｷｷ Products

o Servers o Workstations

ｷｷ Able to survive the Workstation Wars of the 1980’s ｷｷ Mid 1980’s

o Teamed up with AT&T for a short time ｷｷ Came up with Unix System V Release 4 ｷｷ Sun version was called Solaris 2

ｷｷ Mid 1990’s o Aiming to build network appliances

ｷｷ Single function computers ｷｷ Network computer (a diskless workstation)

o None of the business initiatives were successful ｷｷ Late 1990’s

o Successfully transformed into a vendor of large scale symmetric multiprocessing servers

AppleApple ｷｷ Founded in Los Altos, CA in 1976 in a garage ｷｷ Apple I was delivered in June of 76 and a total of 200 were built ｷｷ 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

ｷｷ Apple III came in 1980 o Started to struggle to compete against IBM and Microsoft

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

o Lisa failed ｷｷ high price tag ｷｷ limited software titles

ｷｷ Founded in Los Altos, CA in 1976 in a garage ｷｷ Apple I was delivered in June of 76 and a total of 200 were built ｷｷ 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

ｷｷ Apple III came in 1980 o Started to struggle to compete against IBM and Microsoft

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

o Lisa failed ｷｷ high price tag ｷｷ limited software titles

Apple Continued…Apple Continued… ｷ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 ｷｷ Mid to late 1990’s

o Attempted to reinvent them selves o Formed an alliance with IBM and with

Motorola ｷｷ Trying to create a new computing platform

ｷ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 ｷｷ Mid to late 1990’s

o Attempted to reinvent them selves o Formed an alliance with IBM and with

Motorola ｷｷ Trying to create a new computing platform

The Bubble BurstsThe 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.

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…Benefits of Bubble…

Rise of e-commerce and tax free trade.

Individual investor empowerment.

Plentiful bandwidth for consumers

Rise of e-commerce and tax free trade.

Individual investor empowerment.

Plentiful bandwidth for consumers

How Were They Affected?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.

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…

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.

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.

How did they affect each other?

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.

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.

After the BubbleAfter the Bubble

Apple was the only company to experience significant growth.

Apple was the only company to experience significant growth.

Sun MicrosystemsSun Microsystems

Very aggressive company. Changed strategy to specialization.

Allied with Fujitsu and AMD. Sungrid. Consistently produced losses. Forward EPS -.15, P/E -30.1.

Very aggressive company. Changed strategy to specialization.

Allied with Fujitsu and AMD. Sungrid. Consistently produced losses. Forward EPS -.15, P/E -30.1.

IBMIBM

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.

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.

HPHP 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.

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.

MicrosoftMicrosoft

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.

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 ComputerApple Computer

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

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…

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.

Split investment between Apple and IBM.

Apple- Intel/Mac, Innovative, high P/E, high growth.

IBM- Projected growth, consistent, strong dividend.

In a global changing environment…

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.

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!Thank YOU for listening!

Questions/Comments? Questions/Comments?