Friday, April 12, 2013

Intel and Microsoft -- Walking Dead

When IBM launched the PC in 1981 it was still wrangling with the Department of Justice over a 13-year monopolization antitrust suit.  To prove once and for all to the boys in the Antitrust Division at the Justice Department that it had clean hands, Big Blue designed and integrated a personal computing system based on Andy Groves' CPU (8088) chip and Bill Gates' operating system software (DOS).  No monopoly here, IBM said.   This is open architecture -- we won't control the computing market anymore.  Sure enough, DOJ dropped the antitrust complaint.  What happened, instead, is IBM bequeathed the incipient PC hardware monopoly to Intel and a new software monopoly to Microsoft, enriching Grove and Gates beyond belief.

Since then IBM has become a totally different company, not a purveyor of computers anymore and software per se, more of a consultant and data miner than anything else.  Meanwhile, Intel and Microsoft have stayed close to the safe havens granted by IBM.

Looking at their stock prices, we can see how Microsoft's and Intel's fortunes are still tightly linked, more than 30 years later.

The ten-year growth rates are less than 15 percent.  Over the same period IBM's stock price has risen 168 percent.  The PC market is imploding.  The end won't be tomorrow, but Microsoft and Intel are two firms that have gone beyond maturity into old age, and, if they don't transform themselves substantially and painfully, will be walking down the zombie trail sooner rather than later.

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