Fallen IT Giants

4/23/2012 6:25:39 PM

The brutal IT market does not allow the computer industry a single breath of relief. Wrong decisions at significant places or a slight hesitation at the wrong time could lead to the downfall of even the largest multi-billion dollar IT giants

The IT industry has always lived fast and furiously and was marked by accelerated technological changes. Young computer companies whose founders had produced their first devices in garages were soon transacting as multi-billion dollar firms – a new years later, they were counted as bankrupt candidates. A high-innovation pressure was hovering over this field from the very start. If one lags behind in this race of technology, ideas and consumer-preference, even a giant can turn into a dwarf in no time. Or die a silent death.

The thing buried recently was the PC. The grey box does not have a future in this field any more; it lacked growth and profits. Therefore, the firms who made money from PCs are under tight observation. For example, the world’s largest PC manufacturer Hewlett-Packard, with its annual turnover of more than 100 billion US dollars, is one such firm. The former CEO Leo Apotheker had barely announced that HP wants to quit the PC-business, and its share prices collapsed. The problem: HP had priorly withdrawn from the smartphone and tablet market. Apotheker saw the HP’s future in software, services and servers for cloud, and bought the technology required for the same – before he was fired. This is likely because Google, Microsoft and Oracle were waiting at a better position in cloud. Today, HP is struggling to restrict its debts and still stays rather firmly in the PC market. They event intend to produce tablets again.

Description: Leo Apotheker, HP’s former CEO

Leo Apotheker, HP’s former CEO

The advancement of the PC had led to the downfall of the first giant. Not the grey box, but the breadbox C64. Amiga and Atari were the computers of the masses in the beginning. They, however, used Motorola processors, which were not compatible for the PC architecture. Neither Commodore nor Atari took the race for faster hardware seriously. As Atari parted from its success model ST, it tried to take the plunge in another sector, but their video game console, Jaguar, was a flop. The erstwhile market leaders Commodore and Atari had to be declared as bankrupt in the mid 1990s.

The internet gobbles up its children

The advancement of the Internet began in the mid 1990s, a new platform for the fateful question of success or downfall of IT journeys. Within a few years, 5.2 million servers were made out of just the 7,500 attached servers. The fate of Netscape Communicators was sealed during this period when Microsoft’s Internet Explorer, led by its Windows market power and its 100 million dollar yearly investment, swept across the Internet and devoured everything. Netscape was taken over by AOL in 1998 – AOL was still a giant at that time too, and is today looking for a new business model.

The old success strategy of America Online was based on the fact that the user connects to internet with the proprietary software – those famous golden CDs- and surfed via the AOL portal. That went well for a long time until customers switched over the DSL connections and flat-rates. A new source of income was here: Since 2010 the very low-rate writers who earn a few US dollars per hour can produce a huge amount of texts on popular subjects for the Content Farm. These texts can be called up as often as possible with Google’s optimisation, and an income source in generated from this. Hence, although AOL is not necessarily a bankrupt candidate, it is certainly not a company which has molded the IT sector any further. Thus, it is not surprising that there are rumors about its fusion with Yahoo. A trend shows that staggering IT giants like to take over big names which are also stuck in difficulties.

We again return to HP: In 2002, Hewlett Packard took over the indebted Compaq, the greatest computer producer of the world to date. On the other hand, Compaq themselves had bought the bankrupt DEC in 1998 – the then number 2 company after IBM among the computer producers in the 1990s. However, DEC was unable to respond to the threat of their competitors’ cheaper and more powerful products, and eventually crumbled when they failed to regain popularity. At that time, only a small department really researched for something great which should decide the future: a search engine. In 1995, the DEC research team put forward AltaVista. It was the greatest search engine of the world – till Google came into picture.

However, there are also good reasons to buy the remains of a dead IT giant. In the meantime, the computer firms which hold central patents earn quite a lot of money such as Microsoft with its intellectual property rights on Android. It’s no wonder that Apple, Microsoft, Oracle and EMC have founded the company CPTN holdings in the last year. CPTN holds 882 patens of the former IT giants Novell whose last remains were sold in 2011. The survival of an IT giant does not depend on the right patents but on the fact whether it can develop technologies, continue trends and implement new ideas. Poor outlook show: Yahoo had bought over AltaVista but, having no clue on what to start or do with it, eventually shut it down in May 2011.

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