Are big tech companies on the decline? In a post on Re/code, venture capitalist Matt McIlwain argues that they are. Though I don’t think the evidence he cites is either new or compelling, tech workers should still be aware.
“IBM just reported its seventh straight quarter of declining sales, and I believe that the value of big cap technology companies as a group will substantially decline in the coming years,” McIlwain wrote. He says the changes in enterprise technology markets are “too disruptive on many, many levels for these companies as a group to overcome.”
As IBM Goes…
There has rarely been a time in tech history when someone wasn’t predicting the impending downfall of IBM, a company that has repeatedly tripped and gotten back up over the decades. While Big Blue isn’t the behemoth it once was, neither has it been sold to a foreign competitor at a fire sale price.
Indeed, IBM just shed its commodity server business to Lenovo for $2.3 billion. In 2005, the Chinese company purchased IBM’s ThinkPad unit and today is the world’s top-ranked PC maker, by volume. It now has the server presence it previously lacked. Analysts consider the deal a good one for both companies.
The deal also moves about 7,500 IBM employees to Lenovo, an example of how modern job security is tied as much to product lines as companies. Being on a company’s critical path will likely lead to longer employment than working in a business unit that could be sold off.
The Path of Evolution
This volatility allows the companies whose doom McIlwain predicts to look good in the short term. IBM, HP, Cisco, EMC, Intel, Microsoft and Oracle have a combined market cap of $1 trillion, up almost $100 billion over the past two years. The companies’ combined revenues declined $818 million (-0.2 percent) and profits increased only $138 million (+0.2 percent) over the same time. Still, they have between them “$218 billion of cash, hundreds of thousands of paying customers, and respected and established brands,” McIlwain himself notes. IT spending continues to grow in the 4.5 percent range annually, according to a Morgan Stanley CIO survey that he cites.
Big Tech is certainly changing, but its supposed decline reflects evolution more than a sudden death — or even death at all. Either way, employees have an important stake in their company’s future, though understanding what that future holds – and how to position yourself for it – isn’t as simple as individual news stories and columns sometimes make it seem.