Where is the vision?
Growth in technology stocks has always been driven by the unique vision of an entrepreneurial leader. Microsoft had Bill Gates, and began failing as soon as he left the building. Apple, of course, had Steve Jobs. IBM had Lou Gerstner, who gave that company a new "software and services" vision in the 1990s, unifying its product line under Linux and setting a course that only now is looking murky.
If vision is what you seek, as an investor, there are really only two plays for you today. These are Larry Page's Google (GOOG) and Jeff Bezos' Amazon.Com (AMZN). Both share the same vision, cloud computing, both have been executing on that vision for a decade, and while there are differences in how they execute on it - Google turns cloud into its own services and Amazon focuses on being the low-cost provider to those seeking cloud capacity - both companies have entrepreneurs at the top who know what they're about and can explain their vision in a few words.
Cloud, while easy to say, is hard to implement profitably. Both IBM and Microsoft have been moving toward cloud for years. Neither is close to creating a cloud vision that's compelling both to investors and technology buyers.
That's in part because both are stuck in the past, with "legacy" systems and what are dubbed "enterprise customers." These customers have stopped spending on new gear and are now putting all their new dollars into cloud. But as IBM's latest results make clear, the fall in enterprise isn't making up for the rise in cloud. And as Microsoft's performance demonstrates, anything can become a legacy system in a cloud era - even a PC.
So what is the vision? What IBM and Microsoft both say is that it's "hybrid cloud." That is, enterprises are being told to build their own clouds, using tools like open source OpenStack, and then connect them to compatible, public clouds into a hybrid that captures a portion of cloud's savings while still retaining the control of the enterprise era.
There are two problems with this vision. First, there's a ton of competition in hybrid cloud. Nearly every large "incumbent" tech company out there, in both communications and computing, is trying to do the same thing. Second, and more important, the customers aren't buying.
Back when Virginia Rometty was appointed IBM CEO, in 2011, I was skeptical that a marketing executive would have the vision for a technology revolution. I was so adamant on the point that this site forced me to make that post an InstaBlog rather than putting it in the paid feed.
Fair enough. But the concern remains. Rometty is no Gerstner, and Steve Ballmer has proven he's no Gates. Can Microsoft even find a visionary at this point - many want them to try and re-capture IBM's Gerstner magic by going far outside for Ford's (F) Alan Mullaly. Will IBM stick with Rometty, and what will that do to investment confidence? Even Warren Buffett, while sticking with the company due to its stock buybacks, isn't loading up on the stock at its new bargain price.
My own view of the future is that is a ton of money to be made connecting what clouds can do to what devices can do, and in the Internet of Things, which I began writing about a decade ago. But someone has to turn that into a simple vision that customers will believe, and get thousands of people to execute.
History tells us that lack of a vision can be near-fatal for a tech company. Both Microsoft and IBM are suffering from that right now. It may be time to dump both until they get one. I don't want to take a loss on my IBM ... I'll wait for the present mood to wash out before I sell.
But I think I'm going to sell.