Technology's Paradigm Shift: Which Companies Will Dominate?

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Includes: AAPL, AMZN, CSCO, IBM, INTC, MSFT, NOK
by: Edward Harrison

In the video below is an interesting conversation between Pete Cashmore, the social media blog Mashable’s founder, and Margaret Brennan of Bloomberg Television. The two were talking about Eric Schmidt, the Chairman and former CEO of Google (NASDAQ:GOOG). The tech world is buzzing about Schmidt’s admission yesterday that Google blew it when they underestimated Facebook.

Now, Cashmore’s site is all about social media, the epicenter of Web 2.0. So, he knows what he’s talking about when it comes to new media. His view is that Schmidt is being too hard on himself for missing "the friend thing" because Google simply doesn’t have social DNA. Essentially, Cashmore is saying Google is all about search and advertising and that they can’t be expected to make a natural transition into social. It was also interesting to hear Cashmore talk about Nokia’s (NYSE:NOK) fall from grace and the symbiosis of a Microsoft-Nokia takeover.

Schmidt mentioned the “Gang of Four” internet companies as Google, Facebook, Amazon (NASDAQ:AMZN) and Apple (NASDAQ:AAPL). So, he’s saying in effect, “forget about Cisco (NASDAQ:CSCO), Microsoft (NASDAQ:MSFT) and Intel (NASDAQ:INTC)”. I see this as another part of the paradigm shift in technology as it moves to a mobile-centric world. Just a generation ago, people were chained to their IBM (NYSE:IBM) desktop computers. When the clone wars decimated IBM’s market, Microsoft and Intel emerged as Kings of the Hill. The internet bubble was all about the move away from the Wintel duopoly. But mobile data was in its infancy. That world was still very much focused on the internet as content within a Wintel-based ecosystem. Cisco, Microsoft and Intel were still major factors. The internet’s “Gang of Four” back then was Yahoo (YHOO), AOL (NYSE:AOL), Amazon, and eBay (NASDAQ:EBAY).

Fast forward to today and we are really talking about the internet as the new area of focus for content delivery. But now its a mobile world with Android and iOS as dominant platforms, not Windows.

Here are my questions:

  • IBM bled red ink in the first jobless recovery in the early 1990s. I think of them a little like Nokia today. How did IBM make the transition from also-ran PC maker to still leading edge technology company? Is there something in that model for others?
  • What’s with Amazon as the ONLY member of the Gang of Four during both the internet bubble days and in the new Web 2.0 version? Remember, they were unprofitable and leveraged during the internet bust and many thought Amazon would go bankrupt. Do they have some special sauce that others can benefit from? I tend to see Amazon as a leading example of ‘creative destruction’
  • How about Cisco, Microsoft and Intel. Are they out of paradigm, and if so, how do they get back in the game?
  • What about Yahoo!, AOL and eBay. No one’s really talking about them. In the internet bubble hey-day they rivalled Intel, Microsoft and Cisco for valuation. Is their goose cooked? What can they do?

My take: These are the kind of questions people like Eric Schmidt should be asking themselves. First and foremost is the Cashmore social DNA question: “are we out of paradigm? If we are, how do we get back in paradigm without wasting shareholder money?” Microsoft needs to be looking at IBM because they are clearly out of paradigm.

Bloomberg video below:

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.