What Next in Mobility?

by Ernie von Simson

August is usually a slow somnolent month; a torpid time to loll at the beach, play with the kids, or read empty novels, certain that nothing strenuous can happen before Labor Day.

This August was different. The IT sector’s dynamic mobile business suffered three major reversals: Apple lost Steve Jobs; HP abandoned both WebOS and its tablet (and will probably sell its industry-leading PC business); and Google may abandon Android neutrality with the acquisition of Motorola Mobile. Any of these three could cause major disruptions that may not be visible for three years.

The Apple CEO transition from Steve Jobs to the highly regarded Tim Cook raises questions. Can the greatest innovator since Thomas Edison be succeeded by any chief operating officer? Wall Street remains upbeat assuming the company surely has a three-year product pipeline.

But the history of Steve’s previous replacement in 1985 paints a less optimistic picture. Sales and profits rose for the first years under John Sculley, masking the essential stagnation that relegated Apple to a minority market share until Steve returned in 1997.

Will that happen again? Can any CEO hold to a fixed product pipeline against big money competitors like Google and Microsoft?

HP’s abandonment of the mobility market and possible sale of its PC business reawakens questions about the company’s strategically destructive zig-zags over the last 20 years. CEO John Young forced out the leader of the company’s successful computer business to push more R&D emphasis on the traditional instrumentation business — the same business his own successor spun off a few years later.

Carly Fiorina bought the Compaq PC business over the loud objections of several insiders and was herself ousted. Her successor Mark Hurd bought Palm and cut R&D. Now his successor wants to abandon Palm’s WebOS and spin off PCs. After all those turns, HP’s ratio of market capitalization to revenues is now 0.4 — versus 2.0 times for IBM and 3.1 times for Microsoft.

Are the lions gathering? Will there be an HP at anything like its present scale three years from now?

Google’s acquisition of Motorola Mobile could signal the end of the independent smartphone companies as the sector follows Apple and RIM: integrating processor, operating software, hardware, and even apps. As a rule, the company that controls the platform can eventually control the rest. That was certainly evident when Microsoft’s move into productivity apps during the 1980s placed WordPerfect, Lotus, and Borland at an extreme disadvantage. And, again, once Oracle moved from database into apps, it eventually absorbed Siebel and Peoplesoft.

Three years from now, there could easily be three vertically integrated smartphone makers: Apple, Google/Motorola, and Microsoft/Nokia with the positions or alliances of RIM, HTC, Samsung, and the rest yet to be determined.

Potentially destructive change has been a constant in the IT industry. For the mobility sector, change comes faster and rattles more destructively.

Ernie von Simson is the senior partner in the CIO Strategy Exchange and the author of The Limits of Strategy an inside analysis of the success and failure of IT companies over the past 30 years.

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