IBM, HP, Sun, Microsoft,

Apple and the dot-com bust

Presented by Zach
Stone, Brent Steinke
and Richie Rich

Changing Times, Changing Companies

We will cover each of these companies product

mix and strategies leading up to the 2001 dotcom bust.
Then we will cover how the stock crash affected
the firms and the changing environment.
Lastly we will discuss how each company
responded and what product and strategy
changes they have made.

A Quick Look
at the Stock
History

Before the Bubble Burst

Companies

IBM
Started as CTR, changed name in 1924
Antitrust lawsuit in 1969
Teamed up with skunkworks to build IBM
PC
Loss of nearly 5 Billion in 1992
Shifting focus from components and
hardware to software and services

HP
Started in 1939 by Bill Hewitt and Dave
Packard
First product, 200A.
Invented many of the first calculators.
In 1980s they came out with printers and
scanners as well as multi-use units.
In 1994 HP began outsourcing
manufacturing.

Microsoft

Founded in 1975 by Bill Gates and Paul Allen

In 1980s flooded the market with IBM PC clones, used
IBM contract.
MS-DOS dominated home PC market as a variant of
UNIX.
Marketed the Microsoft Mouse in 1983 and entered
computer hardware market.
Bill Gates began to promote OS/2 as the future of
computing, declared OS/2 partnership over in 1991.
In 1995 introduced Windows 95 and transitioned the
company towards consumers. Followed with Windows 98.

Sun Microsystems

Founded in 1982 in Santa Clara, Ca

Products
o Servers
o Workstations
Able to survive the Workstation Wars of the 1980s
Mid 1980s
o Teamed up with AT&T for a short time
Came up with Unix System V Release 4
Sun version was called Solaris 2
Mid 1990s
o Aiming to build network appliances
Single function computers
Network computer (a diskless workstation)
o None of the business initiatives were successful
Late 1990s
o Successfully transformed into a vendor of large scale symmetric multiprocessing
servers

Apple
Founded in Los Altos, CA in 1976 in a garage
Apple I was delivered in June of 76 and a total of 200 were built
Apple II came in 1977 and stood out due to high quality and a number of
technical advantages

Apple III came in 1980

o Open architecture
o Color graphics
o Elegantly designed interface to a floppy disk drive

o Started to struggle to compete against IBM and Microsoft

1983 the Lisa team won a race with Macintosh and was released with a GUI

o Lisa failed
high price tag
limited software titles

Apple Continued

1984 Macintosh was launched

o Initially sold well
o Follow up sales not so strong
o Sales did change due to intr0duction of the LaserWriter (first
laser priingter)
1990s
o Greatly expanded its computer lineup
o Offered a mulititude of models
o Failed to adequately differentiate from one to another
Mid to late 1990s
o Attempted to reinvent them selves
o Formed an alliance with IBM and with Motorola
Trying to create a new computing platform

The Bubble Bursts

Perpetuated by firms believing that to succeed

they simply needed to increase market share.
The three reasons below are the main causes of
the tech bubble burst
Network effect- Increase users
Speculative venture capital- A Frenzy of
investments
Changing business landscape- Cheap money, low
interest rates. Workers investing in their own
company stock.

Benefits of Bubble
Rise

of e-commerce and tax free

trade.
Individual investor empowerment.
Plentiful bandwidth for consumers

How Were They Affected?

IBM- Benefited from increase in use of Linux

software and their hardware.
HP- Moved into service sector.
Microsoft- Forced to improve software because
of Linux, but also because of antitrust suit.
Sun Microsystems- Declined as a result of the
rise of Linux.
Apple- Stock dropped but the release of the
iMac and iPod have spurred growth.

The Bubble and Linux grow

In 1999 there saw the rise of Linux,
aggressively supported by IBM and HP
created the prevalence of open-source
software.
Linux put pressure on Sun who sells
proprietary Unix and caused Microsoft to
improve its offerings.

How did they affect each

other?

The massive push for the adoption of Linux by IBM

pushed Sun (Unix) into a downhill slide.
The adoption of Linux as an OS option spurred
Microsoft to develop better software.
HP began to focus on services instead of hardware and
therefore buffered itself.
Apple continued to sell proprietary technology and
therefore saw very little computer sales growth. The
advent of the iPod was a new driver for growth.

After the Bubble

Apple

was the
only company
to experience
significant
growth.

Sun Microsystems
Very

aggressive company.
Changed strategy to specialization.
Allied with Fujitsu and AMD.
Sungrid.
Consistently produced losses.
Forward EPS -.15, P/E -30.1.

IBM
Very consistent company.
Changed focus into services and consulting.
Changed CEOs, grew patent portfolio.
Sold PC division to Lenovo Group.
Solid Financial Footing
Forward EPS 5.85. P/E 13.8.

HP
Good at being mediocre. Followed market
at nearly every turn.
Supported Linux/FOSS.
CEO Carly Fiorina
Controversial Compaq merger.
2005 ApplQ acquisition.
Workforce reduction lead to profits.
Good growth prospects. Forward P/E 15.5.

Microsoft
History

of success
Overcame Monopoly antitrust lawsuit.
Slow growth of stock.
Forward P/E 17.8
Stock has dropped 12.4% in last 12
months.
Windows Vista.

Apple Computer

iPod/iTunes
Intel Processors
Mac OS/Windows/Linux
Boot Camp
Financials- Forward P/E
31.1, EPS 2.08

If we had $10,000 to invest

Split

investment between Apple and

IBM.
Apple- Intel/Mac, Innovative, high
P/E, high growth.
IBM- Projected growth, consistent,
strong dividend.

In a global changing environment

Firms need to innovate and address new
technologies and issues if they wish to
succeed.
Strong alliances can create new standards
or disrupt old ones (Linux VS. Unix).
Firms must always strive to maintain a
competitive advantage if they wish to
succeed.

Thank YOU for listening!

Questions/Comments?