Goodbye, IBM. Seriously.

For those of us who worked at Apple in earlier days, the company's current success is sometimes surreal.  I had one of those moments today.  Back in the mid 1990s, we were struggling to get to $10 billion in revenue per year, a figure that seemed ridiculously high.  This week, Apple reported quarterly revenue of $27 billion.  Apple is almost certainly now a $100 billion a year company.

To put that in perspective, Apple is now larger than companies like Honda, Sony, Deutsche Telekom, Procter & Gamble, Vodafone -- and IBM.  Apple is very close to passing Samsung and HP, which would make it the world's largest computing company.

In 1981, when IBM entered the PC business, Apple ran a big ad in the Wall Street Journal saying "Welcome, IBM. Seriously."  At the time, everyone thought it was a very cheeky move by a tiny upstart company.  No one -- and I mean absolutely no one -- would have believed that 30 years later Apple would be looking at IBM in the rear view mirror.

The spookiest thing is that Apple may still have a lot of room to grow in both mobile phones and tablets.  There's no way the company can keep growing like this indefinitely, but it's very hard to predict exactly when it'll slow down.

15 comments:

Anonymous said...

Apple is a consumer gadget and content company. IBM is a software and services provider to the Fortune 100. Sure AAPL has more than double the market value, but so what. AAPL is bigger than every US company except Exxon. Both companies are innovative and highly profitable. What about Dell? The Chinese? There are tons of companies that Apple has crushed...IBM is not one of them, and sadly neither is Microsoft.

Anonymous said...

Most goddam profound blog post ever

Anonymous said...

"The spookiest thing is that Apple may still have a lot of room to grow in both mobile phones and tablets. There's no way the company can keep growing like this indefinitely, but it's very hard to predict exactly when it'll slow down."

Are you living in a cave? iphone has not only slowed down, it's gone into reverse.

All power to the Google Overlords.

Michael Mace said...

Thanks for the comments, folks. My point wasn't that Apple has crushed IBM (actually, I am a big fan of IBM's self-reinvention). But passing them in revenue is still a remarkable milestone if you've been following Apple over the years.

In Silicon Valley, the conventional wisdom is that the big revenue comes from enterprise and components, not consumer. Big companies like Oracle, Cisco, Intel, and even HP rely on enterprise and infrastructure for much or all of their revenue.

The most remarkable thing to me is that Apple got to this point without a big enterprise division. It's another case where the conventional wisdom in the Valley isn't very wise.

(By the way, Anonymous, if you're looking at revenue, which was my focus, Apple is about the 13th largest US company.)

Anonymous said...

Maybe Anon#3 doesn't fully grasp the meaning of reverse. The figures I'm looking at show that Apple sold more iPhones in Q4 2010 than any prior quarter and more than that in Q1 2011. Let's not let the fanboyism rot your brain.

hp said...

Indeed, I find #3 odd.

Most Android users I know, myself included, are planning to or have recently switched to an iPhone after countless releases of weak, unpolished hardware/software combinations.

I suppose that in that sense, the iPhone IS the reverse of Android devices.

All power to the Google botch jobbers.

Michael Mace said...

By the way, there is a really nice discussion of this post over on YCombinator. If you're interested, it's worth checking out.

Anonymous said...

Revenue, market cap ... we need a metric that captures the depth of catastrophe that occurs to a host country when a company becomes dysfunctional. For example, Toyota's gas-acceleration woes caused a small problem for Japan, but TEPCO's bad judgement in disaster recovery for their power plants is bringing Japan to a crisis point. By that sort of metric, IBM is a much more important company to any country it operates in than Apple -- IBM ceasing to do its job well can bring a country to its knees quite quickly.

Anonymous said...

nay, if Apple truly "pass" IBM, they would make a new processor/memory/components, rather than pay the lawyer to sue Samsung. (or defending from their lawsuit). IBM learned from co-develop processor from the PS2/X-box (read "the race for a new game machine"), come out stronger with scars. Apple is an unknown with all the tango they play with device MFG. Give two years or three, write an article again...time is the best judge.

Anonymous said...

This whole discussion is very shallow. It's not news that a market leader has fallen.

One of the main strengths of capitalism is that the high-and-mighty are regularly toppled through competition, changes in market conditions or customer preferences, and other factors.

Just look at the listing of corporations in the DJIA today and compare it with the list of names from say 20 or 50 years ago. The differences are dramatic. Once you do that comparison you will soon realise that what has happened to IBM is nothing new.

In the real world, your success inspires other guys who want to eat your lunch. Some will try to do that to you by competing directly in your own market. Others try to establish new niches to bleed money away from the market you dominate. Still others try to erode your leadership through regulatory interference. There are countless other strategies too.

There are other factors at play too. For instance, in order to succeed, you usually have to generate enough size to allow economies of scale to make a difference. However, balanced against that, with scale you almost always get bureacracy and other counterproductive behaviours. So the very thing which allows you to succeed initially often contains the seeds of failure.

It's only in the fantasy world of left-wing politics where the rich are getting richer.

greenlander said...

I worked at Apple until 1996. I left and sold all my stock because it was pretty clear that the ship was sinking. It was before Steve Jobs came back. Gil Amelio was at the helm.

Who could have known that my decision was 100% wrong? Silicon Valley is such a strange place.

feathertail said...

It's only in the fantasy world of left-wing politics where the rich are getting richer.

http://motherjones.com/politics/2011/02/income-inequality-in-america-chart-graph

Michael Mace said...

Now then, kids, let's talk nice please.

Greenlander, it sounds like you left Apple at about the same time as me (and for the same reason). We should get together sometime and compare how much our stock would have been worth if we'd stayed. On second thought, no, that would be too depressing.

Buy an ipad said...

IBM is indeed obsolete and has gone by the wind. They are forgotten and replaced by many that surely offers something new and one of a kind. Thanks for sharing your post.

Anonymous said...

Here is a slightly different take on IBM's demise:

http://www.economist.com/node/18803123

Perhaps IBM are not so doomed as Apple's marketing people want us to believe!