Three separate incidents in the tech world in recent weeks reveal certain larger patterns in company strategies and market sentiment in the sector: a likely Microsoft chief executive has finally emerged; Google acquired one hardware firm and sold another; and Apple celebrated 30 years of the Mac just before getting punished by Wall Street for posting a record quarter.
The emergence of Satya Nadella as the likely successor to Steve Ballmer in the Redmond hot seat has surprised everyone, given the Indian native wasn't exactly a household name.
It’s revealing that Nadella is being promoted after his successful stewardship of Microsoft’s Cloud and Enterprise group, an area in which the company is making some impressive progress in its bid to catch up with Google and Amazon.
In an interview with Quartz last year, Nadella said Microsoft’s cloud effort aimed to make the tech giant “part of the fabric which is helping with this digitisation of everything”. That’s certainly a statement of intent.
Outgoing chief executive Ballmer tried to refocus Microsoft as a “devices and services” company. However, with its operating system hegemony waning after the disaster that is Windows 8 and little consumer appetite for its Surface range of tablet computers, the services side of the equation will increasingly mean cloud computing and storage.
Nadella seems well equipped to ensure Microsoft is competitive in the cloud.
Meanwhile, Google's adventures on the devices side of things are increasingly taking shape. Splashing out $3.2 billion (€2.4 billion) on Tony Fadell and Nest raised eyebrows, but now that it appears the "father of the iPod" will be overseeing all hardware operations at Mountain View, the acquisition looks rather astute.
On the other hand, getting rid of Motorola after just a few years at a humongous, multi-billion dollar loss doesn’t look so canny. The purchase always reeked of desperation and its inability to produce any decent phones was pretty damning.
With Microsoft focusing on services and Google refiguring its approach to devices, the 30th birthday of the Mac on January 24th really stands out. There was a revealing sentimentality to the commemorations. This was a technology that affected people deeply, obviously.
Even Apple, which is normally averse to nostalgia, took time to mark the occasion – and quite understandably, too, in that the success and survival of the Mac is among the company’s greatest achievements.
But it’s worth contrasting the warm tributes accorded to the Mac on its 30th anniversary with the less generous reaction of Wall Street to Apple’s most recent quarterly results, published a few days later. Apple’s great period of growth, fuelled by the arrival of the iPhone in 2007, is evidently at an end, and the market is officially unimpressed. That is despite the first quarter’s $13.1 billion in net profit, a figure that has only been bested on three previous occasions in corporate history, all by oil and gas companies.
Technological art
But in all the nostalgia and reminiscing, we can perhaps see a clue as to the market's residual mistrust – the Mac was not so much a device or an appliance, which are hardly likely to be so fondly remembered, as a work of technological art that made a profound impact. As Jobs put it in his final Apple keynote address, introducing the iPad 2 in 2011: "It is in Apple's DNA that technology alone is not enough – it's technology married with liberal arts, married with the humanities, that yields us the results that make our heart sing."
However, while that approach can engender spectacular loyalty among users, and spectacular hostility among non-users, it isn’t the sort of approach that Wall Street is equipped to price into the stock’s performance.
The market sees Apple as relying on regular big hits, and is thus always suspicious that the next hit might not come.
Analyst Horace Dediu recently contrasted the perceptions of Apple and Google, and pointed out that "Google being seen as an analogy of the internet itself . . . We believe Google is infrastructure".
That is something the market can evaluate and appreciate.
By acquiring Nest, Google is nabbing, in Fadell, one of the few individuals who has that Apple artistry in his blood. If Fadell and his colleagues can bring some of the creative culture and magic from Cupertino to Mountain View, then it could add artistic merit to its infrastructural strength. Wall Street would love that.
Microsoft, by appointing someone like Nadella and focusing on becoming “part of the fabric which is helping with this digitisation of everything”, would appear to be trying to emulate Google’s infrastructural importance, via the cloud.
The three companies’ differing strategies are becoming clearer but at the moment it’s only Apple that is producing gadgets that will be fondly recalled and celebrated in 30 years’ time. The market, on the other hand, is far less prone to sentimentality.
