Predictions #8-10: Apple, IBM & Zuckerberg
It's time to wrap up all these 2018 predictions, so here are my final three in which Apple finds a new groove, IBM prepares for a leadership change, and Facebook's Mark Zuckerberg gives up a dream.
Apple has long needed a new franchise. It's been almost eight years since the iPad (Apple's last new business) was introduced. Thanks to Donald Trump's tax plan, Cupertino can probably stretch its stock market winning streak for another 2-3 years with cash repatriation, share buy-backs, dividend increases and cost reductions, but the company really needs another new $20+ billion business and it will take every one of those years to get a new one up to scale.
Turning into a movie studio won't be Apple's next big business. The profit margins aren't high enough for one thing, but even more important there simply isn't room for another $20 billion player in an already crowded entertainment market. Apple realizes this or they would have committed a lot more than $1 billion to video productions in 2018. By Apple standards, making TV and movies is a hobby.
The only place where Apple can make a high-margin splash that really makes sense is in the cloud. Their cloud infrastructure is in place but underutilized. Remember my column years ago about visiting Apple's North Carolina data center? Well things haven't changed much since then yet Apple just keeps building capacity. Their cloud capacity is easily as big as Microsoft's. Now all Apple needs is something to do with the excess.
There is a significant trend right now in moving both applications and desktops to virtual cloud machines. The U.S. government, for example, seems headed to replacing its eight million PCs with virtual devices. So far the only government computers that won't be replaced, however, are Macs because of their proprietary PROMs. Windows and Linux run fine from the cloud but so far Macs do not unless the target data center is made entirely of Mac Minis as some have done.
My prediction #8, then, is that Apple will in 2018 buy one or more of the many startups helping shift desktop computing loads to the cloud. Cupertino will compete with Amazon, Google, and Microsoft offering virtual cloud PCs.
This might look like a hobby, too, given that Mac sales are only about 15 percent of Apple's total volume. But that would be a very near-sighted look. Customer devices are still needed to access these virtual desktops and many of those devices in business - even for Windows virtual desktops - are iPads and iPhones running iOS. So promoting Mac app cloud migration would sell more iOS devices.
Even more important, however, is that there's an opportunity here to grab market leadership. It would be uncharacteristic of Apple to make a grab for enterprise IT leadership but crazy times call for crazy actions. And by offering a public cloud service that would support Apple, Linux and Windows virtual PCs, Apple would have a shot at literally stealing from Microsoft the future of the Windows business - a typical Apple lead from behind move. Remember Apple didn't invent the smart phone or the tablet yet today leads both markets.
IBM also needs new $20 billion businesses. Remember that CAMSS (cloud, analytics, mobile, security and social) were supposed to be the sources of IBM's growth in the next decade? Well that hasn't been working or Warren Buffett would have held onto his IBM shares. Over the past year, Berkshire Hathaway has dropped its IBM holdings from $10 billion to $300 million. And given the delay Berkshire inserts in reporting such sales it is likely the company now holds no IBM shares at all. All Buffett has said so far is that the company wasn't what he once thought it was, whatever that means. But it leads me to my easiest prediction by far, which is that Ginni Rometty will this year be replaced as IBM CEO.
This is an easy prediction to make both because all IBM CEOs not named Watson seem to retire at 60 (Rometty's current age) but also because her tenure in the office has been an abject failure as explained in excruciating detail in my book The Decline and Fall of IBM.
The more difficult prediction would be identifying Rometty's replacement. If he or she is a career IBMer it won't bode well for Big Blue, which is a place where the smart executives left long ago. My advice is to hire an outsider like when Lou Gerstner replaced John Akers in the early 1990s. Only a true outsider can lead the total cultural change required to save IBM from death. Gerstner seemed to be doing just that but look how the company snapped right back into its bad old ways under Sam Palmisano. Maybe Buffett just decided IBM was a lost cause.
A recently-departed IBM sales guy told me the other day "you know they reallyhateyou." And it's true. They hate me for my eleven years of reporting bad executive decisions and poor planning ever since I discovered in a hotel bar in Rochester, MN back in 2007 that IBM employees hated their company. I've probably cost IBM millions over that period but IBM management cost the company tens of billions over the same time. Hating must be easier than actually listening.
My final 2018 prediction is that Facebook's Mark Zuckerberg will give up his political ambitions. What, you didn't know Zuck wants to be President? I'm pretty sure he once did have such a goal and, heck, if Trump can do it why not a younger, smarter guy whose wealth is real? Zuckerberg's recent listening tours are all a part of his very deliberate transformation from geek to statesman. Alas, it won't work.
The problem for Zuckerberg isn't that he couldn't do the job, it's that the personal cost is too high. Presidents have no privacy, their every move is criticized, and for a guy like Zuckerberg who likes to be in control, there's damned little control actually available. He's starting to realize this just as Facebook needs more attention during the Fake News and Russian election tampering crises, which are both going to be brutal for Facebook going forward.
If he doesn't become President, then, what will be Zuckerberg's second act? That depends on how he wants to be perceived. If Zuckerberg needs to be the winner in his category, there's probably no way he can beat Bill Gates as a philanthropist. Gates will always have more money and experience. Not that Zuckerberg can't still be a philanthropist, but I don't think he'll identify that as his principal occupation as Gates presently does. It should be interesting to see what he eventually chooses to do, instead.
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