|  August 23 2012  |   Blog   |   5 COMMENTS

Unless you’ve been living under a rock, the technology sector has been blasted with disappointing news all week.  For instance, Facebook shares continues to fall since its initial IPO, Groupon’s investors have announced they have given-up on the company, and Dell’s revenue numbers are far below the projected numbers expected on Wall Street. A debate has emerged among the media about whether the failure of these companies means this is another tech bubble about to burst, or if the recent struggles are simply not indicative to the health of the market.

In the case of Facebook, Mashable asks a hypothetical question as to what would happen if Zuckerberg were to step down.  For somebody who is a 28 year-old multi-billionaire and just had the largest IPO on the history of Wall Street this is a crazy thought! However, the article states that this would enable Facebook to implement a more experienced CEO, and it would inject fresh ideas to further its growth. Additionally, it lays out three examples from Larry Page at Google, Steve Jobs at Apple and Bill Gates at Microsoft, who all walked away from their companies eventually to pursue other interests. Is this the inevitable answer to Facebook’s success?

The resuscitation of Groupon is a bit more troubling. GigaOM writes that the business model didn’t even lend itself to be a tech company in the first place, and their top saleswoman actually quit! However bleak the future looks for the company, the silver lining is that it did beat its second quarter estimates, and it claims to have built a new revenue stream. Groupon ‘s new segment called Groupon Goods is the company’s way to sells items like earrings and yogurt which it gets directly from manufacturers, and they book the revenue for the entire price of the item. The Associated Press writes that analysts believe Groupon can still succeed, and they expect the company to meet the expected $605.5 million revenue mark for the next quarter.

In the case of Dell, it’s no secret that they are continuing to move away from the PC market, so what direction will they take to recoup the lost revenue from the PC?  The New York Times Bits blog says the company wants to sell enterprise-level cloud technologies, and they have former HP executive Marius Haas leading the way. Additionally, the article mentions with Dell’s acquisitions of Quest Software in July, it expands Dell’s footprint in the datacenter and opens the door to selling more servers.

I am not a prognosticator of the financial markets, but as tech public relations professional, we are able to work with start-up and veteran tech companies every day. From our side it seems there are an endless number of tech organizations on the cusp of greatness, and while the success of these aforementioned companies certainly helps, I believe the market is more stable than we think.

What is your take on the future of the technology market?

 

*** Picture from Invest2Success blog

, , , , , , | Blog

5 Comments


  1. I think its a bit of a misnomer to lump the tech sector’s performance with a few big names. Dell’s problems are well chronicled, and the case of FB and Groupon are nothing new – overhyped companies that relied too little on quantitative factors in their pricing (like future revenue streams, actual asset value, etc). The S&P’s technology index is actually up close to 20% YTD. Tech market is really healthy. The risk lies as it does in any bubble… overhyped markets that rely on speculative revenue as opposed to quantifiable value – see the real estate bubble, the tech bubble, and so on).

    David Feldman
    August 23, 2012

  2. I think in order for a situation to be considered a bursting bubble, you have to see a host of companies running into the same problems because they all share a similar business model. For example, the cause of the dot-com bubble at the beginning of last decade is usually attributed to the fact that so many companies focused first on expanding their customer base as quickly as possible, even if they didn’t have the resources to do so in an appropriate manner.

    The three examples brought up here present three unique problems by three vastly different companies. Groupon has had problems for over a year now in improving relations with merchants, and proving that the “group buying” model can actually make local vendors money. Facebook continues to struggle to find ways to monetize, and, like David notes, was probably too over-hyped to begin with, and Dell simply can’t keep up with competitors.

    Oddly enough, I would argue that the incredibly diverse range of messed-up issues these tech companies are having is probably a good sign that there is no unifying “tech bubble.”

    Jason Fidler
    August 23, 2012

  3. David and Jason,

    Thank you for the comments. I think you both bring some valid points to this argument.

    David – I agree that to lump these three companies together and highlight their problems does not qualify as the entire Tech sector being in decline. However, I do agree with Om Malik that if financial companies are finding it difficult to define what a “Real” tech company is these days, that doesn’t bode well for the market.

    Jason – Interesting point business models correlating with the decline in the market. I am not a financial analyst so I am not sure if I can bring credence to your comment, but I hope you’re right!

    Brian DeMichele
    August 23, 2012

  4. I think I read somewhere that 105% of the profts generated by the world PC market go to Microsoft and Intel – so NOBODY can make ANY money there, except by arbitraging a small local advantage on huge volumes (Lenovo vs. Dell)
    Secondly, while BillG left for good, both Page and Jobs returned to their companies – I do not see a trend here demonstrating that Zuck must leave as CEO.
    Third, it’s become a world of vertically integrated UX: Apple demonstrated how powerful this can be, so I expect a lot more integration to happen. Examples? Apple/Twitter, Facebook/Foursquare and then Microsoft/Facebook, somebody may pick up what’s left of Nokia (MS again ?), don’t think anyone is interested in Groupon, let it die a quiet death

    Gianni Catalfamo
    August 24, 2012

  5. Gianni,

    Thank you for your response. The notion of the technology market moving towards integrating products will certainly bring new services and toys to the sector, and could help to strengthen the stocks on Wall Street. Alternatively, do you believe that this will help to solve the financial challenges and change Facebook’s business plan? I agree I don’t believe that Zuckerberg has to leave as the CEO, but I think it might be favorable if he did.

    Brian
    August 30, 2012
Leave a Reply
Name*
E-mail*
Website*
Message/Comments