The rumbling out of the tech sector is starting to feel like one of the industry's periodic seismic shifts.
And the tremors hitting
this week, as each announced a major business shake-up, left some analysts thinking another Big One is on the way.
"We're right now at the forefront of another major change," says Rob Enderle, founder and principal analyst at the Enderle Group, a technology consulting firm.
Previous tech quakes toppled the dominance of the mainframe, the minicomputer and the
PC. Indeed, the last such shift shook IBM to its very foundations some 15 years ago.
And this one threatens to do the same to the industry's current leaders like Microsoft and Intel. "The ability of these now old legacy firms to step up to a new model will dictate whether they are successful in the future," Enderle says.
The changes at these companies suggest they're trying to move with the market, each in its own way. Microsoft said that it would
up its investments by $2 billion in the coming fiscal year. Intel
committed to cutting spending by $1 billion this year as part of a broad restructuring. And Sun
replaced founder Scott McNealy as its CEO with COO Jonathan Schwartz.
Each company had its own particular reason for making its move. Microsoft, for instance, is facing slowing revenue growth and a long-stagnant stock price. Intel's stock has been similarly dormant in recent years, while the company has steadily lost share to chief rival
Advanced Micro Devices
. Meanwhile, Sun has struggled for years with losses and revenue declines.
But the underlying cause for each seems to be the same: a maturing business that's not responding well to broader industry upheaval.
But these three are only the latest to feel the temblors.
have already shaken up their management teams.
has gone through several major restructurings in recent years.
And just what is causing all the shaking? The ongoing move away from the PC as the tech epicenter and toward Internet and mobile-focused companies. In the emerging landscape, companies such as
Research In Motion
are poised to become the technology industry's new pillars.
"Those guys ... represent the new guard," says Roger Kay, a technology analyst at Endpoint Technologies, another industry consulting firm. "They are pulling mindshare away from the old, maturing companies."
IBM illustrates how difficult such industry changes can be for the past pillars. The company went through years of layoffs and restructurings in the 1990s before it finally achieved solid ground. H-P has gone through similar turmoil in more recent years.
Some worry that a similar fate awaits Microsoft, Intel and Sun.
"A reorganization in and of itself doesn't necessarily fix anything," says Enderle. "I didn't see anything from these three companies that made me feel any of them are doing what's required to really fix the problem. It's not clear to me they really know what the problem is."
Indeed, Microsoft was notably vague about how it would invest the extra $2 billion it has earmarked as was Intel on the specific cuts it would take. To some, Sun's management change
seemed simply more of the same, as McNealy's replacement is a longtime Sun manager.
The changes got a mixed reaction on Wall Street. Microsoft's stock dropped 11% following its announcement, while Sun and Intel shareholders reacted positively to their announcements.
But the near-term gyrations hide the underlying trends. The technology industry's aging pillars have seen their stocks flat-line at best -- or plunge at worst -- over the last five years as investors have bet on the upstarts.
"The market has already spoken," says one buy-side analyst whose firm is long Microsoft. "The market has already acknowledged that growth is slowing, that these are maturing companies."
That's not to say Microsoft or an Intel is about to be buried in rubble. IBM, for instance, survived its Great Quake and is again a robust company. Unlike Enderle, some analysts think today's technology giants are well aware of their problems and poised to fix them.
The buy-side analyst, for example, sees Microsoft's stepped-up spending as a bullish sign for the company.
"The jury is still out on Microsoft. You can't count them out," the analyst says.
But the changes needed to keep Microsoft and its aging peers on top could be wrenching. And those companies that have weaker foundations could well be toppled, analysts say.
"That the nature of the beast," says Kay. "I don't think big institutions change very easily."
Especially not when the ground beneath them is giving way.