What had me in the frame of mind to make this decision was the announcement from AMD on Asset Smart and several days with HPs very strong Printing and Imaging division.
For me AMD is representative of the post crisis US and the result was an amazing amount of innovation that corrected their own serious financial difficulties and left them with what now may be a competitive advantage.
HP was like the pre-crisis US, secure in its belief that changes would come slowly and that all that needed to be done was preserve the status quo. But change is always coming and the US is a good (well, maybe a bad) example of what can happen if you arent prepared for it.
The problem AMD had was terminal. They would run out of money in 24 months and their industry requires a massive investment in technology on a regular basis. This investment typically has to come years before the benefits arrive and AMD has been operating on near zero to negative margins for some time. So they simply didnt have the money to make the investments that needed to be made.
Even if they had the money, the market would have punished them for not maintaining profitability during the process. In short, even if they could have come up with the cash to build out the plant and equipment they needed to compete, the company probably wouldnt have survived the process with its executive team intact.
Intel, one of the few firms able to succeed with the current model, estimates that of the 20 companies that could do what AMD does, fewer than 6 are likely to be around in a few months because the costs of maintaining manufacturing capability are so high.
AMD, in order to initially and continue to survive, needed to change the game plan and that is what they did with Asset Light. They found a funding source in Abu Dhabi, basically Oil money, that was both deep enough and more than willing to wait for a future return.
They were able to cut a unique innovative deal which not only made them solvent, it leaves them with $2B in reserves and a lower breakeven point (meaning they will be more profitable going forward). They are the now most competitive, on paper, in terms of available resources than they probably have ever been. And had they not first dropped into crisis none of this likely would have ever happened.
HP Printing and Imaging
HP Printing and Imaging is far from crisis. This company within a company is a revenue and profit machine generating a massive amount of money for HP but only showing a moderate 8% growth.
The unit does innovate in terms of things like green technology and their high-end Indigo presses are rapidly replacing their analog counterparts in a variety of markets. At the event they announced an alliance with Tandberg to help drive their Halo technology (high-end video conferencing) more broadly into a market hungry to save money with travel alternatives.
But HP Printing and Imaging really isnt Printing and Imaging, it is more of a Printing company and imaging is probably where the future is. In addition, HP Printing is solidly in the two-dimensional color present where the future is three-dimensional and animated. In looking at the company Im reminded of the railroad industry just before the introduction of Transworld Airways, or the Gas industry as the first light bulbs were strung in demonstration, or the carriage industry the year before Ford figured out mass production. If you go to Times Square or drive down many freeways the billboards that catch your eye are not the static ones but the active ones and the prices for that technology is in freefall.
The hot news this last week was on the battle of the new eBooks. Second-generation Kindle information was leaked and Sony responded with their new touch screen reader. 3D printing continues to advance, cutting massively into the cost of prototyping and promising a future where we will be able to print some of the objects we use.
Most of what we read is coming to us by way of Google, Facebook, MySpace, and the Web and viewed on products like the iPhone and Archos. Snail mail is already in steep decline and an increasing number of us havent written a letter or published in a paper magazine in years. Esquire magazine has just published the first issue with a digital cover and got national recognition for it (though not all response was good). Still, the first light bulbs and commercial airlines were hardly great either and the issue evidently sold out at twice the normal cover price.
The one product that is solidly focused on the digital future is Halo, HPs stunning Telepresence offering. But the strongest competitor is Cisco which, with their Visual Networking initiative, is chasing this opportunity with their entire massive telephony/networking company, which is better positioned for it.
Cisco is able to give their product away for free, is capable of out-marketing and out-selling the rest of the segment and they havent even hit their true stride yet. Although HP and Tandberg likely have the better near term solution, long term they are massively overmatched right now by a company that has successfully put down every major competitor theyve ever had (anyone remember 3Com?).
Much like the US was blind to the (to some of us) obvious collapse of the sub-prime housing market, HP and other entrenched vendors probably dont see the massive change coming. And the trigger event could well be the current world financial crisis as company after company, in an effort to save themselves, suddenly starts thinking and doing things differently to conserve cost.
The last depression drove massive change and the dominant companies standing after it was over were not the same ones standing before it started. Crisis brings opportunity or disaster and the difference is anticipating accurately, or responding rapidly to, the changes that are to come.
Applying this to the US Election
Ive been on the fence with regard to the latest US presidential election and frustrated with how much the candidates both attack each other with less than honest statements. I think there are two primary problems that need to be solved. The first is trust in government and the second is the economy.
To solve either will require doing things differently. One question jumped out at me during the latest debate that catalyzed my own thoughts and got me to make a choice. This was the question asking the candidates to rank the energy, healthcare, and social security in order of priority.
McCain said all of the above, which while nice and probably popular, seems impossible under the current economic conditions. Obama said energy has to come first which should fund the ability to do the other two and he tossed in education which protects the future of the nation.
Thats not the popular answer but, to me it was both the most honest, and the most likely to be a successful path to assuring we dont ever have this financial problem again. If the US can stop being addicted to foreign oil a lot of things we cant now afford suddenly become affordable and we potentially stop being a debtor nation. To me, if the nation has no money, it doesnt matter what we want to do we cant afford to do it.
Crisis brings change. With AMD crisis has potentially changed them into a company that has a chance to become dominant from a company that was going to fail. For HP Printing and Imaging the lack of crisis may cause them to miss a future they would have otherwise dominated. And for the US, crisis may give us the first real chance to end our oil dependency and become a real superpower once again.
Lets hope for the best outcomes in all cases.