Tuesday, August 2, 2016

All tech companies are not created equal

We often compare tech companies such as Google, Apple, Microsoft and Samsung without realizing they represent two significantly different types of businesses. Apple and Microsoft are the "purest" of the group; they both have a relatively small number of related products; they began in the PC era and evolved to embrace the current mobile craze. Their  fortunes are in some ways easy to predict based on how the "PC sector" develops  . Samsung and Google (now officially called Alphabet) represent entirely different models.
As a business, Google is primarily an advertising company - most of its revenue comes from selling ads that show up on searches and YouTube videos. The company uses a lot of technology but does not sell much of it. In addition it has a vast array of experimental projects including self-driving cars and balloons to deliver Internet service around the world. It's possible some of these will eventually go into production and make money but many - likely most - will be cancelled. Their free Android operating system for mobile devices is intended to get Android based phones in as many hands as possible so - surprise, surprise - ads they sell will pop up billions of times per day. Google cannot control much that happens on Microsoft or Apple devices but Android is another story. The image above shows the complexity of the Google structure.
 Samsung most closely resembles a "conglomerate" a collection of unrelated companies - hospitals, construction companies, smartphone maker and chip making foundries to name a few. It diverges from what most people consider a traditional corporate structure and operates more like a hereditary monarchy. When the founder died his son took over; that elderly son has been incapacitated for two years and his son is planning to take the reins when he dies. It's not as simple as it seems because the intrigue as the shift occurs resembles the power struggle in the Saudi monarchy more than a mere passing of the baton.
 It is important to understand these changes since many people are wondering who will be the next Microsoft. As large as some of these companies are some will gradually diminish in power as others become dominant. 

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