July has not brought necessarily good news to certain high tech and consumer electronic producers and their respective businesses focused on industry supply chains.
Business headlines have included Microsoft reporting its biggest quarterly loss ever, fueled by a nearly 5 percent decrease in revenues, as well as writing-off 80 percent of its $9.4 billion investment in Nokia’s handset business and the shedding of 6 percent of its global workforce. The providers cloud-based software businesses were up 88 percent from the year-earlier period but reflected a slowdown from prior 100 percent plus gains in prior quarters. Within Microsoft’s consumer hardware revenues, revenues for the Surface tablet nearly doubled to $888 million while sales of the XBox gaming console rose 27 percent, but both hardware lines could not generate enough margin to offset performance of the broader Consumer division.
Under pressure from an activist investor, Qualcomm, one of the largest producers of semiconductor ships utilized in mobile phones, is expected to conduct a strategic review that will explore a potential breakup of that company. Financial media speculates that a breakup would possibly involve a separation of chip production from its lucrative patent-licensing businesses.
Speaking of mobile devices, who would have envisioned that Apple’s latest quarterly performance that included a 35 percent increase in iPhone related revenues and a 38 percent boost in profits, would disappoint Wall Street. Our Supply Chain Matters Commentary will tell you why.
IBM reported its 13th consecutive quarter of revenue declines as this technology provider continues to reinvent itself in the light of the accelerating movements toward mobile and cloud based computing. In the latest June-ending quarter, revenue fell 13.5 percent and IBM reported year-over-year declines among nearly all of it major business lines. While its cloud-computing business has reached $8.7 billion in revenues, it was not enough to overcome shortfalls in other business units.
As Supply Chain Matters previously noted, Hewlett Packard remains in the final preparation stages in splitting into two separate corporate entities, one, Hewlett Packard Enterprise Company will oversee operations of the now HP Enterprise division. The other, HP Inc., will oversee operations of the now HP Printer and PC divisions. That split is scheduled to take effect on November 1st, with potential implications to individual supply chains and supporting software applications.
Other well-recognized names such as AMD, Cisco Systems, EMC, Intel and others have struggled with fast-changing shifts in customer technology needs and requirements along with the increasing impacts of mobile and cloud-based computing.
The lifeblood of high-tech and consumer electronics supply chains, and increasingly automotive supply chains, has been the semiconductor industry. Of-late, there has been a slew of acquisitions among key suppliers that will likely result in consolidation among a smaller group of global players. The San Jose Mercury Times recently observed that “half a dozen chipmakers in Silicon Valley, including a few storied names, have changed hands in less than two years in nearly $12 billion in mergers and acquisitions affecting thousands of employees and costing some their jobs.” The latest was Intel’s acquisition of programmable chip producer Altera. Silicon Valley speculation is whether Qualcomm will be either be the next acquirer or the next target. This industry consolidation remains of great concern to industry supply chain senior operations and procurement executives.
One of the iconic Don Henley and Eagles tunes was “ A New York Minute”. Originally released in 1989, it features the following verse:
In a New York minute
Everything can change
In a New York minute
Things can get pretty strange
In a New York minute
Everything can change
In a New York minute
Thus is our observation of iconic players in high-tech and consumer electronics. The Third Wave of computing described by industry analyst firm IDC in 2013 has indeed made its sobering presence and the industry is changing at the pace of “A New York Minute”.
Events, change and uncertainty seem to be a constant, and that will continue to spill over into various supply chain related dimensions.
