They Didn't See the Cloud Coming

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How did they not see cloud and mobile coming? How were they not able to move fast enough? What were they thinking?

Do you know those questions can be asked of pretty much every information technology CEO who has reported so far,with the exception of SanDisk SNDK and Xilinx XLNX ? When you listen to these quarters just reported you realize just how disruptive both cloud and mobile are.

Unless companies are specifically built for cloud or mobile and have the cost structures and infrastructure in line with those two themes, they just couldn't deliver what investors wanted.

Take Intel INTC . Yesterday, both on television and on the conference call, the executives bemoaned how slow they were to mobile. "We're are little slow to recognize the trend toward mobility," CFO Stacy Smith told CNBC. Huh? How could they not see this coming? How did Yahoo! YHOO , before Marissa Mayer, not see it coming? She admitted that the company, a little more than a year ago, didn't see mobile coming.

How about cloud? SAP SAP and IBM IBM admitted that the accelerated move to the cloud hurt profits and revenues. Oracle ORCL said as much when it reported last, although Oracle did team up with Salesforce.com CRM , which saw these trends coming years ago, to get moving faster on the cloud. But it may not matter for Oracle, because it's infrastructure is heavily non-cloud based.

Meanwhile, Sandisk, often considered to be the lightweight of techs because of its focus on flash, blew the numbers away because flash is in the sweet spot of mobile. Xilinx also reported a terrific number because it saw mobile and the accelerated move to video coming. But still, because of weakness in Asia, Xilinx gave a muted outlook. I think they were just being conservative, but it did cause the company to catch a downgrade and muted the original excitement.

Now, after these reports, there is no doubt whatsoever that the old-fashioned, expensive software that's sold by salespeople to institutions with hefty licensing fees may rapidly become a thing of the past. That's a high-margin business.

We also know that personal computers were high-margin businesses and the new, smaller-form factors ("ultra mobile" as Intel calls them) are the bane of the existence to a company like Intel that has spent so much capital on other larger-form factors, and, I might add, its stock, where it bought back $3 billion worth. What's it done for the company? I don't know, I have to tell you, though Intel missed the Internet backbone business, which it then ceded to Cisco CSCO . It missed the mobile business, which is dominated by Qualcomm QCOM , and it missed the tablet business, which is dominated by Arm Holdings ARMH . It's sad that this company's not growing at all. Yep, flat revenues.

But it beats the declining revenues that IBM's got as it wrestles with both macro fears and the possibility that its software isn't going to be as profitable given cloud inroads, either. At least SAP didn't talk about declining revenues. There though, the cloud, as fast as it moves toward it, ends up hurting as much as helping the whole company's sales and margins.

In the end the real winner here may be the company that tech enthusiasts love to hate right now because of its high price-to-earnings multiple, Salesforce.com, which is literally based on the fastest-growing trends out there in social, mobile and the cloud. You will never hear CEO Mark Benioff say he didn't hear it coming. His whole company is built on the premise that the holy grail of social, mobile and cloud is the only way to go. No wonder the PE is high. It's deserved.

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