1. IBM, HP, Sun, Microsoft, Apple and the dot-com bust Presented by Zach Stone, Brent Steinke and Richie Rich

2. Changing Times, Changing Companies / We will cover each of these companies product mix and strategies leading up to the 2001 dot- com bust. / Then we will cover how the stock crash affected the firms and the changing environment. / Lastly we will discuss how each company responded and what product and strategy changes they have made. / We will cover each of these companies product mix and strategies leading up to the 2001 dot- com bust. / Then we will cover how the stock crash affected the firms and the changing environment. / Lastly we will discuss how each company responded and what product and strategy changes they have made.

3. A Quick Look at the Stock History

4. Before the Bubble Burst / Companies

5. IBM / Started as CTR, changed name in 1924 / Antitrust lawsuit in 1969 / Teamed up with “skunkworks” to build IBM PC / Loss of nearly 5 Billion in 1992 / Shifting focus from components and hardware to software and services / Started as CTR, changed name in 1924 / Antitrust lawsuit in 1969 / Teamed up with “skunkworks” to build IBM PC / Loss of nearly 5 Billion in 1992 / Shifting focus from components and hardware to software and services

6. HP / Started in 1939 by Bill Hewitt and Dave Packard / First product, 200A. / Invented many of the first calculators. / In 1980’s they came out with printers and scanners as well as multi-use units. / In 1994 HP began outsourcing manufacturing. / Started in 1939 by Bill Hewitt and Dave Packard / First product, 200A. / Invented many of the first calculators. / In 1980’s they came out with printers and scanners as well as multi-use units. / In 1994 HP began outsourcing manufacturing.

7. Microsoft / Founded in 1975 by Bill Gates and Paul Allen / In 1980’s flooded the market with IBM PC clones, used IBM contract. / MS-DOS dominated home PC market as a variant of UNIX. / Marketed the “Microsoft Mouse” in 1983 and entered computer hardware market. / Bill Gates began to promote OS/2 as the future of computing, declared OS/2 partnership over in 1991. / In 1995 introduced Windows 95 and transitioned the company towards consumers. Followed with Windows 98. / Founded in 1975 by Bill Gates and Paul Allen / In 1980’s flooded the market with IBM PC clones, used IBM contract. / MS-DOS dominated home PC market as a variant of UNIX. / Marketed the “Microsoft Mouse” in 1983 and entered computer hardware market. / Bill Gates began to promote OS/2 as the future of computing, declared OS/2 partnership over in 1991. / In 1995 introduced Windows 95 and transitioned the company towards consumers. Followed with Windows 98.

8. Sun Microsystems  ｷ Founded in 1982 in Santa Clara, Ca  ｷ Products  o Servers  o Workstations  ｷ Able to survive the Workstation Wars of the 1980 ’ s  ｷ Mid 1980 ’ s  o Teamed up with AT&T for a short time  ｧ Came up with Unix System V Release 4  ｧ Sun version was called Solaris 2  ｷ Mid 1990 ’ s  o Aiming to build network appliances  ｧ Single function computers  ｧ Network computer (a diskless workstation)  o None of the business initiatives were successful  ｷ Late 1990 ’ s  o Successfully transformed into a vendor of large scale symmetric multiprocessing servers  ｷ Founded in 1982 in Santa Clara, Ca  ｷ Products  o Servers  o Workstations  ｷ Able to survive the Workstation Wars of the 1980 ’ s  ｷ Mid 1980 ’ s  o Teamed up with AT&T for a short time  ｧ Came up with Unix System V Release 4  ｧ Sun version was called Solaris 2  ｷ Mid 1990 ’ s  o Aiming to build network appliances  ｧ Single function computers  ｧ Network computer (a diskless workstation)  o None of the business initiatives were successful  ｷ Late 1990 ’ s  o Successfully transformed into a vendor of large scale symmetric multiprocessing servers

9. Apple  ｷ Founded in Los Altos, CA in 1976 in a garage  ｷ Apple I was delivered in June of 76 and a total of 200 were built  ｷ Apple II came in 1977 and stood out due to high quality and a number of technical advantages  o Open architecture  o Color graphics  o Elegantly designed interface to a floppy disk drive  ｷ Apple III came in 1980  o Started to struggle to compete against IBM and Microsoft  ｷ 1983 the Lisa team won a race with Macintosh and was released with a GUI  o Lisa failed  ｷ high price tag  ｷ limited software titles  ｷ Founded in Los Altos, CA in 1976 in a garage  ｷ Apple I was delivered in June of 76 and a total of 200 were built  ｷ Apple II came in 1977 and stood out due to high quality and a number of technical advantages  o Open architecture  o Color graphics  o Elegantly designed interface to a floppy disk drive  ｷ Apple III came in 1980  o Started to struggle to compete against IBM and Microsoft  ｷ 1983 the Lisa team won a race with Macintosh and was released with a GUI  o Lisa failed  ｷ high price tag  ｷ limited software titles

10. Apple Continued…  1984 Macintosh was launched  o Initially sold well  o Follow up sales not so strong  o Sales did change due to intr0duction of the LaserWriter (first laser priingter)  ｷ 1990 ’ s  o Greatly expanded its computer lineup  o Offered a mulititude of models  o Failed to adequately differentiate from one to another  ｷ Mid to late 1990 ’ s  o Attempted to reinvent them selves  o Formed an alliance with IBM and with Motorola  ｷ Trying to create a new computing platform  1984 Macintosh was launched  o Initially sold well  o Follow up sales not so strong  o Sales did change due to intr0duction of the LaserWriter (first laser priingter)  ｷ 1990 ’ s  o Greatly expanded its computer lineup  o Offered a mulititude of models  o Failed to adequately differentiate from one to another  ｷ Mid to late 1990 ’ s  o Attempted to reinvent them selves  o Formed an alliance with IBM and with Motorola  ｷ Trying to create a new computing platform

11. The Bubble Bursts / Perpetuated by firms believing that to succeed they simply needed to increase market share. The three reasons below are the main causes of the tech bubble burst… / Network effect- Increase users… / Speculative venture capital- A Frenzy of investments… / Changing business landscape- Cheap money, low interest rates. Workers investing in their own company stock. / Perpetuated by firms believing that to succeed they simply needed to increase market share. The three reasons below are the main causes of the tech bubble burst… / Network effect- Increase users… / Speculative venture capital- A Frenzy of investments… / Changing business landscape- Cheap money, low interest rates. Workers investing in their own company stock.

12. Benefits of Bubble… / Rise of e-commerce and tax free trade. / Individual investor empowerment. / Plentiful bandwidth for consumers / Rise of e-commerce and tax free trade. / Individual investor empowerment. / Plentiful bandwidth for consumers

13. How Were They Affected? / IBM- Benefited from increase in use of Linux software and their hardware. / HP- Moved into service sector. / Microsoft- Forced to improve software because of Linux, but also because of antitrust suit. / Sun Microsystems- Declined as a result of the rise of Linux. / Apple- Stock dropped but the release of the iMac and iPod have spurred growth. / IBM- Benefited from increase in use of Linux software and their hardware. / HP- Moved into service sector. / Microsoft- Forced to improve software because of Linux, but also because of antitrust suit. / Sun Microsystems- Declined as a result of the rise of Linux. / Apple- Stock dropped but the release of the iMac and iPod have spurred growth.

14. The Bubble and Linux grow… / In 1999 there saw the rise of Linux, aggressively supported by IBM and HP created the prevalence of open-source software. / Linux put pressure on Sun who sells proprietary Unix and caused Microsoft to improve it’s offerings. / In 1999 there saw the rise of Linux, aggressively supported by IBM and HP created the prevalence of open-source software. / Linux put pressure on Sun who sells proprietary Unix and caused Microsoft to improve it’s offerings.

15. How did they affect each other? / The massive push for the adoption of Linux by IBM pushed Sun (Unix) into a downhill slide. / The adoption of Linux as an OS option spurred Microsoft to develop better software. / HP began to focus on services instead of hardware and therefore buffered itself. / Apple continued to sell proprietary technology and therefore saw very little computer sales growth. The advent of the iPod was a new driver for growth. / The massive push for the adoption of Linux by IBM pushed Sun (Unix) into a downhill slide. / The adoption of Linux as an OS option spurred Microsoft to develop better software. / HP began to focus on services instead of hardware and therefore buffered itself. / Apple continued to sell proprietary technology and therefore saw very little computer sales growth. The advent of the iPod was a new driver for growth.

16. After the Bubble / Apple was the only company to experience significant growth.

17. Sun Microsystems / Very aggressive company. / Changed strategy to specialization. / Allied with Fujitsu and AMD. / Sungrid. / Consistently produced losses. / Forward EPS -.15, P/E -30.1. / Very aggressive company. / Changed strategy to specialization. / Allied with Fujitsu and AMD. / Sungrid. / Consistently produced losses. / Forward EPS -.15, P/E -30.1.

18. IBM / Very consistent company. / Changed focus into services and consulting. / Changed CEO’s, grew patent portfolio. / Sold PC division to Lenovo Group. / Solid Financial Footing / Forward EPS 5.85. P/E 13.8. / Very consistent company. / Changed focus into services and consulting. / Changed CEO’s, grew patent portfolio. / Sold PC division to Lenovo Group. / Solid Financial Footing / Forward EPS 5.85. P/E 13.8.

19. HP / Good at being mediocre. Followed market at nearly every turn. / Supported Linux/FOSS. / CEO Carly Fiorina / Controversial Compaq merger. / 2005 ApplQ acquisition. / Workforce reduction lead to profits. / Good growth prospects. Forward P/E 15.5. / Good at being mediocre. Followed market at nearly every turn. / Supported Linux/FOSS. / CEO Carly Fiorina / Controversial Compaq merger. / 2005 ApplQ acquisition. / Workforce reduction lead to profits. / Good growth prospects. Forward P/E 15.5.

20. Microsoft / History of success / Overcame Monopoly antitrust lawsuit. / Slow growth of stock. / Forward P/E 17.8 / Stock has dropped 12.4% in last 12 months. / Windows Vista. / History of success / Overcame Monopoly antitrust lawsuit. / Slow growth of stock. / Forward P/E 17.8 / Stock has dropped 12.4% in last 12 months. / Windows Vista.

21. Apple Computer / iPod/iTunes / Intel Processors / Mac OS/Windows/Linux / Boot Camp / Financials- Forward P/E 31.1, EPS 2.08 / iPod/iTunes / Intel Processors / Mac OS/Windows/Linux / Boot Camp / Financials- Forward P/E 31.1, EPS 2.08

22. If we had $10,000 to invest… / Split investment between Apple and IBM. / Apple- Intel/Mac, Innovative, high P/E, high growth. / IBM- Projected growth, consistent, strong dividend. / Split investment between Apple and IBM. / Apple- Intel/Mac, Innovative, high P/E, high growth. / IBM- Projected growth, consistent, strong dividend.

23. In a global changing environment… / Firms need to innovate and address new technologies and issues if they wish to succeed. / Strong alliances can create new standards or disrupt old ones (Linux VS. Unix). / Firms must always strive to maintain a competitive advantage if they wish to succeed. / Firms need to innovate and address new technologies and issues if they wish to succeed. / Strong alliances can create new standards or disrupt old ones (Linux VS. Unix). / Firms must always strive to maintain a competitive advantage if they wish to succeed.

24. Thank YOU for listening! / Questions/Comments?