Silicon Valley is having a moment. A generational shift moment, that is.
A new crop of CEOs has taken the helm of tech industry giants who, starting in the 1970s, achieved dominant positions in software, devices, Web services, and mobile technology. Some of these powerhouse companies, which set the tech agenda for decades, have slipped from their leading positions as innovators, because mobile devices and cloud-based software have edged out programs installed on desktops and sold by license.
This isn’t a new phenomenon. But the events of recent weeks call attention to a changing of the guard in the tech industry. It’s not so much that the old guard isn’t pulling down lots of money—they are. But there’s a clear sense that they’re playing catch-up around trends set by newer companies, rather than setting the industry’s future course.
If you talk to young entrepreneurs in the Bay Area, almost no one says they’re trying to disrupt Microsoft, Yahoo, or Oracle anymore. On the other hand, Facebook, Twitter, and Google are fair game, and Apple is still the one to beat in hardware and mobile design.
There are those who believe all of the above companies’ best days are behind them. But that’s not stopping the old incumbents from trying to reinvent themselves with new leadership, strategies, and product directions. Indeed, a younger group of chief executives at these companies is already being judged on how well they can position their teams to compete in the new tech era.
Here’s a quick rundown on four big firms that are in flux:
Oracle
Oracle co-founder and CEO Larry Ellison is the latest industry icon to step down. Ellison is yielding his long-held position (effectively since 1977) to his two top executive aides, Safra Catz and Mark Hurd, who will share the position of CEO, the Oracle board announced on Sep. 18. Ellison will become CTO and executive chairman of Oracle’s board.
But Wall Street’s uneasiness about Redwood City, CA-based Oracle (NYSE: [[ticker:ORCL]]) had less to do with Ellison’s changing role—he will continue to supervise engineering departments as de facto chief—than it did with the company’s financial performance. First-quarter results didn’t meet the expectations of analysts as the company continues to fend off competition from cloud-based products across its business. (You can listen to Ellison’s comments on cloud computing from 2008.)
Microsoft
Meanwhile, Oracle’s longtime rival in database software, Microsoft (NASDAQ: [[ticker:MSFT]]), announced thousands of layoffs and closed Microsoft Research’s Silicon Valley lab in Mountain View, CA, as part of plans to create a leaner company under new CEO Satya Nadella. The closure of a Microsoft Research lab is notable in its own right; it’s the first MSR shutdown that I know of, and it reportedly affects 50-plus researchers working in distributed computing and other areas that could affect the company’s future.
Nadella, who replaced longtime chief Steve Ballmer in February, is increasing the company’s focus on mobile and cloud-based products. That’s a huge but necessarily gradual shift for the company, which still makes the vast majority of its money with Windows and Office. Meanwhile, Redmond, WA-based Microsoft, founded in 1975, is still trying—and mostly failing—to challenge Google in digital advertising and Apple in the mobile phone market.
Apple
Which brings us to the iPhone giant, which has grown into the world’s biggest tech company (NASDAQ: [[ticker:AAPL]]) three decades after its birth in 1977. Apple’s iPhone revenues alone were larger than all of Microsoft’s or Oracle’s in 2013; granted, comparing sales in hardware vs. software is tricky.
But while Microsoft and Oracle were taking their lumps last week, Apple fanatics were sleeping on sidewalks waiting to buy the Cupertino, CA, company’s latest phones. Sales began Sep. 19 for the iPhone 6 and iPhone 6 Plus; the gadgets were first unveiled 10 days earlier, along with a new product type, the Apple Watch.
Apple’s Tim Cook isn’t a new CEO—he took over the top job in 2011—but he does have the weighty burden of trying to maintain the success rate of the late Steve Jobs. He also faces increasing challenges on the mobile front, especially globally: Apple’s pricey phones have lost some market share to devices sold by Samsung and other manufacturers who rely on the Android operating system developed by Google.
Yahoo
This is the dark horse, the wildcard, the one that doesn’t quite fit with the others. It was founded in 1994 at the beginning of the Web era. Yet it is more compelling today.
Former Google executive Marissa Mayer, Yahoo’s CEO since 2012, is trying to revive the Sunnyvale, CA-based company, which lost out to Google as the dominant search engine but has diversified its online offerings in a bid to attract users and advertising revenue.
And Yahoo (NASDAQ: [[ticker:YHOO]]) enjoyed a multibillion-dollar boost this month because of its investments rather than its business operations. The company was a big investor in Chinese e-commerce giant Alibaba, which completed a record-setting $25 billion IPO last week. Yahoo has gained more than $8 billion from selling some of its shares, and its remaining 16.3 percent stake in Alibaba (NYSE: [[ticker:BABA]]) is currently worth about $36 billion. Keep an eye on what Yahoo does—and who it might acquire—with all that cash.
Bigger picture: keep an eye on large international tech companies—Baidu, Tencent, Mail.ru, and others. Silicon Valley may soon face a geographical shift as well as a generational one.
Bernadette Tansey contributed to this report.
