We remember where we were when the big events happened. We forget when things come together to influence the future. Last week may have been one of those weeks.
Here is why.
Monday the 23rd included an announcement that investment firm Elliott management acquired a major stake in Salesforce. There are subsequent articles during the rest of this week regarding Elliott’s intentions.
Tuesday, Microsoft announces a multi-year, multi-billion dollar investment in OpenAI, that startup behind ChatGPT.
Wednesday, Microsoft announced earnings, recording the slowest growth in more than six years, despite Azure growing 31%. the U.S. Justice Department seeks to break-up Google’s add business. The suit was filed on Tuesday and reported on Wednesday.
Thursday, Microsoft Outage Hits Outlook, Teams and Xbox Live Users and IBM cuts 3,900 Jobs .
Friday, Intel reported a $664 million dollar lost in the fourth quarter, SAP announces plans to cut 3,000 jobs and it seeks a buyer for Qualtrics, and the U.S. GDP Rose 2.9% in the Fourth Quarter
It was a busy week. Some thoughts on a few themes arising from what happened last week:
Activist Investors will influence high-tech strategies
Elliott Management’s position in Salesforce, its desire to take two seats on its board and in its own words “realize the value befitting a company of its stature,” represents the biggest news of the week for two reasons.
First, CEO mea culpas related to hiring too many people has passed, now comes the hard work of generating earnings. Unfortunately, there will be more layoffs, like IBM and SAP announce last week.
Second, the veil of tech invincibility is compromised. The future value of high tech is no longer based on riding on top of strong demand and cheap money to drive growth. The ABILITY TO EXECUTE now moves to the front. Tech CEOs will need to focus on improving their financial performance and earnings or face similar challenges. Technology companies are now just as susceptible to activist investors as other industries. Perhaps more so since many tech companies are cash rich, have managed leverage and expect to continue to grow, particularly those tied to the cloud.
This can have a ‘chilling effect’ on high tech CEO’s investments and focus. Is high tech becoming just another industry? Many commented that Tesla cutting costs on its electric vehicles as a sign that it was just another car company. This was the week that put that question on the table.
In another month, few will remember last week, but the implications of that week will be hard to forget.
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