Dell Misses, IBM Furloughs And Cisco Cuts
All consistent with my remarks over the last year including my remarks in the first quarter of last year and then a follow on post in June of last year that IBM stock is putting in a major top that could be its final top. Forever. In other words, that IBM may never again see $200 a share. Ever. Since those initial remarks IBM has produced no upward stock appreciation over the following two calendar years. This when Warren Buffett made a big investment in IBM.
As I have noted numerous times over the last eight years, I abhor technology stocks. Technology is an incredibly unpredictable and unstable business by its very nature. 99.999% of all technology inventions happen outside of the walls of any particular technology firm. That means beyond the early adoption cycle, technology firms have little chance of long term stability unless they are able to devise a business model that successful extracts rent. These three companies are all big, bloated, dead wood. All three of these companies have only managed to maintain their relevance since the mid 1990s by buying up, ie eliminating, literally over ten thousand more innovative competitors that would have eventually led to their demise, and by selling mythical value propositions that don’t exist, and by selling solutions that are so complex that customers must buy greater and greater amounts of wildly bloated consulting & services to implement them and by benefiting from the need for IT resources to support the financialization and increased national security state control of the global economy. In other words, these three firms have survived by becoming adept at extracting rent.
As I noted on here seven years ago and then again last year, the vast majority of IBM’s profits, well more than 50%, come from the global financial industry alone. From companies whose business models include greater and greater debt serfdom and greater and greater rent extraction through various legalized extortion rackets. The expenditures of the national security state and military-industrial complex aren’t far behind in driving IT-related profits. Without these two client bases spending inordinate amount of money for IT and consulting services to extract more rent and increase the tyranny of the corporate state, what else is left? This is the case with most IT providers and management consulting firms. IT’s high-profit future is completely dependent on the fate of global financial predators, the need for greater and greater technology by the national security state, pushing around paper as a business model, greater and greater successful financial and corporate state rent extraction and increased debt serfdom. The above companies along with SAP, Oracle, HP, Accenture, Wipro, Infosys, Tata, CapGemini, Microsoft and others could very well be in a fight for their survival over the next ten years. Or, at a minimum, come out of this cycle fractionally the size of what they are today. This is consistent with a long term thesis on here that we will see corporations and/or large business units within corporations fall like dominos in the back end unwinding of this cycle.
Permanent corporations must device schemes of greater and greater rent extraction to survive regardless of the industry. That is, unless they are granted regulated monopoly status by society like Ma Bell. It’s not just financial firms that are adept at extracting rent. This country was not founded on free market corporate capitalism. It was founded on people leaving Europe in droves to get away from the feudalism of free market corporate capitalism and the class-based looting by the predators who controlled it. That would be the political-economic aristocracy. The same dynamic is driving the world into modern day feudalism.