I’d say that in past years, 70% accuracy is being rather forgiving, however Bob IS an industry luminary and he does tend to know what he’s talking about.
The 70 Percent Solution Bob’s Predictions for 2002 By Robert X. Cringely
Each year at this time, I make predictions about what will happen in high tech business during the next 12 months. It’s not really that hard to do if, like me, you read a lot, go to lunch a lot, and have smart friends. My predictions are 70 percent correct, year after year. What I got wrong the last time out was I wrote that the recession would be over by now, that Microsoft would be a bad stock to own, and that Cisco would be a good one.
My other predictions, which included Microsoft settling with the DoJ without requiring a break-up, were all correct. You can find that column under the “Old Hat” button on this page or among the “I Like It” links.
This year, I am going to do things a bit differently just because this year feels different. There is a new feeling coming from the laboratories and boardrooms, a feeling that has nothing to do with terrorism and patriotism or even high tech, and has everything to do with waking up from a long sleep and realizing that the blanket has slipped off the bed and it is cold.
As we slouch through this recession, it is clear to me that corporate arrogance is a problem that has afflicted us for sometime, but there are signs of it weakening. Last year, when I predicted Cisco would do so well, it was only weeks after I had sat through the company’s European, Middle East and African division sales meeting. At that moment, Cisco executives were setting high goals and expecting to reach them. Only it didn’t work out that way. This made me realize even the most successful companies don’t have any greater insight, just better luck. Back in October 2000, Cisco had basically no idea where it was really going, just expecting that a corporate body in motion would tend to stay in motion, that success would breed success.
Good companies learn lessons and not such good companies don’t. It took years of staggering losses and the hiring of an outsider for IBM to turn around in the early 1990s. Big Blue has fared better than most of its competitors in recent years, and it is entirely as a result of that humbling. But losses and new blood aren’t always enough. AT&T brought in Michael Armstrong for exactly the same reason, and all he did was make a $100 billion mistake. Same for Carly Fiorina at Hewlett-Packard, though her loss was smaller. Great corporate names, both, and they are threatened because of arrogance.
Now to this year’s predictions:
1. The dominant theme will be the continuing battle between evil and evil as Microsoft expands its .NET strategy and the rest of the industry responds. Look for further stratification as the banks come to realize that Redmond’s goal is to take a piece of every online transaction, which is to say Microsoft intends to steal the banks’ business. This is a fundamental reworking of business that WILL happen over the next three to five years.
2. The main technical tool for this reworking will be XML, and it will probably be easy to label 2002 as the Year of XML. This new data standard will be sprinkled on every type of software imaginable, whether it makes sense to do so or not.
3. Look for emergence of an XML industry, which is to say a rash of new startups built around XML services. Microsoft’s dedication to the standard in its relatively pure form makes this emergence inevitable. The big XML hit for 2002 will come from a company called KnowNow.
4. KnowNow is a new company backed by Kleiner Perkins, the big venture firm, and represents the resurgence of venture capital in 2002. Having spent 2001 NOT investing money, the VCs this year have to either resume investing their funds or get out of the business. Look for the former, again thanks to XML, as the VC industry finds another type of business to spawn than pawn off on us.
5. The resurgence of VCs can only come with a resurgence of the market for Initial Public Offerings, which should happen by late spring.
6. Other hot IPO areas besides XML will include security (thanks to bin Laden and Microsoft’s continued incompetence in this area) and an emerging niche called rich media.
7. XML is real, security is real, but rich media is not real — at least not in 2002. Just as the online music industry grew up around MP3, rich media is built on MPEG-4, which is far more than just another video codec. MPEG-4 is a framework for building new types of entertainment that are more Internet-friendly. Beyond carrying traditional video, MPEG-4 enables the creation of entertainment products made of up many levels of artificial scenes, sets, even animated characters. It is the entertainment of the future, but alas that future won’t start in 2002. The problem is that embracing rich media means rejecting old media and the tools aren’t yet good enough to make that jump.
8. Rich media doesn’t absolutely require broadband, but it sure helps. And 2002 will be a pivotal year for broadband, which took a lot of lumps in 2001 with the fall of companies like Northpoint, Rhythms, Covad, and Excite@Home. What is key here is the deal for Cox Cable to buy AT&T’s cable TV unit. If that goes through (and I think it will), Cox will try to make its big investment pay off by competing for local and long distance phone service over its cable system. Other cable companies will follow suit and the only way for the local phone companies to fight back is with expanded DSL.
9. And Microsoft will make itself a part of every deal, everywhere, no matter what happens with its anti-trust case. Quite simply, Microsoft will take an equity position in every tech deal that’s over $1 billion, leveraging to the hilt its close to $40 billion cash hoard. Don’t bet against Microsoft in 2002. That is because, in addition to having deep pockets, Microsoft owns the start page, the defaults, the windowing environment, and the content standards. It turns out they also own the traffic, the audience management, and if you’re watching closely what they’re doing with Windows Media, they’re going to force you to pay licenses to show your own content on-line. Today, on the desktop, tomorrow, on UltimateTV.
10. Finally, I think last year’s prediction for Cisco Systems will come true this year. I wrote “The answer to every problem with the Internet will continue to be ‘pay more money to Cisco.’ At current prices the stock is a bargain.”
No, I don’t own any Cisco stock.