2004 Top 10: The big stories

If there were any lingering doubts that we are in the post-PC era, several big stories this year should have cleared them up. The sale of IBM's PC business to China's Lenovo Group, and the death of Comdex, were powerful reminders that IT is in a transitional stage. When one of the hottest business stories of the year involves an IPO of a company whose technology helps people find information on the Net, it's certain that the network, to paraphrase the well-known dictum of Sun Microsystems, has become the computer.

This transitional era involves not only shifts in computing technology per se, but issues related to law and technology strategy. Would technology advance more rapidly if patents were disallowed? Can users deploy mission-critical open-source systems secure in the knowledge that the legal underpinnings of the code are sound? There are no easy answers, as the biggest stories of the year reveal.

Here are the top 10 IT stories of the year, not necessarily in order of importance:

IBM bows to reality, sells PC unit to Lenovo

If there ever was a sign of the times, it was IBM's sale of its PC unit to China's Lenovo Group just a few weeks before the year ended. The deal, which will give IBM more than a billion U.S. dollars in cash and equity, calls for IBM to keep its foot in the PC arena in order to continue offering a full range of services and products. IBM will own 18 percent of Lenovo, which will be headed by a current IBM executive and headquartered in New York. Still, there is no doubt that the company that gave legitimacy to the PC revolution of the 1980s essentially is exiting the PC business because margins are too thin and the competition is more fierce than ever. Analysts expect more vendor consolidation over the next few years. The Lenovo deal also pointed to ....

China: The next India, or the next .... U.S.?

While Western vendors have for years been beating down the door to get into China, this year the country began to emerge as a player in its own right. Speaking in Beijing in September, Cisco Systems President and Chief Executive Officer John Chambers said China "will become the IT center of the world." He was speaking in terms of decades, but nevertheless the year has seen major companies such as Accenture and IBM, as well as Indian services providers such as Wipro, establish or expand outsourcing facilities in the country. The facilities still cater mainly to the local markets, but China's IT and facilities infrastructure is stronger than India's. As China fortifies its foreign language skills and piracy laws, look for its increasing presence in the service sector. Meanwhile, hardware and networking companies such as Lenovo and Huawei Technologies are reporting rapid international growth, while software companies such as Red Flag Software are starting to take more of a leadership role in international software trends.

Oracle v. PeopleSoft part II: Larry wins it.

So Larry Ellison meant it, after all! Many industry insiders thought the incendiary Oracle co-founder and CEO made a hostile bid for ERP (enterprise resource planning) rival PeopleSoft last year mainly to take advantage of the FUD (fear, uncertainty and doubt) that such a move was sure to cause. But on December 13, Oracle closed the deal to buy Peoplesoft for approximately $10.3 billion (AUD$13.6 billion), ending an acrimonious takeover battle. Despite the many obstacles PeopleSoft put up, Oracle persisted and in September it got the regulatory green light to continue its pursuit when a federal judge rejected the U.S. Department of Justice's effort to block the offer on antitrust grounds. Finally, two years after Oracle's initial bid, the story ends as another case of industry consolidation.

Sun and Microsoft, friends after all

One of the shocks of the year was to see Sun co-founder and CEO Scott McNealy sitting side-by-side with Microsoft chief executive Steve Ballmer, laughing and joking about their surprise "broad cooperation agreement." The April deal settles all outstanding litigation between the formerly bitter industry enemies and calls for Microsoft to pay Sun $1.6 billion to resolve antitrust and patent issues. The agreement appeared to be a winner for all sides: Sun gets cash to help its corporate makeover, which has entailed a souped-up Solaris and a new round of products for its core financial industry users; Microsoft placated a fierce rival and laid to rest some legal problems; and users, in theory, will get products that work better together.

E.U. slaps Microsoft with antitrust ruling

It took the European Union's antitrust ruling against Microsoft to show that the software giant could not completely buy its way out of legal trouble. Though Microsoft settled various antitrust cases and complaints with payoffs to several states, companies and organizations, the E.U. in March hit Microsoft with a Euro 497.2 million (AUD$875 million) fine and required the company to offer a version of its Windows operating system without the Windows Media Player software. The ruling goes beyond the settlement in the U.S. antitrust case, and Microsoft appealed. The case will drag on for years, but if Microsoft is forced to permanently offer Media Player as a separate product, it could force a change in its business model.

Intel's annus horribilis

Intel, a company that once prided itself on smart business strategy execution and industry-leading innovation, exits 2004 with a completely overhauled desktop and server roadmap, scaled-down expectations for consumer electronics and communications products, several embarrassing manufacturing gaffes, diminished respect, and a drop in its stock price. The flip side of the story is that Advanced Micro Devices Inc. seems to be encroaching on the mighty Intel's market dominance. In February, despite earlier statements to the contrary, Intel was forced to unveil a 64-bit processor for low-end servers in response to rival AMD's early success in generating demand for a similar product. If anything, this might prove that competition does indeed spawn technology advances.

Gaga over Google

Google's initial public offering in August, one of the most talked-about business stories of the year, brought up bittersweet memories of the dot-com era and some cautious optimism for the economy. Would all the interest in the Internet search engine company mean that investors would start pumping money into the market? That question has not been answered yet, but the stock opened strongly, the company has shown some good financials, and its Gmail 1G-byte e-mail service has spawned copycat offerings. There were some embarrassing gaffes, for example when its confusing October financial report had analysts wondering whether it had missed or exceeded financial expectations (it in fact exceeded them). Though it may not herald another dot-com boom, the IPO showed that with the right technology and market position, a company can still attract an investing public.

Peeved about patents

The turmoil over ratifying the European Union's patent directive has exposed the fear and confusion surrounding the concept of ownership of intellectual property (IP). As originally proposed by the European Commission, the directive would allow software patents. But subsequent versions by the European Parliament were changed to disallow software patents, and just before the end of the year it became apparent that a vote in another legislative body, the Council of Ministers, would be postponed, apparently because political pressure had smashed a consensus about which version to ratify. For the most part, large corporations are for patents and open source advocates and smaller companies, which have fewer resources to deal with patent issues, are against them. The issue, however, has even large American companies concerned. A loose consortium of large U.S. companies was reported to be seriously considering buying Web services patents auctioned off by bankrupt software company Commerce One Inc., for example, in order to ward off potential legal problems.

SCO case imploding, Linux growth exploding

The SCO Group's lawsuit against IBM last year worried many users, who feared that SCO's IP claims could restrict the growth of Linux. SCO alleges that IBM illegally contributed source code to Linux. This year SCO broadened the case, filing lawsuits against Novell and users Autozone and DaimlerChrysler. Now, while SCO may still prevail against IBM, prospects for its success appear to have dimmed: A judge threw out a large component of the case against DaimlerChrysler, and in a late-in-the-game move, SCO changed its claim against IBM to copyright infringement. SCO also has failed to sign up many customers for its Intellectual Property License for Linux. Although the IBM suit may not go to trial until late 2005, it does not appear to have dampened Linux's prospects. IDC expects Linux to make up 25.7 percent of worldwide server shipments in 2008, up from 15.6 percent of worldwide server shipments in 2003.

Comdex: The party's over

The long lines for buses, the chatty cabbies, the monstrous exhibit halls, the parties imbued with rock-star glow by young billionaires: All this may continue to happen at trade shows, but not at Comdex, which was cancelled this year. After losing 40 percent of its attendance in 2001 in the wake of the Sept. 11 terrorist attacks and the dot-com bust, it never recovered. The show, which came of age in the 1980s as the Computer Dealers Exposition, probably hit its peak in the mid-to-late 90s but was carried along by an exuberant industry buoyed by dot-com era dollars. As much as anything else, the demise of Comdex signals the end of an era, which began with the PC revolution and hit its zenith with the explosive growth of the Internet. Perhaps the way is clearing up for a rational rebirth.

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