In Mobile World, Tech Giants Struggle to Get Up to Speed
By CLAIRE CAIN MILLER and SOMINI SENGUPTA October 22, 2012
SAN FRANCISCO - Intel made its fortune on the chips that power personal computers, and Microsoft on the software that goes inside. Google's secret sauce is that it finds what you are looking for on the Internet. But the ground is shifting beneath these tech titans because of a major force: the rise of mobile devices.
These and other tech companies are scrambling to reinvent their business models now that the old model - a stationary customer sitting at a stationary desk - no longer applies. These companies once disrupted traditional businesses, from selling books and music to booking hotels. Now they are being upended by the widespread adoption of smartphones and tablets.
"Companies are having to retool their thinking, saying, 'What is it that our customers are doing through the mobile channel that is quite distinct from what we are delivering them through our traditional Web channel?' " said Charles S. Golvin, an analyst at Forrester Research, the technology research firm.
He added, "It's hilarious to talk about traditional Web business like it's been going on for centuries, but it's last century."
The industry giants remain highly profitable drivers of the economy. Yet the world's shift to computing on mobile devices is taking a toll, including disappointing earnings reports last week from Google, Microsoft and Intel, in large measure related to revenue from mobile devices. Investors are in suspense over Facebook's earnings to be disclosed Tuesday, for much the same reason.
Demand for Intel chips inside computers - which are much more profitable than those inside smartphones - is plummeting. At Microsoft, sales of software for PCs are sharply declining as people spend money on phones and tablets instead. At Google, the price that advertisers pay when people click on ads has fallen for a year. This is partly because, while ads on mobile devices are exploding, they cost less than Internet ads because advertisers are still figuring out how to make them most effective.