Bungled mobile bet will be Ballmer’s swan song

Being rich doesn’t necessarily mean you’re smart, and the rich guys on Wall Street have made a lot of terrible calls in the past few years. But when it comes to the mobile revolution, Wall Street is catching on. If there was ever any doubt about that, just check out the barrage of instructive earnings and sales news we’ve seen as the third-quarter financial reporting season comes to an end.  

We saw wretched results from Intel, AMD, Microsoft, and others. Bad economy, sure, but the real news is flagging PC sales. If it were just the economy, why is Samsung doing so well in sales of chips for mobile phones and actual mobile phones?

[ Check out InfoWorld’s tablet deathmatch: iPad Mini vs. Nexus 7 vs. Kindle Fire HD. ]

Apple sold 3 million iPads last weekend. Think about that. Yeah, the company has screwed up with Maps and other items, but when you can hit those kinds of sales numbers, many sins can be forgiven.

Then there was Facebook. Those who thought the company was headed for MySpace territory were wrong. An earnings call with CEO Mark “Boy Billionaire” Zuckerberg convinced Wall Street that Facebook is gaining traction in mobile advertising. Sure, it was fun to watch the IPO fizzle, but the bottom line is when you have hundreds of millions of users, you’ll find a way. Of course, mobile ads mean even more intrusive, privacy-shattering stunts, but that’s another story.

What this means to those of us who don’t invest in tech stocks is clear. Old-line tech giants like Microsoft, Hewlett-Packard, and Intel will throw resources into mobile, and the venture capital crews on Silicon Valley’s Sand Hill Road will do the same, creating more and more opportunities for engineers and developers who know mobile technology.

Those are easy calls. But I’m going to stick my neck out and make another: If Windows 8 and the Surface tablet flop, you’ll see a shareholder revolt that will send Steve Ballmer packing by this time next year.

Numbers don’t lie: Mobile is the future
When it comes to mobile, you have to start with Apple, and just a few numbers tell the tale. Apple, the world’s biggest company measured by stock-market value, said it sold 26.9 million iPhones in its fiscal fourth quarter, up 58 percent from a year ago and above analyst expectations.

That enormous sales figure would have been even higher had supply not been constrained, said CEO Tim Cook. Either way, when you can sell 3 million devices in a couple of days, there’s no doubt that Apple is showing the industry what road it needs to take.

Then there’s Samsung. For all the legal ugliness between it and Apple, the two companies are partners, with the Koreans selling mobile chips to Cupertino — which Intel wishes it could do. (As I noted last week, that’s not impossible, and Intel is working hard to shift gears and become a serious provider of mobile silicon.) Samsung estimated that its July-September operating income nearly doubled to $7.3 billion from a year earlier.

As for Intel, the chipmaker’s revenue was $13.5 billion during the third quarter, dropping from the $14.2 billion in the same quarter last year; profits were off sharply as well. AMD is doing much worse and now says it will cut its workforce of nearly 12,000 by 15 percent, its second round of layoffs in less than a year as it struggles with a weak global economy and a consumer shift toward tablets.

The chipmaker forecast a drop in fourth-quarter revenue that is worse than Wall Street expected, and AMD CEO Rory Read said he does not expect the PC industry to improve for “several” quarters. That may be optimistic — and Wall Street is running out of patience. Look at what’s happened to the share prices of these old-guard PC-focused companies and you’ll see exactly what I mean.

Bye-bye, Ballmer?
First it was the netbook, then it was the Ultrabook. Microsoft, Intel, and the PC makers keep looking for a way to convince buyers they don’t need an iPad or Android tablet. Neither initiative gained much traction, so Microsoft bet big on Windows 8 and the Surface.

InfoWorld and I have been dumping on Windows 8 so much I’m not going to repeat the arguments. Maybe we’re wrong, and buyers will decide that the new OS and the Microsoft’s first serious venture into hardware are what they want. It would be a huge boost for the industry if it happens, but I’m not optimistic.

Most recently, Microsoft reported $4.47 billion in net income for its first fiscal quarter of 2013, a 22 percent decline from the same period a year earlier, while revenue was off 8 percent. But the really telling number was in the Windows Division, with revenue of $3.24 billion, down a frightening 33 percent from the same period last year.

Something has to change. There’s been a string of bad quarters, and the stock has been frozen for nine years. At some point — I think we’re getting really close — investors are going to demand a shakeup. When they do, it’s going to be good-bye, Ballmer.