Silicon Insider: Test Time for Tech CEOs

Oct. 4, 2007 — -- In boom times everyone's a genius. It's the downturns that distinguish the pros from the minor leaguers.

For the last three years, as we've watched the stock market climb back into the stratosphere, and as one tech company after another sets records in revenues and profits, there's been no shortage of CEOs and senior executives swaggering about and talking smack about how their "vision" or "strong hand" or just flat-out leadership brilliance has guided their companies to unprecedented success.

You can hear the self-satisfaction in their public pronouncements and see it in their master of the universe redux poses in business and trade magazines.

Well, pardon me if I haven't bought it, but I've seen all of this many times before. The truth is that good times conceal a whole lot of bad management, weak products and structural flaws. They also present indifferent and momentarily prosperous customers as being far more loyal than they really are.

By the same token, the onset of hard times quickly reveals all those problems, often turning them from benign to malignant. Downturns expose dangerous overextensions, internal business contradictions and fair-weather friends and partners.

Any moron with a good suit can run a hot company during boom times; only a true manager can pilot a struggling company during a bust.

In the last few days, as the tech industry slowly slides into its latest cyclical downturn, we have seen four telling examples of great companies -- a couple of them run by famous executives -- suddenly finding themselves at risk of running aground. How these executives act to keep their firms afloat in the months ahead will do much to decide the duration of this downturn, the nature of the next boom, and what role their own firms will play in the years ahead.

The first of these companies is Apple Computer. As I noted in this column a few weeks ago, and am even more convinced now, the introduction of the iPhone late last spring may prove to be the high water mark of Apple for a long time to come.

Despite the apparent (but by no means guaranteed) success of the iPhone, Apple has already -- and it would seem prematurely -- cut its price by nearly a third, slicing into its profit margin. And despite a clever PR decision to give those early adopters refunds in the form of company store credits, some customers still aren't satisfied and are suing. Though the litigants haven't a leg to stand on, their very presence creates cracks in the powerful image of a monolithic army of Apple true believers.