Before we dive into the data behind Alphabet's forward-looking strategy, we must quickly assess its most mature and most profitable (by far) business line: Google search and advertising. As a reminder, Google now consists of search, mapping, cloud & enterprise, Google-branded consumer hardware and operating systems (Chrome, Android, etc.), and YouTube. All other units, from investment vehicles (GV, Google Capital) to the X arm, are now subsidiaries reporting directly to Alphabet management. We will use the Google moniker when discussing either the company proper or historical pre-Alphabet activities under its banner. The company outperformed analyst expectations in Q2'16 with surging top- and bottom-line growth.
Twenty years ago, Louis Gerstner transformed IBM by emphasizing consulting and technology services -- not just technology -- to solve customer problems. Today, as the wave of digitization continues to grow and envelope all the world's enterprises, IBM is at a crucial juncture once again. CEO Ginni Rometty is leading the company into new areas, betting big on its Watson software and cloud computing. But these new services have yet to grow fast enough to supplant the profit declines in the company's eroding legacy products. This time, the transformation IBM faces is far more difficult, for two reasons.