Tag: dell

Beating the shock clock

Dell Boomi’s CEO, Chris McNabb sees being part of an empowered Dell as his company’s advantage against the newly listed Mulesoft.

With a range of tech companies floating as corporations lose their appetite for acquisitions, companies like Boomi which was bought by Dell in 2010 believe they have an advantage over competitors like Mulesoft which have to answer to the public markets at sky high valuations following their recent stock market listing.

If Chris McNabb, CEO of Dell Boomi, is concerned about his competitor’s successful IPO, he wasn’t showing it when he spoke with Decoding the New Economy at a restaurant in a Sydney office park last week. With Mulesoft’s stock popping 45% on the first day of trade, attention was on how his company would react to such a vote of confidence in his market rival.

“We continue to grow very rapidly, well north of market growth rates. I think you’ll see us consolidate our position at the top of most boards in terms of the number of customers. If you look at Mulesoft’s S1 (the company’s official stock offering document) it shows them with around 1,078 customers while we have 5,300 customers. We almost have an unfair competitive advantage.”

Part of that unfair advantage McNabb cites is the breadth of services now offered by Dell’s merger with EMC where he flagged an increased push across the organisation’s sales team starting in the second half of this year.

“For us to say six months ago that we’d sit here and say that the merger of two 25 billion dollar plus businesses could be bedded down is really saying something. I think it’s one of the best integrations that I’ve ever seen.”

“For Boomi it’s been terrific and continues to be terrific. We get unequivocal support from executives, Michael Dell and the ELT – Executive Leadership Team – has been nothing but a hundred percent supportive.”

“Now we’re looking at what we can do with the EMC Solutions sales team, what we can do with our brothers in the strategically aligned businesses, specifically Pivotal, Virtustream and VMWare. What are the opportunities to go to market more collaboratively with them?”

Boomi’s recent ManyWho acquisition fits into that range of offerings and McNabb believes the workflow platform’s role as a tool helping CIOs manage their organisations’ transitions to cloud services will be a compelling offering.

“Workflow automation – redoing business processes in a structured and an unstructured way – was always a key strategy of ours.”

“Hybrid IT is here for the next ten years, so how do we enable it so customers can buy all the best of breed software they want yet still have a suite like experience?”

“We believe hybrid IT is creating challenges for CIOs and as you  get all these different cloud applications from vendors you’re breaking apart your ERP and creating an integration problem and you’re creating a data management problem along with governance, API management and orchestration.”

“It’s our vision to give CIOs the unified platform the necessary fundamentals in cloud services to address these issues.”

With a solid market position in North America, McNabb sees the Asia-Pacific as the big growth driver for Boomi with channel partners leading the company’s expansion across the region.

“Worldwide EMEA is going through a ton of growth and this region (APAC) is going through a ton of growth. Our expectation is this region will have the highest growth rates – Australia, New Zealand, South East Asia, these are key target areas.”

“If I look at things strategically and how important the channel is to us, is it’s a force multiplier as it allows you to get entire teams being certified and ready to go across regions. It also helps execute in a better way in local markets, you have to be in a region in a big way and if you can get really good certified partners you can do that much better and faster than if you’re hiring and building it yourself.”

Returning to the topic of Mulesoft, McNabb sees not being part of a publicly listed company as one of Boomi’s big advantages.

“We don’t operate on a ninety day ‘shock clock’, we know what the market’s growing at, we know what our platform is capable of, we know we’re going to raise our targets. There isn’t increased pressure to perform.”

“As it turns out, those in the public eye do have the ninety day shock clock to attend to and it will be interesting to see how those first, two, three or four quarterly reviews go. I’ll certainly be an eager listener to their investor calls.”

Ultimately though, McNabb thinks Mulesoft’s IPO and it’s 45% pop on listing vindicates Dell’s ongoing investment in Boomi and the potential of the cloud integration marketplace.

“I look at it as a terrific validation of the marketplace…. It’s good for everybody.”

Fading giants move to support each other

Merging two fading giants is unlikely to save their fortunes in the face of a declining industry.

Two struggling tech giants are reportedly set to merge with persistent rumours that Dell is about make an offer for storage provider EMC.

Both companies have been hit by shifts in the computing industry with cloud computing undermining both businesses, Dell was also hit by the collapse of the Windows upgrade cycle which changed the buying patterns of computer purchasers.

A combined company offers some theoretical advantages in bringing together one of world’s biggest server companies with a storage business, however it’s difficult to see how the two businesses combined would slow the decline of the segments both are strong in.

Mergers can slow the decline of companies like EMC and Dell, but without innovating and finding new opportunities to exploit it’s unlikely they can recover lost ground.

 

 

The PC industry’s search for new directions

Microsoft and Dell struggle to reinvent themselves in the post PC era

All Things D reported over the weekend that Microsoft executives are fretting over a major restructure being planned by CEO Steve Ballmer. This is part of the fundamental changes challenging the entire PC industry.

Ballmer is dealing with massive changes in Microsoft’s core business as PC sales decline with customers moving to smartphones, tablet computers and cloud computing so finding new markets is a priority for the company’s board and senior management.

The same problems are facing all the major players in the PC industry and it’s the main reason why Dell is in the throes of a battle to take their business private, what’s fascinating is the different ways these companies are responding to these changes.

In Dell’s case the company’s looking at becoming “an Enterprise Solutions and Services (ESS) focused business” – essentially copying what IBM did a decade ago in moving from hardware and focusing on consulting and services to large corporations.

Microsoft on the other hand sees the future in devices and cloud computing with Ballmer telling shareholders last year that becoming a “devices and services company” is the future.

It’s important to recognize a fundamental shift underway in our business and the areas of technology that we believe will drive the greatest opportunity in the future.

In Ballmer’s view those opportunities lie in cloud computing services and devices like the Windows Surface tablet computer and the smartphones, products which Dell struggled with during the 2000s.

These are two very different directions and it illustrates just how the major players in the PC industry are searching for new business models as the old one collapses.

How many of them successfully make the transition will be for history to examine; it’s easy to see Microsoft surviving given its massive financial reserves and market power, although nothing can be taken for granted as we could have said the same about Kodak twenty years ago.

Dell on the other hand is far weaker being smaller with a narrower product base and currently has the management distraction of competing buyout offers. Dell’s survival is far from certain.

Others, like HP, seem to be slipping into obscurity as management flip-flops from one scheme to another. The takeover of EDS as part of HP’s move into enterprise consulting does not seem to have gone well and the company is wallowing.

What we’re seeing is the rapid disruption of an industry that itself was the disruptor not so long ago. It reminds us that even the corporated giants of today are as vulnerable as the stagecoach companies of yesteryear in the face of rapid change.

Will going private save Dell?

Can Dell going private reverse the personal computer manufacturer’s decline?

Now Michael Dell and a team of private equity investors are going ahead with taking the company he founded private, the question is will this make any difference to the technology company.

Turning around Dell is going to be a massive task as the company has lost the advantages that made it the world’s biggest PC manufacturer. At the same time, the industry itself is shrinking as corporate and consumer customers move from personal computers and servers to tablets and cloud services.

The triumph of logistics

Dell’s real success lay in logistics. In the early 1990s the company – along with its competitor Gateway – developed a global just-in-time assembly network which took advantage of cheap Asian suppliers, efficient air courier networks and call centres.

Bringing these together meant Dell and Gateway could deliver a custom made computer to a customer in just over a week without the hassle of holding warehouses of stock, employing sales staff or renting stores.

Price was the ultimate advantage and these companies could undercut competitors with their efficient networks, lack of inventory and no retail overheads.

Losing an advantage

Unfortunately for Dell, competitors caught up and by the early 2000s most PC manufacturers were using similar manufacturing methods and were able to match their price points.

By 2006, HP overtook Dell as the world’s biggest PC manufacturer.

Worse yet, Apple adapted Dell’s logistic systems to corner the high end of the PC market and then expand into consumer devices.

Dell’s reaction was to compete solely on price and to do so they cut component costs and outsourced support to lowest cost providers.

This backfired horribly and the poor quality products coupled with execrable after sales support deeply damaged Dell’s brand with the Dell Hell debacle being the public face of widespread customer unhappiness.

Dell in the post PC world

Making matters worse for Dell is that the market has shifted away from personal computers.

Dell has a tragic track record of diversifying out of the PC markets, all of its attempts to move into consumer electronics with PDAs, smartphones, tablet computers and entertainment devices have been, at best, embarrassing.

Enterprise computing has been more successful but even here Dell has shown little innovation and most of their entries into the corporate markets has been through acquiring specialist companies rather than doing anything different.

Part of this to failure to diversify has been because of Dell’s relationship with Microsoft. The various versions of Windows intended to be used on PDAs and tablet computers turned out to be wholly unsatisfactory and left the market open to Apple with the iPhone and iPad.

Going private

That Microsoft is going to have a financial interest in the privatised Dell is not encouraging for the company’s prospects.

Neither is the continued presence of Michael Dell. His return as the company’s CEO in 2007 has not solved the company’s problems.

It’s difficult to see where the problem was being a public company, Dell’s woes were not because of troublesome board members or activist shareholders.

Going private might allow Michael Dell and his team to experiment without the accountability of quarterly reporting, but that barely seems worth 26 billion dollars.

Dell could surprise us all by reinventing its business and claiming a role in the post-PC world, but right now its hard to see how.

Silicon Valley and the virtues of going private

Is the technology industry swinging back to investing in private businesses with solid cash flows?

Last week there were a pair of interesting stories about the tech industry’s investment models.

The biggest story was the rumours that PC manufacturer Dell may go back to being a private company and the other was Survey Monkey’s raising of $800 million through debt and private capital.

Not your usual VC play

Polling company Survey Monkey’s capital raising is notable because it’s very different to the standard VC equity models used by Silicon Valley companies of this size.

Adding to the unusual nature of Survey Monkey’s behaviour is the declaration that they have no intention of becoming a public company. By ruling out an obvious way for investors to cash out of the business, they are making a clear statement that those putting money into the venture are doing so for the long term.

That Survey Monkey is also taking on debt indicates management believe they are going to have the cash flow to service payments. Not playing to the Greater Fool business model makes the online polling company very different to most of its contemporaries in Silicon Valley.

Dell going private

Survey Monkey’s $800 million is dwarfed by Dell’s market cap of 22 billion dollars so the talk of the PC manufacturer buying out its stock market shareholders and becoming a private company is big news indeed.

The New York Times Dealbook has a close look at the of the idea of taking Dell private and comes to the conclusion it’s not likely to happen.

While there are challenges, there is merit to the idea. Richard Branson delisted Virgin from the London Stock Market in 1988 after becoming frustrated with the short term objectives of his shareholders and there’s a possibility of Michael Dell may feel the same way.

For Dell, the challenge lies in moving away from the commodity PC sector. The Dell Hell debacle showed the company’s management has struggled with the realities of the low margin computer market and things aren’t getting better.

Dell themselves are steadily moving away from PCs with bigger investments in services and other computer hardware sectors.

Project Ophelia, a USB stick sized computer running Google’s Android operating system was one of Dell’s announcements at the Consumer Electronics Show and could mark where the company is going in the post-PC environment.

Given portable and desktop PCs represent over half of Dell’s income moving away from those markets is going to be a major change in direction for the company.

A change is though what the company needs with revenues down 11% on last year which saw profits nearly halved.

Whether going private or staying public will allow Dell to recover its profitability remains to been seen, but management could probably do without the distraction of answering to stock markets while dealing with a complex, challenging task.

Both Dell and Survey Monkey are showing that there isn’t one path to raising funds for technology companies, in fact there’s plenty of businesses raising money privately without the razzamatazz of high profile venture capital investments.

It may well be though that we’re seeing private companies coming back into fashion as individual investors see the advantages in businesses with good cash flows rather then the hyped loss leaders which have dominated Silicon Valley’s headlines.

Image of Wall Street courtesy of Linder6580 on SXC.HU

 

Saving Hewlett Packard

Bloomberg Business week looks at the big challenges facing Meg Whitman as she tries to rebuild Hewlett Packard.

This site has previously looked at the massive task facing Meg Whitman as she tries to rebuild Hewlett Packard and undo the mis-steps of the company’s previous managerial failures.

Bloomberg Businessweek goes further with a deep analysis of what went wrong for HP over the last two and Whitman’s challenges in rebuilding the business.

HP’s decline starts with the biggest mis-step of Carly Fiorina, one of Whitman’s predecessors, in selling off HPs instrumentation business in 1999.

Power in the instruments

Industrial instruments were the core of HPs business, generations of engineers and scientists knew and trusted the HP brand which was synonymous with high quality, cutting edge technology.

The proof of the instrument arm’s strength is in the subsequent share performance of the spun off company – today Agilent trades at $43 while HP wallows at $15, half of what it was worth in 1999.

Making matters worse for HP was buying into the personal computer industry just as Dell and Gateway were commodifying the market. Fiorina’s high spending ways left Hewlett Packard incapable of competing against the lean operations of their nimbler competitors.

In many respects Fiorina’s successor Mark Hurd is the IT sales guy from central casting; aggressive, an excellent eye for numbers, intolerant of (other peoples’) wasteful spending and an ego the size of Uranus.

For HP he had some good points, making executives directly responsible for their division’s performance and cutting out management consultants. Anyone who shows Bain & Co or McKinsey’s the door, is not a wholly bad guy.

Cutting costs in the driver business

In cutting costs Hurd was ruthless – the Bloomberg story tells of how he cut HP’s driver division from over 700 to 64 staff. This in itself was not a bad thing.

Those who worked on HP products remember that period well. The software that came with Hewlett Packard equipment was buggy and overblown and Hurd’s reforms bought in a real improvement as drivers went back to being simple and effective.

Cost measures though also showed in HPs products and after sales support – increasingly the company resembled Dell during the dark days of Dell Hell where buyers of shoddy equipment found themselves dealing with poorly trained support desks over low quality phone lines. Customers started to flee HP products.

The perils of stack ranking

At the same time Hurd was using the crudest management technique of all – stack ranking, the practice of culling the bottom ten percent of workers each year.

Vanity Fair’s 2012 expose of Microsoft’s decline infamously blamed stack ranking for much of that company’s woes. The problem being that defining the bottom 10% of a team invariably involves politics and staff become more obsessed with currying favour with their managers than shipping good products.

People like Steve Ballmer and Mark Hurd like stack ranking because they thrive in that environment. The paradox is that characters like Steve Jobs, Bill Gates and Mark Zuckerberg tend to be culled.

HP, and Microsoft, needed more geeks focused on shipping new products than political animals like Hurd and Ballmer but that’s not what they got.

While Hurd met his financial targets, HP’s position was becoming more fragile as cranking up margins on services and printer cartridges while slashing costs on PCs and hardware can only go so far. His implosion over his royal lifestyle was probably one of the best timed exits in corporate history.

It’s worth reflecting on Hurd’s management excesses as he slashed expenses for the lesser beings in his company, you can browse a list of his expenses at The Street. In this respect alone, Hurd personified the entitled managerial culture of modern western society.

Replacing Hurd with the quiet Leo Apotheker made sense in that the new CEO was the opposite to his predecessor, but just as he didn’t have Hurd’s ego he was also a dud who made strategic mistakes and let costs begin to slip.

In replacing Apotheker Meg Whitman has massive job ahead of her, an important part of getting HP on track is slimming down management ranks to make the company more nimble. That in itself is a big task.

The biggest task of all though is to recapture HPs position as being an innovative leader with high quality products. Over the Fiorina and Hurd years that position was squandered and replaced by companies like Cisco and Apple.

Right now it’s hard to see where HP can re-establish itself in the marketplace but the goodwill towards the company from a generation of engineers who were bought up believing Hewlett Packard means quality means the company has a chance.

Hopefully Meg Whitman is the right person to seize those chances and undo fifteen years of bad management.

Whitman’s managerial mountain

How Meg Whitman has to dismantle the legacy of over a decade’s poor management at HP

This week’s announcement by HP that it will take a nearly nine billion dollar write down on the $10 billion investment it made in British business intelligence software business Autonomy shows how a once proud company can be laid low by a managerial culture.

HP’s purchase of Autonomy was a classic example of the Silicon Valley greater fool exit where the founders and investors of a business find a foolish buyer – in this case HP – to overpay for the operation.

In HP’s case it appears they overpaid by $8.8 billion dollars, this follows a $8 billion dollar write down earlier this year on the 2008 acquisition of Electronic Data Systems.

HP’s management are now claiming Autonomy’s managers defrauded them and the deal has been referred to the US Securities and Exchange Commission and the UK Serious Fraud Office – a point which Autonomy’s former CEO, Mike Lynch, describes as nonsense given 300 HP managers and two major accounting companies carried out due diligence on the firm.

For HP this is another humiliation on a decade of embarrassment largely caused by poor leadership with poorly chosen CEOs including the hubristic Carly Fiorina, followed by the poster boy of entitled managerialism, Mark Hurd, who in turn was succeeded by the haplessly incompetent Leon Apotheker.

Apotheker was the wrong person to undo the mistakes of his predecessors however at least with the Autonomy purchase he was trying to clamber onto a technology trend before it left the station, unlike both Hurd and Fiorina who had missed opportunities and entered markets way too late. Although like Apotheker, they overpaid for acquisitions like Palm, EDS and 3Com.

In Fiorina’s case she had missed the dot com boom and subsequent bust while trashing the company’s brand by competing with Dell in the low end, lousy margin consumer PC industry.

Hurd’s solution was services, as shown by the $14 billion dollar acquisition of EDS. At the same time he took an axe to HPs costs and continued Fiorina’s gutting of HP’s core competences in R&D and high end industrial technology.

Like all managerialists, Mark didn’t apply the cost cutting mantra to himself, staying at the best hotels and flying the world on corporate jets like a latter Bourbon. A list of his expenses, along with the salaries for himself and his senior executive buddies, would embarrass a third-world kleptocrat.

When he left HP under the cloud of a sexual harrassment scandal, the board gave him a settlement of over $40 million dollars rather than the $27 million he was entitled to.

Most infamously, in the scandal that bought him down, a company ‘hostess’ claimed he stopped by an ATM in Madrid to show her the million he kept on call in his checking account.

It’s instructive that Roman emperors would have a slave reminding them that they were only mortal. Today’s managerial heroes have ‘hostesses’ to remind them of their entitled position of being hairy chested, virile heroes of 20th Century capitalism; even as their 1980s thinking destroyed shareholder wealth on an industrial scale.

One could ask why a company like HP would need ‘hostesses’ – particularly at a time when cost cutting was mandating office lights were turned off at 6pm. Just the fact pretty ladies could be on the company payroll to solely to stroke the egos of senior male executives is enough in itself to illustrate the mess HP had become.

With over $16 billion in write downs this year, sacking the eye-candy for over-privileged middle aged executives is the easier task for current HP CEO Meg Whitman. Whether she can manage to save HP from over a decade of poor management remains to be seen, but the shareholders will be hoping.

Goodbye to the electronics store

As the economy and society change, the era of the big box retail store is coming to an end.

“Can Electronics Stores Survive?” asks the Wall Street Journal.

The future doesn’t look good with the liquidation of Circuit City in the United States and the exit of Australian giant Harvey Norman from the electronics markets.

Yet Apple Stores are growing and while it’s tempting to dismiss their sales training as brainwashing the truth is their staff are among the most profitable retail employees on the planet.

The real problem is the Big Box category killer store featuring wide product lines but poorly trained staff motivated only by commissions is a business model whose time has passed.

Customers can now go online, research website that are far more informative and honest than the staff at the megastore then get the appliance delivered and often installed for less than the shelf price at the mall.

The earliest industry this has affected is the computer sector – long ago companies like Dell and Gateway changed how people shopped for PCs.

Given the economics, it’s surprising the low margin big box stores survived as long as they could and the main reason they did was because appliances were an ideal channel for pushing profitable finance plans and extended warranties.

Often the store and sales assistant made more money out of the “interest free 72 months” deal, the three year warranty and the connector cables than they did from selling a top end laptop or plasma TV.

Now the easy credit era is over, those add-ons aren’t so profitable and with Amazon leading an army of e-commerce retailers changing customer expectations, those businesses locked into Big Box, easy credit way of doing things have to rethink how and what they are selling.

Harvey Norman’s founder Gerry Harvey said recently that people would still buy big items from his store. The reality is they are moving across to sites like Winning Appliances where they can choose the items, have them delivered installed and the old appliance taken off, a godsend when you’re dealing with a 50Kg washing machine or fridge.

Apple’s success shows retail does have a future. It just doesn’t lie in the low service, Big Box model that grew out of the easy credit and cheap energy economy of the late twentieth Century.

The tough world of smartphones

Competing in the smartphone market is tough as Dell have discovered.

Dell’s announcement they are going to exit the Smartphone business – for the second or possibly even third time – comes on the same day Nielsen release a survey showing smartphones are now the bulk of US mobile phone purchases.

For Dell this shows the problem they have in being locked into the commodity PC business, what was once a lucrative business is now suffering softening margins and slowing sales. In desperation they are looking to other product lines but struggle to differentiate themselves in other markets.

The difficulties of doing this in the smartphone sector is shown in Nielsen’s analysis of what phones are selling.

Of those sold in the last three months, a whopping 43% were Apple products while 48% were Google Android devices.

Even more frightening in those Nielsen figures is Blackberry’s collapse where the Canadian product has 12% of the market but only 5% of sales in recent months. It’s little wonder Blackberry’s owner RIM is laying off senior managers.

For Microsoft, that only 4% of phones were “other” than Android, Apple or RIM show just how tough the task of selling Windows Phone is going to be, something that won’t be helped with dumb marketing stunts.

Google’s apparent success in mobile isn’t all that it seems either; while the Android platform has nearly half the smartphone market it doesn’t appear to be particularly profitable.

The Guardian’s Charles Arthur looked at a number of legal cases involving Google’s mobile patents and extrapolated the claimed damages to get an estimate of how much Google earns from Android.

Arthur estimates Android has earned Google $543 million dollars between 2008 and 2011 which, given Google’s mobile revenues last year were claimed to be $2.5 billion last year, indicates Google makes more money from Apple devices than it does from its own products.

While Arthur’s estimates are debatable, they show how Apple’s profits dominate the smartphone market. Google, like Dell in computers, are locked into the commodity, low margin end of the market.

Just as Dell have learned that entering new markets doesn’t guarantee success, Google may have to learn the same lesson.

To be fair to Google, at least management are aware of being too dependent upon one major source of revenue.

Whether mobile services built around the Android platform can provide an alternative cashflow of similar size to their web advertising services remains to be seen.

Reputation’s long tail

Cutting customer support costs in many ways

When you decide customer support is an unnecessary cost, you make a statement that defines your position in the market place. Dell are reaping the consequences of this now.

Micheal Dell, CEO and founder of Dell Computers, hopes to grab some of the tablet computer market from Apple with the release of Microsoft Windows 8.

It’s a big goal – Apple have owned the tablet computer market since launching the iPad.

Dell, along with most of the other PC manufacturers, squandered the decade’s head start they had in tablet computers with poorly designed and overpriced tablet PCs which were based around a clunky version of Microsoft Windows using styluses.

Part of the problem was Windows itself; the operating system was designed for desktop users and to make it work on tablet computers it required a clunky workaround. Being designed for smart phones and tables mean Windows 8 may overcome previous limitations.

But Dell have a problem; they are perceived as a low price, low quality supplier and have a competitor in Apple that has locked in the supply chain for the product.

So Dell will struggle to beat Apple on price while customers believe the Dell system is inferior.

Even more difficult for Dell is their support reputation, a quick look at the comments to the Bloomberg story illustrates the problem.

Of the the sixteen reader comments, admittedly not a scientific sample, three business owners claim they will never buy Dell again after customer support issues.

This is the critical mistake Dell’s management made in the 2000s – in order to cut costs so they could be profitable at lower price points they trashed their support.

Eventually this culminated in the Dell Hell debacle where Jeff Jarvis’ experience summed up the frustrations of thousands of Dell’s disillusioned customers.

Apple on the other hand chose not to go down the rabbit hole of cheap and nasty systems. Today they can offer free, and skilled, support in their genius bars as their fat margins allow them to provide constructive and helpful assistance to their customers.

Now Dell has the reputation for at best indifferent after sales service which means they are locked into competing on price and ever declining margins.

It’s not a good place to be for Dell but that’s what you get for treating your customers like an unnecessary nuisance while fixating on headline prices.

We often talk about the Internet’s long tail; our online reputations could be the longest tail of all.

The end of the PC era

Why the personal computer is fading away

This morning a graph appeared on the web from analytics site Asymco showing the stalling of PC sales and the rapid catch up of Android and Apple iOS systems.

Such graphs starkly illustrate how the industry is changing as people start using tablet and smartphones instead of their PCs but there are some caveats with making blanket comments about the death of the Windows based computer.

Sales are still huge

One important thing about the chart shown is it has a logrithmic scale – a doubling in height indicates ten times the sales.

That point alone shows just how massive the lead Windows had over 15 years from the mid-1990s, something that is shown in a previous Asymco chart.

Despite Gartner’s reported 1.4% fall in PC sales – the basis of the Asymco graphs – there are still 92 million personal computers sold each quarter so it is still a massive market.

Tethered devices

One of the weaknesses with smartphones and tablet computers is they are still tethered to the desktop. If you want to get the best experience from your phone or iPad you have to synch it with your home or office computer.

For the moment that’s going to continue for most users, but not forever and the extended life of PCs means customers are using older computers to connect.

Extended life cycles

A bigger problem for the PC manufacturers is the extended life cycle of personal computers.

Since the failure of Microsoft Vista, PC users have been weaned off the idea of replacing computers every three to five years and nearly half the market is using systems that are more than ten years old.

On its own that indicates fundamental problems with the Windows and PC markets for Microsoft and their manufacturing partners.

The irrelevant operating system

One of the effects of increased computer life cycles is that the operating system has become irrelevant. Customers no longer care about what they are using as long as it works.

This is one of Microsoft’s problems; the virus epidemic of last decade and various clunky versions of Windows Phones has left customers perceiving PC and Windows software as being clunky and buggy.

Not yet dead

While the PC market is now shrinking, it’s far from dead. There’s still a huge demand to cater for although the big growth days are over.

For manufacturers whose business model has been based on fighting for market share in a growing sector, they now have a problem. They have to identify profitable niches and generate innovative products.

Unfortunately for the PC industry, the market has moved on. Apple have captured the bulk of the high margin computer sector and the industry’s response of pushing “ultrabooks” to capture the MacBook Air customers isn’t going to resonate with consumers trained to buy cheap systems.

Watching the PC industry over the next five years will be fascinating. Some companies will adapt, others will reinvent themselves and many will fade away as they cling to a declining business model.

Despite the personal computer industry only being 30 years old, it’s already in decline which is something older industries should ponder upon.