Paul Wallbank – Communications Professional
Comms, journalism and writing
The PC industry launches a marketing campaign. It’s unlikely to win any converts
PCs can do what? Is the question being asked in a new campaign being run by Intel, Microsoft, Lenovo and Dell.
Judging from the reaction to the companies’ effort whatever PCs can do, it’s unlikely to help their at best stagnant market share.
Ahead of tomorrow’s announcements by Apple, the strategic leaks are happening fast on both the next version of the iPad and Google’s Nexus appearing in the media today.
The problem for tablet manufacturers is that sales have stagnated in recent times with the products no longer flying off the shelves.
Part of the reason for this is customers are happy with their existing products; a three year old tablet will do most of things a brand new one will do so there’s little reason for upgrading.
For vendors like Apple and Google it’s further proof that the PC industry model of three year upgrades is firmly dead, the sector will need something more than planned obsolescence to drive growth.
HP and eBay splitting their businesses is part of a structural change in the technology industries
HP’s CEO Meg Whitman announced today that the company will be splitting in two with its Printer and PC division being carved away from its consulting services.
The two new companies will be Hewlett Packard Enterprises and HP, the latter being the old printer and PC division.
For HPs shareholders this split is a decade too late as the printer and PC division is in an industry where declining margins are the norm.
It’s not hard to think though that both businesses are ultimately doomed, it wouldn’t be surprising to see the smouldering ruins of both companies being picked up by companies like India’s Wipro or China’s Lenovo in the not too distant future.
That HP is divesting isn’t surprising as the trend is moving away from the big conglomerates model of the past decade; two weeks ago eBay announced it will be splitting its PayPal division and the float of Alibaba will almost certainly see Yahoo! begin to hive off businesses that have underperformed under their corporate umbrella.
An era where the key to growth in the technology industries doesn’t involve buying competitors and startups to build online empire will leave the Silicon Valley greater fool business model somewhat lost. It might be time for a few venture capital and seed funds to think about their pivot.
Could Windows 9 be Microsoft’s last desktop operating system?
On Tuesday Microsoft are expected to announce their new Windows 10 operating system at a media event in San Francisco.
If the rumours are true, then the new system will be launched almost exactly two years after Windows 8 was released amid hopes that it would stem the PC industry’s decline.
Windows 8 didn’t deliver with most people being frustrated with the system’s inconsistent interface that tried to be unified desktop, laptop and tablet operating system which managed to be unsatisfactory on all of them.
As a consequence, users avoided Windows 8 like the plague with industry analysts Netmarketshare claiming most of Microsoft’s customers are buying systems kitted out with Windows 7 or just sticking with decade old Windows XP systems.
Making matters worse for Microsoft is the decline in personal computer sales in general with IDC estimating global shipments of both portable and desktop system will drop 3.8% in 2014.
These declines are already well established in the trends being seen in Microsoft’s business with the company’s Windows division showing an accelerating decline in profit margins.
Should that decline continue with Windows 10, it may well be that Microsoft will have to consider the future of product.
As it is, the market may be deciding for them as users increasingly switch to tablets and smartphones. We may also see a wave of cheap Chinese made laptops running versions of Google Chrome or other Linux based systems also threatening the existing PC sales base.
Either way, a lot rides on what Microsoft announces in San Francisco this week. It could be the end of an era that defined the mass adoption of computers.
Lenovo’s Yoga 2 Pro is an attempt to combine a laptop and tablet computer into one device
Can a laptop be a tablet computer? The Lenovo Yoga Pro 2 tries to balance the needs of both in a package designed for home and small business users.
The laptop computer market is in a difficult place at the moment as both consumers and businesses move to tablets and smartphones so it’s interesting to get hold of the Lenovo Yoga Pro 2 to see how one of the leading portable manufacturers is responding to the changing industry.
One of the best ways of testing a portable device is to take it on a long trip, so a couple of 14 hour transpacific flights and trips around San Francisco, the Napa Valley and Silicon Valley proved a good workout for the Yoga Pro.
From a hardware perspective the Yoga is an impressive device with 8Gb of RAM, 256Gb solid state hard drive and a 1.8GHz i7 chip. The screen is a very nice 13.3″ 3200 x 1800 high-resolution display.
Rounding out the hardware specs are two USB ports — one 3.0 and the other 2.0 — along with a Micro HDMI output, webcam, inbuilt mic, headphone jack and an SD Card reader. All the basics expected in a mid range ultrabook that weighs in at a respectable 1.4kg.
In using the Yoga as a laptop, the device works well with the keys being crisp and responsive although the position of the glidepad and the backspace key being alongside the home key caused problems for this clumsy touch typist.
One of the problems with the larger form of ultrabooks is their usability when travelling economy on a plane; if the passenger in front of you reclines then it becomes difficult to use the device. This isn’t a problem specific to the Lenovo Yoga, but it is a drawback that the industry seems not to have considered in its move to the larger screens.
If you’re not travelling on planes, the weight and form factor works well and makes the Yoga 2 Pro a nice device to use while on the move. In an office environment it’s a standard mid to upper range laptop with good fast specifications.
For battery life, Lenovo claim “up to nine hours” for the Yoga Pro but in practice standard office use sees about five hours worth of juice with a full recharge taking under an hour. It’s lucky most transpacific flights now have power sockets.
While 1.4kg is good for a laptop it’s lousy for a tablet computer with the Yoga Pro 2 weighing in a kilo heavier than the iPad and 500g (one pound) heavier than the Microsoft Surface Pro. This makes it awkward to use over extended periods and the keyboard doesn’t feel right as the backing to a tablet.
The Yoga’s weight problem illustrates the core conflict for a device that wants to be a laptop and a tablet as the different demands for each type of device make if difficult for designers to meet both markets.
In the Yoga 2 Pro’s design, it’s clear the engineers had to make a choice between compromising either on the tablet or laptop functionality. As it turns out the designers decided to go with releasing a good Ultrabook laptop with compromised tablet functions — this was the correct choice for the Yoga.
Probably the greatest problem though for the Yoga Pro 2 in tablet mode lies in software with Windows 8 being far from adequate as a tablet operating system with a confused interface, an inconsistent user experience and unpredictable responses to touch screen commands.
For companies like Lenovo who are persisting with Windows as their operating system, it’s becoming critical that they start demanding better design from Microsoft before they find their market being overwhelmed by Android and iOS devices offering a superior user interface.
While the Windows 8 irritations aren’t a deal breaker for the Yoga, it does limit the device as a tablet computer and its something anyone considering it instead of an iPad or Android tablet should keep in mind.
Overall, the Lenovo Yoga Pro 2 is good Windows Ultrabook for home and small business use offering the benefits of an ultrabook with the flexibility of being able to flip into a tablet for specific uses.
The device isn’t cheap, but the range of features and good hardware specs make it a decent purchase for small businesses, sole proprietors or workers operating from home who need a versatile Windows computer.
Can Intel adapt to the post PC marketplace where the old Wintel dominance no longer matters
Twenty years ago people cared about the specifications of their computers and chip maker Intel led the industry with its marketing of 486, Pentiums, Pentium Duos and Pentium IIs.
As we come to the end of the PC era, the consumerisation of technology and the rise of cloud computing mean customers no longer care about what’s inside their systems and Intel is struggling to find a new message.
Over the last few months Intel have been showing off their latest range of Central Processing Units (CPUs) to enterprise and small to medium business (SMB) groups. Last week the company hosted an SMB event in Sydney that illustrated how Intel is struggling to cut through the market.
Speaking at the event was Steph Hinds – an evangelist for cloud computing – who told the story of how her Growthwise accounting practice was flooding out during storms.
Because her systems were on the cloud Steph and her staff were able to work from home and local cafes while the landlord fixed her offices. Had Growthwise been using a server based system the business would have been crippled while her IT people implemented a disaster recovery plan.
Steph’s story in itself illustrated the Clean, Well Lighted Place argument for cloud computing and also showed how Intel is struggling to sell its PC and server upgrade cycle message in an era where that business model is dead.
This didn’t stop some of the other speakers at the small business event trying to sell the idea that upgrading computer systems and retaining an IT support company were essential to small business success but it’s a message that was valid a decade ago.
For Intel the challenge is to find a new message – it may well be that the company’s future lies in supplying the powerful CPUs that run data centres, or maybe the low energy and maintenance chips required to control the billions of intelligent devices that will run the internet of everything.
The company’s launch of their Galileo board – a tiny computer designed to compete in the intelligent devices market with the likes of the Raspberry Pi – is a step in the latter direction and shows Intel is exploring the possibilities.
Wherever Intel’s future lies, it doesn’t lie in trying to sell a business model that is quickly going the way of the Brontosaurus.
During most of the PC era, it was the Wintel partnership that dominated the computer industry, now Microsoft have realised this fundamental market change and started their journey to become a devices and services company.
The challenge now lies with Intel to decide where their journey will take them in a post PC world.
The collapsing personal computing and server markets are forcing once powerful competitors to bury animosities and feuds as industry giants face a troubled future.
The collapsing personal computing and server markets are forcing once powerful competitors to bury animosities and feuds as industry giants face a troubled future.
Samsung’s exit from selling desktop computers illustrates how quickly the PC industry is collapsing which underscores Michael Dell’s urgency in his attempts to take Dell Computer private along with the spectacle of once hostile competitors like Oracle and Microsoft embracing each other.
Earlier this week Microsoft Australia hosted a briefing at their North Ryde office to show what the company is doing with their Azure cloud computing service, which is part of the company’s quest to find revenues in the post-PC world.
Microsoft are quickly adapting to the new marketplace. This week in Madrid, the company hosted their European TechEd conference where they showed off their Cloud First design principles of software built around online services rather than servers and desktop PCs.
One important part of Microsoft’s cloud strategy is establishing pairs of data centres to provide continuity to the various zones, including China, across the globe. Each individual centre is at least 400 miles apart from its twin to avoid interruptions from natural disasters.
Interestingly, this is the opposite of Google’s data centre strategy and quite different from how Amazon offers its data services where customers can choose the zones and level of redundancy they want.
There’s no real reason to think any of these three different philosophies are flawed, it’s a difference in implementation and each approach brings its own advantages and downsides which customers are going to have choose between.
While Microsoft is showing off its new direction, HP CEO Meg Whitman was in Beijing proclaiming that “HP is here to stay” and laying out the company’s path to survival in the post-PC world.
Like Microsoft, HP is putting bets on cloud computing and China, Whitman emphasized the work she’s been doing engaging with Chinese companies while promising “a new style of IT” and that “HP is in China for China.”
A key difference to Microsoft and Dell is that HP is doubling down on its desktop and server businesses with a focus on selling into the Chinese market. This is a high risk move given China’s investment into high speed networks and the global nature of the cloud computing movement.
One of the boasts of Whitman and her management team is that HP have added a thousand Chinese channel partners over the last twelve months, this is an effort to replicate Microsoft’s market strength in mature markets which has given the software giant breathing space against strong, cashed up competitors like Google and Apple.
Whether this works for HP in China remains to be seen, in the meantime Microsoft are trying to move their huge channel partner community onto the cloud with various offerings that give integrators who’ve traditionally made money selling servers and desktops some opportunity to sell online services.
A selling point for Microsoft is yesterday’s announcement they will offer Oracle databases on their Azure platform. The ending of animosities between Microsoft and Oracle is an illustration of just how the collapse in the PC and server markets is forcing market giants to forget old feuds and build new alliances.
With the server and personal computing markets being turned upside down, we’re going to see more unthinkable alliances and pivoting corporations as once untouchable industry giants realise the threats facing them.
The Rationale for a Private Dell states some stark truths about the PC manufacturing industry and global management in general
Michael Dell continues to press on with his buy out bid for the computer manufacturing giant he created with a presentation to shareholders stating his case why Dell Computers would have a better future as a private company.
Dell’s assertion is the company has to move from being a PC manufacturer to a Enterprise Solutions and Services business (ESS) as computer manufacturing margins collapse in the face of a changing market and more nimble, low cost, competitors.
What’s telling in Dell’s presentation is just how fast these changes have happened, here’s some key bullet points from the slide deck.
- Dell’s transformation from a PC-focused business to an Enterprise Solutions and Services (ESS) -focused business is critical to its future success, especially as the PC market is changing faster than anticipated.
- The transition to the “New Dell” is highly dependent on challenged “Core Dell”performance.
- The speed of transformation is critical, yet “Core Dell” operating income is declining faster than the growth of “New Dell” operating income.
- Dell’s rate of transformation is being outpaced by the rapid market shift to cloud.
The market is shifting quickly against Dell’s core PC manufacturing and sales business and the company’s founder is under no illusions just how serious the problem is.
Should Michael Dell succeed, the challenge in transforming his business is going to be immense – Dell Computing was one of the 1990s businesses that reinvented both the PC industry and the vast, precise logistics chain that supports it.
It was PC companies like Dell and Gateway who showed the dot com industry how to deliver goods quickly and profitably to customers around the world. Businesses like Amazon built their models upon the sophisticated logistics systems and relationships the computer manufacturers created.
A lesson though for all of those companies that followed Dell and Gateway is that those supply chains may turn around and bite you in the future, as Michael says in his presentation;
Within the PC market, Dell faces increasingly aggressive competition from low cost competitors around the world and shifts in product demand to segments where Dell has historically been weaker.
Those low cost competitors were many of Dell’s suppliers as over time the company’s Chinese manufacturers, Filipino call centres and Malaysian assemblers have developed the management skills to compete with the US retailers rather than just be their contractors.
Something that’s being missed in the debate about globalisation at present is that its not just low value work that can be done offshore – increasingly sales, marketing and legal are moving offshore along with programmers and engineers. Now the same thing is happening with management.
The same thing is also happening with corporations as Asian giants like Samsung, Huawei, Wipro and others displace US and European incumbents.
Dell Computing has been a much a victim of that move as it has been of the decline in the PC market which means its more than one battle Michael Dell has to fight.
It may well be that Dell can survive, but we shouldn’t underestimate just how great the challenge is as the company faces major changes to its markets and the global economy.
The latest computer sales figures are not good for those businesses who depend up personal computers.
Consulting firm IDC quarterly report on PC shipment figures this quarter shows a stunning 14% drop of global computer sales. On those numbers, the PC era is definately over.
Across the board the figures are horrible with double digit declines across the board. Market leader HP reported PC sales had fallen by nearly a quarter yet they retained their market lead as all of their competitors reported similar falls.
What’s also notable is the PC industry’s ultrabook attempt to wean consumers off cheap nebooks has backfired terrible, as the analysts note;
Fading Mini Notebook shipments have taken a big chunk out of the low-end market while tablets and smartphones continue to divert consumer spending.
Instead of buying higher priced ultabooks, consumers have abandoned portable PCs altogether and gone to smartphones or tablet computers.
The PC manufacturers must be rueing how they let the tablet computer market slip through their fingers during the 2000s.
Failing to ship decent tablet computers is symptomatic of a bigger problem for the PC manufacturers – their inability to innovate.
The PC industry is struggling to identify innovations that differentiate PCs from other products and inspire consumers to buy, and instead is meeting significant resistance to changes perceived as cumbersome or costly.
As IDC point out, even if they do introduce new products, consumers are wary that any “innovation” is going to be cumbersome. Basically the PC manufacturers have lost their customers’ trust.
How this affects Dell’s proposed buy out remains to be seen; it’s hard to see how investors would not be concerns at a 10% fall in sales, although Dell was one of the better performers.
For Microsoft, this news should further accelerate their moving products and customers to their cloud and enterprise products. For their Windows division it looks like there are tough times ahead.
The decline of the PC market is itself a study in product and innovation cycles. It could well be that the personal computer is going the way of the fax machine.
For some businesses that will be tragedy, but the market – and the opportunities – move on.
After only five years the netbook computer comes to an end having being killed by tablet computers and vendor hostility. We will remember these systems as the Model T or Trabant of the PC world?
Taiwanese technology website Digitimes reports Asustek have shipped their last eeePC netbooks, bringing to an end a product that promised to change the computing world when they were first released in 2007.
At the time the eeePC netbook picked up on a number of trends – cheap hardware, the maturity of the open source Linux operating system, affordable wireless access and, most importantly, the accessibility of cloud computing services.
There’d been a pent up demand for usable portable computers for years but Microsoft and their hardware partners consistently released clunky, overpriced tablet computers that simply didn’t deliver on their promises.
For users wanting a cheap, fairly robust portable computer then netbooks were a good choice, at the price you could even risk having one eaten by lions.
Unfortunately for netbook a few things went against the idea.
An early blow to the eeePC was that retail users don’t like Linux. Most computer users are happy with Windows and MacOS and weaning them off what they know is a very hard sell.
Sadly on this topic I have first hand knowledge having suffered the pain of co-founding a business in the mid 2000s that tried to sell Linux to small businesses.
Asustek discovered this when they found customers preferred the more expensive Windows XP version over the original Linux equipped devices.
Unfortunately Microsoft’s licenses damaged the economics of the netbook and held the manufacturers hostage to Microsoft who, at the time, wasn’t particularly inclined to encourage customers to use cloud services.
Microsoft weren’t the only supplier unhappy with netbooks. Harry McCracken at Time Tech describes how chip supplier Intel worked against the products.
For manufacturers, the netbooks were bad news as they crushed margins in an industry already struggling with tiny profits. However all of them couldn’t ignore the sales volumes and released their own netbooks which cannabilised their own low end laptop and desktop ranges.
In turn this irritated the army of PC resellers who found their commissions and margins were falling due to the lower ticket prices of netbooks.
The one computer manufacturer who stayed aloof from the rush into low margin netbooks was Apple who had no reason to rush down the commodity computing rabbit hole. It was Steve Jobs who launched the product that made netbooks irrelevant.
“Netbooks aren’t better at anything… they are just cheaper, they are just cheap laptops” Jobs said at the iPad launch in January 2010.
Immediately the iPad redefined the computer market; those who’d been waiting a decade for a decent tablet computer scooped the devices up.
Executives who wouldn’t have dreamt of replacing their Blackberries with an iPhone, let alone using an Apple computer proudly showed off their shiny iPads.
The arrival of the iPad in boardrooms and executive suites also had the side effect of kick starting the Bring Your Own Device movement as CIOs and IT managers found that their policy of Just Say No was a career limiting move when the Managing Director wanted to connect her iPad to the corporate network.
Around the time of the iPad’s released the major PC manufacturers declared a detente over netbooks and joined Intel in developing the Ultrabook specification.
The aim of the Ultrabook was to de-commodify the PC laptop market by offering higher quality machines with better margins.
While the Ultrabook has worked to a point, competition from tablet computers and the demands of consumers who’ve been trained to look for sub $500 portables means the more expensive systems are gradually coming down to the netbook’s price points.
Today’s Ultrabook will be next month’s netbook.
For the PC manufacturers, the lesson is that computers have been a commodity item for nearly a decade and only savvy marketing and product development – both of which have been Apple’s strengths – is the only way for long term success in the marketplace.
Those US based manufacturers who haven’t figured this out are only go to find that Chinese manufacturers – led by companies like Taiwan’s Asustek – will increasingly take the bottom end of the market from them.
The car industry is a good comparison to personal computers in commoditisation – with the passing of the netbook, the question is whether we’ll remember the eeePC as a Trabant, Model T Ford or a Volkswagen Beatle.
Windows 8 faces big challenges in replacing Microsoft’s cash cows
In New York on Thursday Microsoft will have a marathon launch of their Windows 8 system and the futures of many of their hardware partners lie on the success of the new system.
For Microsoft, Windows 8 could be the last throw of the dice for the desktop operating system that has sustained the company for thirty years.
The figures aren’t good for Windows as Microsoft’s 2012 profit and loss shows, here are the figures broken out by operating unit segment from the company’s annual report.
| Year Ended June 30, | 2012 | 2011 | 2010 | ||
| Revenue | bn $ | bn $ | bn $ | ||
| Windows & Windows Live Division | 18,818 | 18,787 | 18,789 | ||
| Operating Income (Loss) | |||||
| Windows & Windows Live Division | 11,908 | 11,971 | 12,193 |
The core Windows & Windows Live Division has stagnant revenues and a slowly declining profit margin. We’ll leave the huge losses in the online division for a future post.
Since the days of the first MS-DOS deal with IBM, Microsoft’s core business has been the licensing of operating systems to PC manufacturers and now that model is in trouble.
For instance Dell had an 8% drop in revenue resulting in a worrying 22% drop in operating profit, their PC dominated consumer division suffered a fat 22% drop in sales and recorded a miniscule .5% profit margin. Similarly Asus had 25% drop in sales to record a 2011 loss.
The pain being suffered by PC manufacturers’ sales and margins will almost certainly be shared by Microsoft as companies like Dell, HP and Asus simply can’t afford to pay the licensing fees which have sustained the Redmond business model for so long.
Microsoft and their partners hope – or pray – that the PC decline is a temporary hiccup in computer sales similar to the traditional lull seen before the release of a new system.
History’s not on their side with research company Asymco expecting sales of tablet computers to overtake PCs sometime in late 2013.
This is not a cyclical trend – the PC industry is in structural decline; the traditional Windows upgrade cycle is dead and Google are running interference with their Chromebook networked laptops.
Moving onto tablets and smartphones in this light makes sense for Microsoft and given the PC manufacturers have failed dismally to deliver decent tablet computers or phones over the last 15 years so it’s understandable the software giant wanted to develop their own hardware or team up with a struggling company like Nokia.
The declining margins in personal computers means we’re seeing the end of the Windows desktop ecosystem. With the rise of the web and cloud computing the type of operating system we use is like arguing between Toyota and BMW drivers; one might be more prestigious but both will get you where you want to go.
For Microsoft the challenge is to replace those Windows licensing rivers of gold with similar revenue streams through their phone and tablet products but with Apple and Google already dominating those fields, is it too late for the company that dominated personal computing? The next six months will tell us.
No-one cares about operating systems anymore
Last decade, people queued around the block to buy the latest version of Windows, today no-one cares. What next for a market that has become commoditised?
When you visit a website your browser reports, among other things, what type of system you’re using. Net Applications – a US based web monitoring company who analyse online browsing statistics – keep a regularly updated list of what people are using when surfing the net.
On their latest statistics, Windows XP finally fell below 50% in September 2011, just on ten years after it was released. Windows 7 is taking over from XP while Apple steadily gain market share.
These statistics show how the operating system has become irrelevant, only really dedicated geeks really care anymore about their version of Windows or whether a computer is running an Apple Mac or Microsoft product.
As most computer users are drifting to cloud computing services and consumers are increasingly using their PCs to access online games and social media sites, it doesn’t really matter anymore what systems are used as long as they work.
For many in the computer industry, this is a problem as they desperately want to sell a product in a market that has become commoditised. It’s another example of the PC industry’s broken business model.
It’s not just the computer industry with this problem, the 3D TV hype of 2010 was a desperate attempt to sell new television sets in a market that had stalled; recession hit consumers had no desire to replace their perfectly good TVs that were less than a decade old, just like Windows XP users.
This year’s Consumer Electronics Show that launches in Las Vegas this week will see similar desperation as the various PC and mobile phone manufacturers trying to generate excitement about their new products.
For the journalists and PR folk at the CES the problem is customers largely don’t care anymore. As the failure of 3D TV illustrates, consumers aren’t buying the hype.
Just as with operating systems, most customers want something that works, if you’re going to get them to replace older proven technology you’ll have to show where the new product adds value.
The era of products flying off the shelves because they are new and shiny is over – just ask Microsoft about it’s operating systems.
