The PC is dead, or is it?

by Frank 7. October 2012 06:00

The financial and IT news services tell us very pessimistic stories about the major PC players like DELL and HP. The general gist is that sales of PCs are down and sales of tablets are up and that the share prices of DELL and HP are falling. Just yesterday, the CEO of HP announced to a stunned market that 2013 will likely be worse than 2012. She also lamented the frequent turnover of HP CEO’s since the demise of Carly Fiorina. But to my mind that was a strange thing to do when also announcing that she won’t be improving anything and in fact will be in charge when things get worse. The mental picture I get is of the captain steering the ship into the rocks. My guess is that the musical chairs game at the top of HP will continue for some time yet because market analysts don’t like bad news and shareholders don’t like falling share prices.

So is the PC dead? Will we see it completely replaced in our homes and offices within a few short years? Are you still planning to buy a new PC? If so, why? Is business still planning to buy more PCs, for example to support Windows 8?  Will business in fact move to Windows 8 in 2013 or 2014 or 2015? Why would anyone be investing in expensive new PC hardware for their home or office? Are there better alternatives available now?

To my mind the global financial crisis that began in 2007/2008 has at least as much to do with falling PC sales as the advent of clever tablets from people like Apple. All over the western world people are holding back on spending money and are simply not replacing ‘older’ PCs or notebooks. In fact, I see the current crop of tablets as complimentary devices to PCs and notebooks, not replacements.  I blogged about this previously in “Why aren’t tablets the single solution yet?” and still believe my arguments to be valid.

My customers for example, still use PCs in the office to run my enterprise content management system RecFind 6 and use notebooks to run it when travelling. However, they are also now demanding that I provide support for a range of mobile devices including smartphones and tablets. But my customers are not replacing their PCs and notebooks with tablets, they are using tablets in an appropriate way to extend what they can do with mobile workers.

I also think that companies like DELL and HP are their own worst enemies. They have both exhibited a surprising lack of innovation and salesmanship and their marketing people seem to be about five years behind the market. They have both outsourced their services and support to awful Indian call centres and focussed more on reducing costs than on improving customer service. Customers have a way of showing their disapproval by walking away and I believe this is what they are doing.

So whereas I think tablets are the future I don’t think they are capable enough yet to replace PCs and notebooks in the office environment. I think most people have a tablet in addition to their PC and notebook (and smartphone).

I don’t see tablets, even the next generation, having all the functionality and screen size and power we need to replace PCs in the office. Even in the home, the small screen size of a tablet mitigates its value as does the lack of applications and connectivity; not everyone wants to replace their working backup drive and USB printer just to accommodate Apple.

I also think that PCs and notebooks are too expensive and that Intel, DELL and HP are too used to big margins. In economics we talk about the intersection of the price and demand curves; the theoretical point at which we make the most money. Set the price too high and you sell fewer and make less money. Set the price too low and you sell more but make less profit. Somewhere in the middle is the point where we set our price to get the optimum sales and profit results.

For example, if Apple priced the New iPad at $5,000 if wouldn’t sell any and it wouldn’t make any money but if it priced it at $10 it would sell a shed-load but also wouldn’t make any money. At $400 plus it seems to sell as many as it can produce and also make the maximum profit. Apple has found its optimum price point.

Every vendor struggles for the optimum price point and over time as technology matures and becomes more common, prices have to drop. I don’t think the prices of PCs and notebooks have dropped enough. It’s just economics stupid, your PC and note book prices are way above your optimum price point and that’s one reason why people are not buying them.

So no, I don’t think PCs are dead. I think their sales have dropped because of a combination of the ongoing global financial crisis and poor management and product decisions from the major players like Intel, DELL and HP. Apple has cleverly capitalised on this situation, it didn’t create it. Apple is clearly innovative, HP and DELL are not.

I believe that we are yet to see at least one more re-invention of the PC and notebook, albeit of a higher quality and with more innovation that Intel’s Ultra Book attempt at reinventing the notebook. The re-invention should also come with a new lower pricing algorithm, not a raising of prices as attempted by Intel with the Ultra Book range of notebooks.

So, Intel, DELL and HP; the ball is firmly in your court. You all employ scores of really smart and innovative people. Why don’t you give them the challenge? If you come up with a realistically priced and innovative new PC solution I would certainly buy a few. But, please do something about your service levels; I for one am really tired of being bounced around Indian, Singaporean and Philippine call centres. If foreign call centres are part of the new deal I am afraid that I want no part of it. That model is broken. If you want my business then I demand better service.


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