Posts Tagged ‘idc’

It was the biggest fall since 1994 or 2001 or – to put it another way – it was the biggest fall since records began.

According to IDC, PC sales dropped 14 per cent in Q4 last year, the biggest fall it has ever recorded since it began collecting data in 1994. According to Gartner, PC sales dropped 11 per cent, which is the biggest fall it has reported since it began collecting data in 2001.

Considering the growth that common sense says dominated the PC industry in the 1980s and early 1990s, it may not be unreasonable to assume it was the biggest fall since the days when IBM first tied up with Microsoft.

Bob O’Donnell, vice President at IDC, focused on the disappointing uptake of Windows 8. He commented: “It seems clear that the Windows 8 launch not only didn’t provide a positive boost to the PC market, but appears to have slowed the market.” Part of the problem is that Windows 8 is designed to work with touch screen PCs, but such products are expensive – a lot more expensive than their tablet rivals. The BBC quoted Colin Gillis, financial analyst at BGC, who said: “This is horrific news for PCs.”

Hold on a second what the… ahhhhhhh.

One hour later…..Sorry about that, computer just crashed, and it took an hour to get running again, what with it trying to download the latest version of this piece of software and that piece. Where were we? That’s right, awful. Sorry it is not just the sales that are awful, it’s PCs. Microsoft launched a new version of Word with features most of us will never need. What we really want is a PC that is fast, won’t suddenly lock or crash on us, or suddenly take an age to process the simplest of tasks.

How can it be that PCs are so frustrating, when thanks to Moore’s Law they are so much more powerful?

Isn’t that the real problem with PCs?

Tablets and smart phones, in contrast, are so neat, easy, and reliable.

That’s the real change the PC industry must grapple with.

©2013 Investment and Business News.

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HP has lashed out. When it paid $11billion for a UK software company that produced a search engine that no one really seemed to understand, some said they didn’t understand what HP was up to.

Back then the PC company was under the leadership of Leo Apotheker. A former boss at SAP, Mr Apotheker was a software man. His big idea for HP was to move it into software. Hence the purchase of British software company Autonomy.

If you want to know what Autonomy does, the best description may be search engine with knobs on. Is its product any good? Well HP thought so, so it must have been.

Except that a few months later Autonomy, under the HP banner, looked like a pale shadow of what it once was, and the company’s management team, including founder Mike Lynch, had been given their marching orders

Then HP decided it didn’t want to be in software; it was a PC company. Err no it wasn’t a PC company, it was a printer company. Err no it wanted to be a tablet company. Err no it was a consultancy like IBM. Errrr.

So Leo went, and in came Meg Whitman, who shined a light of certainty on the company. Now HP is absolutely certain it doesn’t know what it is.

But one thing it does seem to be certain about is that buying Autonomy was a mistake. Now it is alleging that the British company cooked the books, put certain costs down as marketing costs when they were unit costs, and booked sales to distributers as sales to end users. Mike Lynch denies it of course. He may be right, or HP may be right.

But what is for sure is that HP panicked, and still seems to be panicking.

Okay it still sells a lot of PCs, but its margin on each sale is tiny – around $22, according to IDC. Contrast that with the profits enjoyed by Apple, which is making money out of the fact that its brand name justifies a premium. Compare that with the profits enjoyed by Google, which rakes in the dollars from adverting when Androids are sold. Or contrast it with Amazon, which counts the dollars as it sells books and other goods from its stores on the back of the Amazon Fire.

The truth is that the PC market may not be dead like a dodo, but it is like the Siberian tiger – on the endangered list.

Chastened IBM saw the signs and got out, became a consultancy, and now Big Blue is back, and for a while this year enjoyed a higher market cap than Microsoft.

But for PC companies like HP and Dell, change is required but what change?

This is classic innovators’ dilemma, or what Clayton M Christensen called the “technology mudslide hypothesis.” In his model, established companies in a position of market dominance reinforce their position of strength through their specialisation, but when a new so-called disruptive technology emerges, they miss it. They get relegated to backwaters or go out of business.

Christensen himself took the disc drive industry as an example, and looked at every major change – for example from 14 inch disk drives used for mainframes to 8 inch disks for mini computers, 5.25 inches with the emergence of PCs and then 3.5 inch disks as laptops were developed. He showed that with the emergence of a new disc drive standard, there was a change in market leadership; previously dominant players started doing dodo impersonations.

What is especially interesting about the Christensen study is that the companies themselves were often aware of the danger, researched the new burgeoning technology, but their existing client base showed no interest, and urged them to stick to what they already knew.

Kodak fell victim to innovators’ dilemma. It even flirted with new technology before the rest of the field; it was, after all, a pioneer in digital photography. It still failed to change, however.

HP saw the changes coming too, which is why it bought PALM.  It didn’t know what do next, however, and actually cancelled its PALM based products about the same time as the Autonomy purchase.

Err, that was not a good move. Still, when all else fails, it can always blame the accountants.

©2012 Investment and Business News.

Investment and Business News is a succinct, sometimes amusing often thought provoking and always informative email newsletter. Our readers say they look forward to receiving it, and so will you. Sign-up here