PCs Hit 'Big 30' - Next Stop, Boneyard?
Just because a technology has become commoditized doesn't mean that it has lost its vital edge or potential for innovation. What really seems to be IBM's (and now HP's) focus on life after PCs is an emphasis on developing and delivering the IT infrastructure beneath consumer and business computing.
Aug. 12, 2011, marked the 30th birthday of the IBM Personal Computer (PC) -- an event marked in numerous congratulatory and cautionary articles and blog posts. In the days since then, PC-related news has remained thick on the ground.
Most shocking, perhaps, was HP's announcement that it was "looking at options" (i.e. sale or spinoff) for its PC business. Then a new report from IDC said Q2 2011 PC sales in China surpassed sales in the U.S. for the first time, suggesting a trend that would see China's full-year PC market pass by the U.S. in 2012.
So, is the PC market dying or very much alive? Are vendors like HP smart to be pulling back, or should they stay in the game?
Is Innovation Device- or User-Dependent?
One article considering the IBM PC's birthday was written by Mark Dean (now CTO of IBM Middle East and Africa), one of the dozen engineers who designed the first IBM PC. Dean noted his pride in those accomplishments but also admitted being proud of IBM's decision to leave the PC business and to sell that division to Lenovo in 2005.
That move, Dean said, reflected IBM's position at the "vanguard of the post-PC era" and said that while PCs will continue to be much-used, they no longer represent "the leading edge of computing" and are "going the way of the vacuum tube, typewriter, vinyl records, CRT and incandescent light bulbs."
How reasonable is Dean's conclusion? Consider this: Since their introduction three decades ago, PCs have enabled and inspired
- computation -- typically involving numeric and/or data intensive processes and applications;
- communication -- including consumer/business processes such as email, as well as Web-based technologies like IM, VoIP and video conferencing;
- creation -- such as traditional text-based productivity applications, as well as increasingly sophisticated graphics tools and photo/video production; and
- consumption -- across a range of processes and markets, including online commerce and fulfillment, audio/video purchase and playback, and many more.
One could argue -- successfully, I believe -- that these four points remain the essential pillars and value propositions of personal computing and PCs, as well as PC-like devices with new form factors like increasingly powerful tablets and smartphones, and even stunningly popular social networking services and sites.
In other words: The PC is dead. Long live the PC.
Has the Post-PC Era Really Begun?
Dean is hardly the first person to espouse the notion of the "post-PC era." In fact, it's an increasingly common pronouncement in the industry, particularly among those promoting tablet devices. But market dynamics make those declarations problematic.
PC sales appear to be growing despite expanding enthusiasm for tablets and smartphones. Knowledgeable analysts and vendors pegged 2010 PC shipments at roughly 1 million units per day (360M+), and early estimates suggest that 2011 sales could well be higher.
Moreover, as noted in the new IDC report, emerging markets including China, India and South America -- where tablets have far less mindshare than they do among well-heeled U.S., European and Asian users -- are enjoying robust PC sales and will likely continue to do so. In essence, the PC market isn't anywhere near peaking, let along retreating.
Additionally, PC vendors and component manufacturers aren't simply ceding the market to Apple. Among the iPad's greatest differentiators, at least initially, were its lightness and battery life. Notebook vendors have steadily whittled away at those advantages but they should also benefit from Intel's "Ultrabook" initiative, which stresses development of notebooks combining high performance, all-day battery life and tablet-like features.
Intel says Ultrabooks will constitute 40 percent of all notebook designs in 2012. That's an aggressive outlook, especially since OEMs' execution is crucial. But if Intel and PC vendors succeed, they will demonstrate the industry's ability to rapidly adapt to radically shifting user requirements. This is no new thing. Most PC component makers and vendors are well-attuned to changes in attitude among consumers and businesses -- they wouldn't last long, otherwise.
Death or Rebirth by Commoditization
That brings us to Dean's comments about IBM's 2005 sale of its PC division to Lenovo, and HP's apparent interest in following suit.
In FY2010, a year enlivened by new PC technologies like Microsoft's Windows 7 and Intel's Core processors, HP's Personal Systems Group (PSG) drove revenues of US$40.741B and operating profits (OP) of $2.032B. By comparison, the company's Enterprise Storage and Servers group delivered greater OP ($2.402B) than PSG with less than half its revenues ($18.651B). Printing and Imaging made $25.764B in revenues and $4.412B OP, and Enterprise Services' $34.935B in revenues resulted in OP of $5.609B. In fact, while PSG accounted for nearly a third of HP's $126B FY2010 revenues, it only contributed about 16 percent of the company's $14.4B in OP.
The point here is not to slam HP -- the company continues to lead the PC market in overall share, and $2.032B in operating profits ain't spare change by any measure. Instead, it demonstrates the practical reasoning underlying HP's and IBM's decisions to leave PCs behind for greener, higher margin pastures.
However, just because a technology has become commoditized doesn't mean that it has lost its vital edge or potential for innovation. What really seems to be IBM's (and now HP's) focus on life after PCs is an emphasis on developing and delivering the IT infrastructure beneath consumer and business computing.
That makes perfect sense, both from business and technological points of view for IBM. Inventing the PC was something of an aberration for the company, which has focused on business-related technologies, tools and services since its inception. Even its signature PC product -- the Thinkpad -- found its greatest success among business users.
As such, both IBM's invention of the PC and the decision to leave it behind are all the more impressive, showing the company's willingness to move beyond what were once core markets and products. That demonstrates another considerable strength -- the ability to focus on the future rather than dwelling on the past. Both moves qualify as examples of an organization that knows itself and deeply understands its core strengths. Both deserve to be celebrated.
But IBM's conscious shift toward IT infrastructure also creates something of an irony related to Dean's comments about PCs "going the way ... of incandescent light bulbs."
Thomas Edison, who is best remembered for his improvements to the electric light, also founded the Edison Illuminating Company in 1880. That company was created to commercialize his inventions and capitalize the use of incandescent bulbs by developing and managing power production and distribution infrastructures.
In 1890, Edison brought together numerous business interests under the Edison General Electric Company, which became the General Electric Company (GE) in 1892. In 1896, GE was one of the 12 companies listed on the original Dow Jones Industrial Average and, 115 years later, is the only one still in business.
GE remains one of the world's premiere corporations, is a major player in numerous industries, including electrical infrastructure equipment, and to this day continues to bring incandescent light bulbs to market.
With all due respect to those forecasting the demise of personal computers, the bottom line to this observer is that PCs and the PC Era have quite a few birthdays ahead of them.