With everyone now claiming the death of the personal computer, it is hard to swim against a moving tide. According to a recent WSJ article, PC shipments may have hit its peak and actually decline this year for the first time in history. Dell and HP stock prices are at ten year lows. Tablets, phones, and all things smart have been growing at a torrid pace. All signs point to the inevitable end of an era; so why, then, am I so skeptical? Is the Atma Business Blog trying to "party like its 1999"?
Make no mistake, PC manufacturers are being squeezed and will continue to be so. On the one end there is mass move to smarter, smaller devices. On the other end, Asian manufacturers such as
Acer and Lenovo are dropping prices and stealing share from incumbents. In the enterprise space,
cloud based solutions and the growth of data centers is diminishing the need for computing capacity on a local level. We're not dealing with a growth story here.
However, the buzz for the new devices is probably overdone right now since they are in the early stages (remember when PCs were supposed to replace servers?). Even in today's "smart" world, PC's are still the most intelligent devices out there. PCs provide more computing power, storage, and access to software applications. Tablets have great functionality but do less. Whether it be enterprise level data mining or consumer internet shopping, the need for horsepower and the desire to do more will continue to grow. Also, as I alluded to in a post a few years ago, we will not be satisfied with keeping all of our valuables exclusively in the hands of third-party cloud providers and will require some level of local storage .
Tablets and other gadgets are nice to have but seem to be incremental to PCs. Mass use of the internet is still best done on a PC. While Twitter gives us instant information, it is no substitute for the New York Times. Good luck trying to utilize your CRM or ERP system in a meaningful way through a tablet. And to this day, software "apps" like Powerpoint are head and shoulders above iOs "apps." Perhaps households and corporations will need fewer PCs in the future, but I don't they can get by without them.
What will change is how tomorrow's PCs will look and who will bring them to us. To this day, I still can't figure out how HP and Dell missed tablets and smartphones. How did Intel give away low power processing chips to ARM ? Certainly Innovator's Dilemma was at play. Perhaps manufacturers like Samsung or Apple who seem to have successfully changed their products with the times will continue to gain share. There also seems to be an unmet need in which new players could emerge through innovation.
Expect a convergence of the things we like from a PC with the UI and ease of smart devices. Today's gadgets appeal to our "wow" need rather than taking a comprehensive approach. The need for intelligence and personal computing will continue to rise and tomorrow's PC's will need to reflect that need. The next generation will be more robust and remain the center of our computing needs. Call me crazy, but I wouldn't be surprised to start seeing VC investment into the next generation of PCs. And perhaps those entrepreneurs will take their sales pitch on the road in their little red corvette.
I think this is an analogous situation to the digital camera. No phone, no matter how good of a camera it is supposed to posses can rival even a moderately priced point and shoot camera. And yet, the point and shoot camera is nearly dead. People (especially younger people) have shown great willingness to trade poorer performance for convenience. So, as a result of "smart" devices with cameras (funny though, I am not sure anything looks dumber than a person taking pictures or video with an iPad!), the digital camera market has bifurcated; point and shoot which is dead, and digital SLR which is experiencing significant and surprising growth. Why surprising? Because the people buying the very expensive dSLR cameras don't know how to use them properly, and actually have no need of their capabilities if they did know how to use them in the first place. A point and shoot would be more than sufficient for their needs.
ReplyDeleteI believe there is a good chance the PC market will go this way. Lower cost, moderate performance PCs, those typically marketed at a younger or less well healed market, will go the way of the Dodo bird or the point and shoot camera. Significantly higher cost, higher end, high core count, large memory size, tens of terabytes of storage PC market will grow. And, much like with dSLR cameras, the people buying these PCs will use very little of their capabilities. The moderately priced PC would have more than suited their needs. So, the number of PCs purchased I believe will continue to shrink. But, the price point and profit margin of the PCs that are sold I believe will increase.
Very good analogy. PC's will also have to move upscale to compete for an audience. Many consumer electronics have gone this way, such as TVs. Innovation has continued to improve performance, but price points continue to hover at the same levels due to the relative commoditization. I agree with you that base units will continue to shrink, but can be profitable for those who get what the PC of tomorrow will be.
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