#pcs

Serena Saitto, Peter Burrows & Aaron Ricadela dive deep into just what it took to take Dell private. One anecdote from this past summer:

Durban sketched out the LBO idea as they wandered for two hours through the grounds of the beach resort — a practice Dell had picked up from walking meetings he’d had with Apple CEO Steve Jobs in years past.

We often hear about Steve "Fuck Michael Dell" Jobs. But the two clearly had a professional relationship throughout the years as well — such as taking long walks on the beach…

But seriously, what a pain in the ass it was to just give the money back to the shareholders.

On the topic of the PC plummet, here’s Matt Rosoff:

You can hash the numbers any way you like, but the trends are clear. The PC market is getting crushed by tablets. In fact, I think we’ve reached a tipping point that will mean the near-total collapse of the consumer PC market within three years. By mid-2016, consumer PC sales will be less than half of where they are today. Probably way less.

A few years ago, such a claim would have sounded beyond outrageous. It doesn’t anymore. 

And:

Personal computers will be a relatively expensive high-end product that people buy every five or seven or 10 years, when their old one breaks or becomes absolutely unusable. Sort of like big-screen TVs. Some of those PCs will be notebooks, but people won’t use them portably as much as moving them from room to room around the house.

For everything else, people will buy tablets. The second (and third, and fourth) computer in every house will be a tablet. Every kid’s first computer (after their smartphone) will be a tablet. If you take a computer on vacation, it will be a tablet. Eventually, the computer most of us take on work trips will probably be a tablet, too. (Whether it runs Windows, OS X, Android, iOS, or something else — that remains to be seen.) 

Cue the trollish, angry, pigheaded, and short-sighted comments! Oh wait, I don’t have comments :)

Alex Wilhelm:

HP’s personal computing division posted revenue of $7.7 billion, down 11% year over year. The larger personal computing market – measured as laptop and desktop shipments, and not tablets and smartphones – is in sharp decline, with shipments falling 11% in the second quarter, following a record 13.9% decline in the first quarter, both measured on a year over year basis.

Yikes.

The competition has been aggressive during this period of uncertainty, but we are, as we have always been, determined to prove to you why Dell is the best solutions provider to meet your needs.

Michael Dell, in an open letter to Dell’s “customers and partners” about his ongoing efforts to take the struggling company private. 

Just how bad is the PC industry right now? Focus on the “solutions provider” part. IBM doesn’t get nearly enough credit for being way ahead on this move.

Harry McCracken (who worked at PC World from 1994-2008) gives the appropriate eulogy:

The news isn’t shocking. In fact, it’s sort of a shock it didn’t happen several years ago. After slightly more than thirty years in print, PCWorld magazine is ceasing publication, effective with the current issue, to focus on its website and digital editions.

If I have to explain why, you haven’t been paying attention to the media business for the past decade or so. The web has been awfully hard on magazines, and no category has suffered more than computer publications. Both readers and advertisers have largely moved online. Many of them did so years ago — especially the sort of tech-savvy people who once read PC magazines. At the end, PCWorld was about a quarter the size it once was in terms of pages and had lost two-thirds of its readership. I don’t even want to think about what had happened to its profits.

I remember PC World fondly as well. I recall going to bookstores (remember those?) and hoping that a new issue would be on the shelves. I could stand there for hours.

They’re feeling confident. … There’s going to be a few years of pain for the rest of the industry, and Dell is going to provide it.

Patrick Moorhead, head of Moor Insights and Strategy, who attended a recent gathering of analysts to hear the new vision for the (presumably) soon-to-be-private Dell.

Dell is going back on the offensive. And if I were a PC or server-maker, these statements would scare the shit out of me.

Michael Mace on the plummeting PC sales:

This is an existential shock for the PC companies. It’s like discovering that your house was built over a vast, crumbling sinkhole.

Great read. Just as much about Microsoft’s future as Dell’s. And he makes a good case for Dell seeing the signs of the PC industry decline (slightly) early and the bid to go private being a direct result of that. It’s easier to transform a ship into a submarine when it’s not already underwater.

Horace Dediu:

If this estimate is considered then the operating profits from PC operations imply that Apple generates more profit than all the top 5 PC vendors combined.

Assuming further that “other” vendors have the same profitability ratio as the top 5 combined yields a figure of 45% “profit capture of PC market” for Apple. This is not as good as its performance in the phone market, where Apple has about 72%, but it’s not bad.

That’s pretty incredible. But the real key, as Dediu notes, is that volume used to make up for the low margins for the other PC makers. Of course now that volumes are falling…

It seems that Apple is the only company that successfully achieved a cruising altitude when it comes to the personal computer business. The rest are going to fall out of the sky.

Roger Kay for Forbes:

With Windows 8, Microsoft entirely screwed the pooch. A badly conceived OS, designed to compete with Apple’s iOS and yet remain a traditional PC, did neither. It only confused and repelled users. Windows 7, a decent replacement for Windows XP, finally, could have sustained the industry easily for a decade.

The dilemma facing the industry is familiar to anyone who knows the children’s “cookie jar” story: if you drop half the cookies, you can take your hand out of the jar with some cookies and then go back for another modest handful. Instead, we have the stupid industry, sitting there on the stool with its hand in the cookie jar, fistful of cookies unable to pass the rim, red-faced, crying, and looking like a fool.

No compromise, indeed.

It should be noted that Kay has a rather odd conflict: his firm, Endpoint, used to consult for Microsoft. But in the past year, Microsoft terminated the relationship. Why? In Kay’s own words:

Because they don’t like independent analysts, who have to tell it like it is even when the picture isn’t pretty. They want “message force multipliers,” tame hacks who will help their public relations efforts. Tell them what they don’t want to hear, and you’re shown the door.

No compromise, indeed.