Dell Gets Ready to Go Private: What Does it Mean for Professional Workstation Users?

The PC market is dominated by just a handful of major players. It’s literally a single hand, as five brands — Dell, HP, Lenovo, Acer, and ASUS — account for 58.9% market share (“Gartner and IDC: PC shipments tumbled…,” October 10, 2012, engadget). The rest is made up by specialty brands. Naturally, in such a tight market, a major strategy shift by one of the Big Five is bound to produce ripple effects.

Last week, publicly traded Dell began taking steps to go private — an option the company’s founder, chairman, and CEO Michael Dell described as “an exciting new chapter for Dell” in a press release. According to the company, Dell has “signed a definitive merger agreement under which Michael Dell, … in partnership with global technology investment firm Silver Lake, will acquire Dell” in a $24.4 billion transaction. →']);" class="more-link">Continue reading

HP Ponders Exit Strategy from PC Business

In 2002, HP bought Compaq in a $25 billion merger that created the PC market’s de facto leader. Nine years later, HP is contemplating what amounts to a U-turn in its strategy. It is thinking of leaving the PC business altogether.

This week, HP’s president and CEO Leo Apotheker announced, “We believe exploring alternatives for PSG [Personal Systems Group] could enhance its performance, allow it to more effectively compete and provide greater value for HP shareholders.”

The alternative he’s considering is “the separation of its PC business into a separate company through a spin-off or other transaction.”

So what might PC-less HP pursue? The company’s plan to acquire software maker Autonomy suggests it hopes to buy its way into the enterprise software business. To explain the $11.7 billion bid, Apotheker said, “Autonomy has an attractive business model, including a strong cloud based solution set … We believe this bold action will squarely position HP in software and information to create the next-generation Information Platform.”

HP’s new plan is to “focus on its strategic priorities of cloud, solutions and software with an emphasis on enterprise, commercial and government markets,” the company outlined.

The Pad Push
In the announcement of its strategy for PSG, HP noted, “The personal computing market is quickly evolving with new form factors and application ecosystems.” One of the notable “form factors” is the tablet, now threatening to take over a chunk of the computing market previously owned by the PC.

Apotheker himself acknowledged, “‘Consumers are changing the use of their PC. The tablet effect is real and sales of the TouchPad are not meeting our expectations” (“HP To Apple: You Win,” TechCrunch, Aug 18, 2011).

HP tried to step up to the tablet market with the launch of its own HP TouchPad. But even with a marketing campaign involving Britain’s funny man Russell Brand and Glee’s Lea Michele, HP’s device couldn’t seem to wrestle away enough market share from the iPad. Consequently, HP is killing off its webOS and TouchPad business — “a difficult but necessary decision,” according to HP’s online FAQ document.

Shifted Market Landscapes
PSG, the division that HP plans to part with, oversees commercial PCs, consumer PCs, workstations, and handheld computing devices. According to the 2010 HP annual report, “In fiscal 2010, net revenue from notebook PCs increased 12% while desktop PCs revenue increased 20%. Workstations revenue increased 42% while handhelds revenue declined 49%.”

A breakdown of HP’s revenues for 2010 shows PSG pulling in $40,741 million, which accounts for roughly 31% of HP’s total consolidated net revenue of $126,033 million.

According to HP’s published numbers for the third fiscal quarter of 2011, “PSG revenue declined 3% year over year with a 5.9% operating margin. PSG remains the PC market leader in terms of units, revenue and profit share. Commercial Client revenue grew 9% and Consumer Client revenue declined 17%.”

By contrast, HP’s software business pulled in $3,586 million, or 2.8% of HP’s 2010 revenue. Perhaps Apotheker, a former SAP man (he served as co-CEO from 2008  to 2010), has what it takes to turn a household name in PC into an enterprise software brand. But, in this blogger’s simple-minded personal view, giving up a division that churns out one-third of the company’s revenue to focus on the untested enterprise software business seems like an uphill battle.

Whatever HP’s reason may be, its departure from the PC business leaves Lenovo and Dell more room to expand. And HP will have to combat IBM, Oracle, and — Apotheker’s former employer — SAP to carve out a market for itself in its new battleground.

PC Still Has a Place
HP’s withdrawal from the PC market signals HP’s shift of focus, but not necessary the end of the era of PC. Caitlin McCabe, Microsoft’s Corporate Communications, noted, “The PC ecosystem is strong and constantly evolving to address customer and market needs. HP and Microsoft remain strategic partners and will continue bringing solutions to customers across many areas of our business.”

With its portability and touch interface, the tablet is quickly becoming the darling of consumers, road warriors, and field technicians. Many data management operations, viewing and markup tasks, and collaboration functions may soon shift to the tablet, because of the ease with which it can execute them. But for professional applications  in digital content creation, industrial design, and mechanical engineering, personal computers — specifically, workstations — will continue to remain the standard.

In the third quarter of 2011, HP PSG revenue shows a decline in notebooks and desktops, but a 19% gain in workstations over 2010. Pulling in $9,592 million in the third quarter, PSG revenue still accounts for 30% of HP’s net revenue of $31,189 million for the same period.

Dell Gets Ready for the Next PC Revolution: Consumerization

“Rumors of the death of PC has been largely exaggerated,” declared Ricardo J. Echevarria, general manager of Intel’s Business Client Platform Division. “The PC will continue to be at the center of business computing, because of its ability to adapt.”

It’s no secret that PCs, desktops and laptops in particular, have been facing mounting pressure from their smaller, nimbler competitions: hand-held tablets and smart phones, a market currently dominated by Apple’s i-devices. PC maker Dell has been sizing up the competition. It singled out five top trends reshaping the future of business computing:

  • The rise of social media as a business application;
  • The blurring of work and home;
  • The emergence of new mobile devices;
  • Shifting business models that require tech-savvy employees; and
  • Changing employee expectations of corporate IT.

“How data is stored, how computing is done is changing,” noted Steve Lalla, Dell’s VP and general manager, Business Client Product Group. The five trends listed above attest to our desire “to be able to do what we do in our personal life in our professional life,” as Lalla put it. More succinctly, Dell calls it “Consumerization.”

If this is true, Dell’s Business Client Product Group has but one way to respond to it — offer consumer-friendly features in professional machines. To do otherwise — to resist the evolutionary demand to adapt — would be to precipitate the demise of business PCs.

PCs Without Borders
Thinking about outlawing your employees’ iPods, iPhones, and iPads in the name of security? You may end up doing more harm than good. “Corporate IT policies that ban the use of employee-owned devices in the name of security inadvertently create new bigger security holes as users skirt IT restrictions,” Dell pointed out (“CIO Strategies for Consumerization: The Future of Enterprise Mobile Computing,” Feb 3, 2011). Tech analyst firm Gartner noted, “Most organizations realize that they cannot stop the influx of personal devices and are looking to the post-consumerization era, seeking ways to stop managing the devices used by workers” (“Predicts 2011: Network Capacity and Consumers Impact Mobile and Wireless Technologies,” November 11, 2010).

Dell’s white paper recommends “evolving security policies to protect data in a heterogeneous device environment.” This could be a huge IT headache, because managers would have to manage devices both inside and outside the firewall, to provide what Dell describes as “boundary less security.”

Socio-Professional Computing
Facebook’s statics show that, “By the beginning of 2011, the average Facebook user spent 1,400 minutes, or 23.3 hours, on the site each month.” Unisys, an IT firm, noted in its “Consumerization of IT Benchmark Study” that “Nearly half of all iWorkers (46%) surveyed give their employers extremely low marks for the integration of consumer devices and social networks with enterprise applications.”

For hardware makers like Dell, the rise of social media demands incorporating high-quality audio-video features, a must-have in the era of Skype, WebEx, and remote communication. To resist social media is to stem the tide — you can’t win. Dell’s recommendation is to “launch enterprise applications that replicate the best aspects of consumer communication and social media within your worker community.”

Among professional design software publishers, there’s also widespread acknowledgment of the rise of mobile devices and social media. Since lightweight devices are not ideal for heavy-duty computing, companies like Autodesk looks to remote-computing functions and web-based viewing and markup applications as part of its strategy. Product lifecycle management software makers like Dassault Systemes and PTC now offer community management, data management, and collaboration applications inspired by social media.

Touchy, Feely Tablets
One behavior change brought on by the popularity of portable devices: People become more accustomed to multi-touch navigation. Apple’s i-devices taught people a new way to interact with displays. We now instinctively drag on images and program windows to expand them, or tap on links to open them. The paradigm is not fully supported or exploited by desktop and laptop makers, but Dell has begun incorporating many such features into its latest machines.

New Machines
Last week, Intel’s Echevarria, Dell’s Lalla, and their colleagues were in San Francisco, California, to unveil Dell’s new business-class machines. The event, held at Hotel Vitale by the Embarcadero, was “the biggest product refresh in the history of Dell,” according to Lalla.

Perhaps the segment best-positioned to take advantage of Consumerization is the company’s new smart phones and tablets (most of them running Android and Windows Mobile) and convertible PC tablets (running Windows 7). Dell’s Streak 7, a camera-equipped mobile device with 7-inch multi-touch display, is powered by NVIDIA’s ARM and Tegra T20 processors, running Google Android OS. Dell Venue, a slide phone with multi-touch enabled 4.1-inch display, runs Windows 7 and is equipped with a 5-Megapixel built-in camera. Dell Inspiron Duo, powered by dual-core Intel Atom N550, comes with a 10.1-inch HD display with multi-touch function.

For more, watch product photos in the slide show below:

Find more photos like this on DE Exchange