Friday, November 16, 2012

Sunset for the Personal Computer Era?

In December 2004 IBM announced the sale of its Personal Computer (PC) business to Chinese technology company Lenovo.

The $1.75 billion transaction received mixed reviews at the time. IBM had been losing money in the PC business for years, and so from a financial standpoint it seemed to make sense.

At the same time, IBM had been one of the pioneers in PC's.  While Apple may have introduced the first PC for home use, it was IBM's introduction of PC's in the early 1980's that truly changed the market (and made Bill Gates a multibillionaire, since IBM used Microsoft's operating system). 

So many analysts at the time felt that the sale was really more a reflection of the inability of IBM to fend off its more nimble competitors, in particular Dell.

But now, eight years later, one could make the case that IBM's move was either prescient or lucky. The PC world is rapidly shrinking.  Tablets and smartphones are hitting PC sales in a way that no one could have anticipated just a few years ago.

The stock charts shown above tell the story:  IBM's stock has nearly doubled in the eight years since it sold its PC business.  Meanwhile, Dell have fallen nearly -78% during the same time period.

I am not enough of a technology expert to know what the future holds for PC's.  I don't believe that either desktops or PC's will totally disappear, but you wonder whether they are heading the way of home phones.

Here's an excerpt from an excellent article from Bloomberg written by Aaron Ricadela:


The {PC sales} declines mark a reversal from the 1980s, when Microsoft co-Founder Bill Gates and Dell Founder Michael Dell helped usher in the PC age with low-cost machines that transformed how companies work and made it easy for consumers to use computers. The PC shunted aside bigger, pricier, more complex minicomputers and mainframes that once dominated the industry. 

“PC makers are succumbing to the fate of those who don’t learn from history, not even their own,” said Erik Gordon, a professor at the Stephen M. Ross School of Business at the University of Michigan. The industry’s reaction has been “like responding to the early auto industry by trying to attach wheels to the hooves of horses.” 

http://www.bloomberg.com/news/2012-11-15/death-be-not-proud-as-dell-to-hewlett-packard-show-pc-end-tech.html