With admirable aplomb, if not grammar, Michael Dell, the chief executive and founder of Dell Inc, tweeted last week: "Like Mark Twain, the reports of PC's death have been greatly exaggerated." His point (once you got past the dangling participle) being that he thinks the PC business is still alive and kicking.
The trigger for his comment was Hewlett-Packard's announcement that it would explore "alternatives" for its Personal Systems Group division, which is the world's biggest seller of PCs. According to Léo Apotheker, the chief executive since September, the PSG chunk might be spun off, sold off, or (perhaps) just kept inside HP.
In a follow-up interview, Dell crowed at the prospect of HP shedding its PC business, as he thinks that will lead to more business for him in the pricier server business (which HP is hanging on to), just as happened after IBM sold its PC business to Lenovo in 2004.
For Dell, focused on selling PCs and "big iron", the billions in revenues to be soaked up from HP's likely exit from the PC business look appetising. But that doesn't alter the suspicion that Dell is looking in the wrong direction if what he's after is profitable growth.
The trouble with the Windows PC business is that while it might be growing, just (at about 2% this year), it's become commodified. Even HP can only wring $40 of profit from each $800 (on average) PC it sells. Microsoft makes about the same profit per Windows licence – ie, per PC. The Windows division is the second-most profitable in Microsoft (after the one that sells Office); PSG is HP's least profitable division.
But you don't have to sell PCs. A fascinating story last week detailed how United and Continental Airlines, the US's biggest, is replacing heavy bags full of flight plans with Apple iPads: a special app will hold the charts, and be updated wirelessly with new information. As well as the saving in weight, they're more convenient, and with a long enough battery life, they'll last all but the longest flights without charging. "The paperless flight deck represents the next generation of flying," said United's senior vice-president of flight operations, Captain Fred Abbott. Computing is becoming something that just gets done where it's needed, not in the temple of a device with a physical keyboard, Intel chip and 12-inch screen perched on a table or lap.
Look further afield, and you see more examples of how computing is no longer tied to being on a PC: smartphone sales are still growing at 50% annually (and app downloads with them); since the fourth quarter of last year they have outsold PCs every quarter. The potential market there is billions of people, and manufacturers in China are taking advantage of it: ZTE is building a $150 smartphone which, says Richard Windsor, business analyst at the stockbrokers Nomura, is "the sweet spot" for China's potentially enormous market. Presently around 60 million people there have such a device, but by 2015 that's expected to hit 112 million – out of 800 million mobile users. (For contrast, by the end of 2012 Nomura reckons the EU will have 108 million smartphone users – representing 48% penetration – and the US 157 million, or 67%.)
And in Africa there's similar growth: Safaricom, an internet service provider (ISP) in Kenya, is getting into low-end smartphones costing about $50 (nothing to you, but a princely sum there – but still substantially below that for a PC). So far it has sold 350,000, indicating how far the market has to go there too. But you can see the potential. Why buy a PC when you can get something that can do computing for a tenth of the price, and lasts all day on a single charge?
If you were looking around for markets to conquer, then you'd certainly think that smartphones in the emerging nations, or tablets and smartphones in the developed world, looked like the better bet; the PC by contrast just looks like a commodity that has reached its end state. Worst of all for the makers, PCs have essentially become fungible commodities, like wheat or oil: any one is interchangeable, and buyers are led by price. Dell's problem is that it hasn't managed to make any impact at all in smartphones or tablets. So obviously its chief insists that the PC isn't dead. But it's hard not to think that it's answering the door with a bleary expression, still wearing its pyjamas and slippers at midday, while computing becomes something everyone can do everywhere.
