The extraordinary(extended) life of a PC

Dell’s announcement of going private did not come as a surprise to many.  This was being discussed in the press for a while now. Going private is a turning point- not just to Dell, but to the PC industry as a whole. What this really says about Dell and possibly extends out to the remaining players in the industry

–       The days of good old growth is gone and we need to do some different things to stay in the business and be competitive

–       These things might mean focus on a smaller PC operational footprint while expanding out on related technologies and services

–       Doing these new things mean restructuring the company significantly – both operationally and financially

–       They believe that these actions will result in better longer term outcomes.

–       Doing that in private is better than when in public as public shareholders may not have the patience to wait for the long term- thus lowering stock price and overall valuation in the medium term

 

The above seems to be quite straightforward- however one point that deserves attention is the reason why the growth days have gone. The answer seems to have less with Dell and more to do with the way the industry has moved along. And also much less to do with Apple inspite of it being a key factor to contend with.

 

The world’s most popular operating system(OS) is Windows XP- period. In the last decade, XP has penetrated very deep into practically every small and large business. Inspite of the fact that Windows 7 deployments have overtaken Windows XP as it’s replacement, sometime last year, there are still millions of computers around running Windows XP.  Just the other day I was at a leading pharmacy chain, where the retail display had that unmistakable XP ‘start button’ on the bottom left of a brand new Samsung display. So this organization chooses to invest in a new display to announce wait times/ ads etc- but cannot pay anything more for it’s operating system.

 

Is it not incredible that Microsoft continues to support XP more than 10 years after it was launched? And that will continue till mid-2014. In fact they are supporting 4 different versions of operating systems in parallel.

So the latest Windows 8 has to contend with XP running Windows Vista and Windows 7. And not to mention the variations in each OS- ‘home, professional, business, ultimate’ etc.

PC manufacturers had it good when there was just one or two operating systems to bundle, but what can they do when so many  exist in parallel- Customers are simply not motivated to buy any new hardware, when the old OS is supported and runs great.  Virtual desktops have further complicated this issue. Further, third party software companies are not compelled to drop support for their product- so likely everyone is happy except the hardware makers. Of course all this assumes incremental innovation in the operating system features.

Imagine what Microsoft, Dell and even HP could do if there was one current operating system. That being said unraveling this is easier said than done. Unless the industry led by Microsoft makes some bold steps over the next few years to rally around a ‘current+ most recent version’ support model, this ‘sales bottleneck’ induced by extended PC lives, will continue. And therein lies the real problem with Dell’s PC business – a matter which may not be solvable by going private.