The PC industry has gone through a radical paradigm shift in the last
couple of years. It all started with the revolutionary product, the
iPhone, launched by the late Apple CEO. This device has
not only totally transformed the smartphone/mobile industry but has
also redefined the meaning of the word 'computer.'
Companies such as Dell (NASDAQ: DELL) and Hewlett-Packard (NYSE: HPQ),which
once dominated the technology sector, have been marginalized.
Hewlett-Packard, which was once the world's largest PC and printer
manufacturer, is struggling to regain its lost growth. while Dell has
plans to go private.
Dell has been one of the companies most affected by the sudden rise
in fortunes of smartphone manufacturers. The shift of computing to
handhelds and smartphones reduces the amount of money consumers are
willing to pay for a laptop or a desktop.
Besides the obvious effect on product margins, the upgrade-cycle has
also become much longer for PC consumers. The turnaround in PC sales, or
the industry for that matter, is no longer a question of PC hardware
alone. The ecosystem has recently become a fundamental component of any
consumer technology item. The three leading ecosystems in technology are
iOS, Android, and Windows from Microsoft (NASDAQ: MSFT).
Microsoft’s Windows is the largest ecosystem in the world and has
been responsible for shaping the world we live in today. Unfortunately,
Microsoft failed to penetrate the smartphone market with its Windows
Phone series, and has taken drastic measures to keep itself relevant in
the industry.
Microsoft has launched the first touch-based operating system, i.e.
Windows 8. A smartphone version, the Windows Phone 8, has also been
launched to target the growing demand for handheld devices.
The intention of any ecosystem is to provide a uniform user
experience across different consumer devices. Microsoft is the
best-placed company to accomplish this task because it already has the
largest user following of its Windows ecosystem. The technology giant
still has the challenge of gaining traction for its smartphone and
tablet OS.
Dell has a choice to keep its commitment to the Windows operating
system, place all of its eggs in the Windows 8 basket, or hedge its
bets. The company recently tried to penetrate the smartphone market with
the Dell Streak series. The poor response to this Android-based device
forced the company to discontinue the model. Dell has released a number
of interesting Windows 8 based Utlrabooks and tablets, but only time
will tell how long the PC industry will survive and tablets will
completely take over computing.
Bottom line
The troubles on the field always create off-the-field problems. The
two largest PC manufacturers in the world are currently in the middle of
a severe management crisis.
Hewlett-Packard’s board has narrowly escaped investor attempts to
bring about a major board shuffle. Hewlett-Packard's board has been
responsible for some of the most misplaced acquisitions of the last
decade and has miserably failed to safeguard shareholder interest.
Despite recommendations from leading advisory firms like ISS and Glass
Lewis, the board of directors has managed to hold onto their seats for
the time being.
On the other hand, Dell is in the middle of a no-holds-barred
struggle to take the firm private, with the founder and CEO right in the
middle of the proceedings.
According to recent news, Michael Dell is now trying partner with Blackstone
after his failed attempts to take the company private via his Silver
Lake partnership. Billionaire investor Carl Icahn is the biggest hurdle
to Mr. Dell’s ambitions. The Blackstone deal will only go through if
Michael Dell is promised the CEO position. I believe that it seems
increasingly difficult for the PC industry to recover and Dell is a
highly-risky investment in its current state. If the struggle to take it
private continues, one or all interested parties might pullout, which
can deliver a serious blow to the stock price. LINK