Where Does the PC Industry Go?

August 23rd, 2011

It’s hard to make a profit from PCs these days. Cutthroat pricing and the rush to the bottom have resulted in cheap computers and cheap profits for the manufacturers. HP, for example, is the number one PC maker on the planet, although portable sales are second to Apple if you include the iPad in the sales figures. But HP also makes a single digit profit on those sales, a fraction of what Apple earns on the sale of each and every Mac.

That’s a reason why Apple won’t play the low-end PC game. They regard such products as junk, and it’s quite true that the lowest cost parts and assembly methods are used. Reliability isn’t apt to be as good as the more expensive gear. While I grant that some of you may find the $399 PC kit, complete with display and input devices, to be sufficient for email and Web access, I wouldn’t depend on that box’s longevity, and don’t forget the annual fee for malware protection software.

So entry-level PCs are killing the profits of the PC makers. IBM realized that years ago, which is why they sold off their personal computer division to Lenovo. HP appears to be coming to a similar conclusion, and they are considering a spin off or possible sale of the PC division. Once again, this is coming from a company that’s at the top of the heap when it comes to global sales. If HP can’t earn enough income from that division, where do they go? Well, to them, it’s all about software, services, and, of course, printers. Printers are profitable when you factor in the revenue from consumables. But people (and particularly corporations) accustomed to buying gear from a single company may have to change their shopping plans if HP gives up on PCs.

Dell is also warning of reduced profits, but the company is not yet diversified enough to focus strictly on other products and services. But the handwriting may be on the wall.

I suppose the big question is whether passing off the PC business to Asian manufacturers who can build them cheaply is sufficient to save the industry. It’s almost as if Apple lives in another universe.

Despite the great success of the iPad, Apple appears to be moving Macs at a pretty decent clip, confirmed yet again in a new NPD Group survey of July retail sales. For several years, Mac sales have grown faster than the overall PC market, largely because Apple offers a better value than most of the competition. The price of admission may be higher, but on the long haul, customers get reliable machines, relatively easy to configure, and they can actually get things done rather than worry about those notorious system slowdowns caused by malware and other problems.

Indeed, putting up with misery is normal in the PC universe. Even if your computer works all right after being set up, over time the system will slow down, and you’ll experience performance anomalies. There are online businesses these days that will offer, at a price of course, to scan your PC from the cloud, banish malware, and provide needed tuneups. Those services exist because they fill a need.

In the Mac universe, yes, there are some maintenance utilities that will clean up system caches and perform other chores that may, in some cases, speed up your computer. There have also been scattered malware issues, most recently that MAC Defender scareware episode, involving an app that offered to remove non-existent virus infections from your Mac if you bought a user license. That problem appears to have died down, although Apple reported continues to push anti-malware protection strings in recent OS X versions.

Yes, Macs do break and require repairs from time to time, but it’s not unusual to see Macs running in full production environments five or even 10 years after they were bought. An example: Around a decade ago, I sold a scanner to a graphic artist. He still uses that scanner, and a vintage Power Mac G4, along with content creation software of that period. Evidently he still manages to run a business with that setup. Buying a new Mac isn’t on the radar yet, because he’d then have to invest in all-new versions of his software. Some day soon, but not yet.

I have a relative using a PowerBook G4 from 2003. It has had a couple of repairs nice then, to replace a defective optical drive and another component (I forget what). But it still chugs along reliably with Mac OS 10.4. The owner is mostly interested email and Web research. That’s all he needs, and he’ll keep that old PowerBook till it drops, or otherwise stops working.

Longevity has always been a hallmark of the Mac platform, where computers remain in use long after their expected lifetimes. So even if the purchase price seems much higher, the cost of ownership will ultimately make the Mac a better investment.

So where does that leave the PC makers struggling to make a living from the sale of all those PCs? Well, I suppose they could try something new, such as a tablet. But, so far anyway, they have totally failed to compete with the iPad in any meaningful way. The real question is where Apple is going to take the Mac, and the answers make take us in many new directions.

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3 Responses to “Where Does the PC Industry Go?”

  1. Karl says:

    Longevity has always been one of the reasons why I use Apple products. I have an old PowerMacG4 (albeit with a processor and video upgrade) that I still use to convert VHS tapes to digital video. It runs a older version of OS X.

    My PowerMacG5 (Leopard) with PowerPC chip still runs daily serving up files and iTunes and the kids still use to browse their favorite websites.

    My newest Mac is a MacBook Pro (Snow Leopard) from about 4 years ago. Still runs well and will probably try to squeeze another year out of it.

    Hell, even my first “Mac”, a PowerComputing PowerTower (OS 9) still fires up and runs strong.

    One reason why I believe this works on the Mac Platform versus the PC is, back in the PowerPC days, that chip never seem to advance as quickly as the Intel/AMD chips in terms of speed. So the Mac OS could run relatively well on older Macs.

    Today, processors have plateaued (in terms of speed). So even though the Apple switched chips they are in the same boat now, the Mac OS runs relatively well on older Macs.

  2. Shock Me says:

    My original 128K Mac and my first Purple iMac still boot up although they lack the storage space to do anything I need of them today. I did have an early two-tone blue iBook and grey iMac that failed in the the interim though. The longest useful life I got from my 15″ PowerBook G4 which chugged along with up-times in excess of 60 days and only died on early 2010 due to an errant power surge (I was able to rescue the internal drive and transitioned to my current MacBook with very little effort beyond finding someone with the screwdriver small enough to open the case).

  3. A friend puts out a small town weekly newspaper using a pair of G3 Macs running OS9 and Quark 3.

    Now that’s longevity! 🙂

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