H-P Bows to 'Post-PC World'
Apple Inc. Chief Executive Steve Jobs envisions a new landscape in which personal computers no longer rule the digital world─but are just another device, like the company's hit smartphones and tablets.
'We're going to demote the PC and the Mac,' Mr. Jobs said, speaking at the company's developer conference in June.
Hewlett-Packard Co. performed its own dramatic demotion Thursday, as the world's largest PC supplier disclosed it is considering plans that include a spinoff or sale of its personal-systems group, which brought in $40.74 billion in sales during its last fiscal year, or about a third of the company's total revenue. H-P shipped more than 64 million PCs during 2010, or about 18.5% of the total PC market, according IDC.
The 'post-PC era,' as Mr. Jobs calls it, underscores several sharp changes in the behavior of both consumers and corporations that are shifting growth to the likes of Apple and Google Inc., and away from PC stalwarts like H-P and Dell Inc.
The move by H-P to exit the PC business bookended a tumultuous week for the technology industry, in which search giant Google agreed to pay $12.5 billion to acquire Motorola Mobility Holdings Inc., in a bid to strengthen its position in the smartphone industry and its patent position.
Computing, once tied to desktops, is increasingly carried out on pocket-sized devices or so-called cloud services that manage corporate operations and send data to mobile users.
Sales of traditional PCs─most of them running Microsoft Corp.'s Windows operating system and chips based on designs by Intel Corp.─are growing at an anemic rate, rising just 2.6% during the second quarter, according to IDC.
Stiff competition has squeezed manufacturers' prices and profits. The current rule of thumb is that manufacturers like H-P can expect to make a profit margin of 2% to 6% on PCs, while analysts estimate Apple's profit margin in the mid-teens for its Macintosh computers.
At the same time, mobile devices like Apple's iPhone and iPad are drawing many consumers away from the laptop models that have driven the PC business lately. They are good enough for what most consumers do─surfing to websites and playing simple games─and are also proving attractive for business chores like presentations. Apple said in a June earnings call that 91% of Fortune 500 companies have deployed or tested the iPhone while 86% of them have deployed or tested the iPad.
The H-P decision mirrors that of International Business Machines Corp., which once led the market but acknowledged the changing industry with the 2005 sale of its PC business to China's Lenovo Group Ltd.
'H-P was the biggest seller of PCs in the world, but they have concluded that's tied to looking backwards and they need to look forwards,' said Brad Silverberg, a venture capitalist and former Microsoft executive. He called the H-P move 'another tectonic shift' providing further evidence of a post-PC world.
Not that H-P has done badly in the business. It outdueled Dell, for example, to take the No. 1 spot in PCs several years ago.
Jean-Louis Gassée, a former Apple and H-P executive who is now a venture capitalist, credited H-P executives with tight management of the hardware production process. But they couldn't change the underlying reality that there is little profit to be made in the business.
'It's structural. It's not bad management,' said Mr. Gassée. 'A competent manager could add a point or two' of profit margin, but that still doesn't make it business. It's a commodity.'
Apple, meanwhile, has siphoned a huge share of whatever profits can be earned from selling hardware to consumers. The company has ridden its recent success to become the world's most valuable company, though Exxon Mobile Corp. recently took back the title. In the quarter ended June 25, Apple recorded profits of $7.3 billion on revenues of $28.57 billion by selling record numbers of iPhones, iPads and Macs.
Apple can make outsized profits in part because it controls software for the devices, which helps it charge more favorable prices. It also has developed add-on services, like its iTunes store--to sell music, videos and software.
'As good and sexy as their hardware is, it often uses their hardware as a means to generate revenue for its services,' said Mark Margevicius, an analyst for research firm Gartner Inc. 'It opens doors to more business and more of an annuity stream,' he said.
Nor has it been easy for PC makers to follow Apple's lead into the newer breed of mobile devices. H-P gambled on the business last year when it acquired Palm Inc. and later launched the TouchPad tablet and webOS smartphones, which also gave it rare influence over both hardware and software.
H-P on Thursday said it would discontinue operations for the TouchPad and webOS phones, and write off at least $1 billion─ and potentially hundreds of millions more in goodwill writedowns─in the months ahead.
At the same time, opportunities beckon in selling to companies, many of which are using Web technology to transform the way they handle computing chores in a trend called cloud computing. H-P is the biggest seller of the server systems sold in high volumes to manage such applications, and the company has moved effectively into other segments recently such as computer networking.
Software and services needed by companies hold the promise of even better profit margins. H-P has made a series of acquisitions in the business software field already, and Mr. Apotheker signaled Thursday with a $10 billion deal to buy Autonomy Corp. that he will make good on a pledge to become more active to build that business.
'This is not only notable in terms of the amount of money being spent,' said Elizabeth Hedstrom Henlin, an analyst at Technology Business Research. 'It's a real statement in my opinion of the H-P board's faith in Leo and his vision.'
Yukari Iwatani Kane/Nick Wingfield
'We're going to demote the PC and the Mac,' Mr. Jobs said, speaking at the company's developer conference in June.
Hewlett-Packard Co. performed its own dramatic demotion Thursday, as the world's largest PC supplier disclosed it is considering plans that include a spinoff or sale of its personal-systems group, which brought in $40.74 billion in sales during its last fiscal year, or about a third of the company's total revenue. H-P shipped more than 64 million PCs during 2010, or about 18.5% of the total PC market, according IDC.
The 'post-PC era,' as Mr. Jobs calls it, underscores several sharp changes in the behavior of both consumers and corporations that are shifting growth to the likes of Apple and Google Inc., and away from PC stalwarts like H-P and Dell Inc.
The move by H-P to exit the PC business bookended a tumultuous week for the technology industry, in which search giant Google agreed to pay $12.5 billion to acquire Motorola Mobility Holdings Inc., in a bid to strengthen its position in the smartphone industry and its patent position.
Computing, once tied to desktops, is increasingly carried out on pocket-sized devices or so-called cloud services that manage corporate operations and send data to mobile users.
Sales of traditional PCs─most of them running Microsoft Corp.'s Windows operating system and chips based on designs by Intel Corp.─are growing at an anemic rate, rising just 2.6% during the second quarter, according to IDC.
Stiff competition has squeezed manufacturers' prices and profits. The current rule of thumb is that manufacturers like H-P can expect to make a profit margin of 2% to 6% on PCs, while analysts estimate Apple's profit margin in the mid-teens for its Macintosh computers.
At the same time, mobile devices like Apple's iPhone and iPad are drawing many consumers away from the laptop models that have driven the PC business lately. They are good enough for what most consumers do─surfing to websites and playing simple games─and are also proving attractive for business chores like presentations. Apple said in a June earnings call that 91% of Fortune 500 companies have deployed or tested the iPhone while 86% of them have deployed or tested the iPad.
The H-P decision mirrors that of International Business Machines Corp., which once led the market but acknowledged the changing industry with the 2005 sale of its PC business to China's Lenovo Group Ltd.
'H-P was the biggest seller of PCs in the world, but they have concluded that's tied to looking backwards and they need to look forwards,' said Brad Silverberg, a venture capitalist and former Microsoft executive. He called the H-P move 'another tectonic shift' providing further evidence of a post-PC world.
Not that H-P has done badly in the business. It outdueled Dell, for example, to take the No. 1 spot in PCs several years ago.
Jean-Louis Gassée, a former Apple and H-P executive who is now a venture capitalist, credited H-P executives with tight management of the hardware production process. But they couldn't change the underlying reality that there is little profit to be made in the business.
'It's structural. It's not bad management,' said Mr. Gassée. 'A competent manager could add a point or two' of profit margin, but that still doesn't make it business. It's a commodity.'
Apple, meanwhile, has siphoned a huge share of whatever profits can be earned from selling hardware to consumers. The company has ridden its recent success to become the world's most valuable company, though Exxon Mobile Corp. recently took back the title. In the quarter ended June 25, Apple recorded profits of $7.3 billion on revenues of $28.57 billion by selling record numbers of iPhones, iPads and Macs.
Apple can make outsized profits in part because it controls software for the devices, which helps it charge more favorable prices. It also has developed add-on services, like its iTunes store--to sell music, videos and software.
'As good and sexy as their hardware is, it often uses their hardware as a means to generate revenue for its services,' said Mark Margevicius, an analyst for research firm Gartner Inc. 'It opens doors to more business and more of an annuity stream,' he said.
Nor has it been easy for PC makers to follow Apple's lead into the newer breed of mobile devices. H-P gambled on the business last year when it acquired Palm Inc. and later launched the TouchPad tablet and webOS smartphones, which also gave it rare influence over both hardware and software.
H-P on Thursday said it would discontinue operations for the TouchPad and webOS phones, and write off at least $1 billion─ and potentially hundreds of millions more in goodwill writedowns─in the months ahead.
At the same time, opportunities beckon in selling to companies, many of which are using Web technology to transform the way they handle computing chores in a trend called cloud computing. H-P is the biggest seller of the server systems sold in high volumes to manage such applications, and the company has moved effectively into other segments recently such as computer networking.
Software and services needed by companies hold the promise of even better profit margins. H-P has made a series of acquisitions in the business software field already, and Mr. Apotheker signaled Thursday with a $10 billion deal to buy Autonomy Corp. that he will make good on a pledge to become more active to build that business.
'This is not only notable in terms of the amount of money being spent,' said Elizabeth Hedstrom Henlin, an analyst at Technology Business Research. 'It's a real statement in my opinion of the H-P board's faith in Leo and his vision.'
Yukari Iwatani Kane/Nick Wingfield
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