HP is doing what? Is the PC Market Approaching Death?

So by now you've probably heard that HP is selling of it's Personal Systems Group.  Basically, that includes PC/laptops/smart phones, and that little HP TouchPad tablet that all of the cool people are advertising but nobody is buying.  So what does this mean?

This is obviously a huge turning point for HP as a company.  Until now HP was primarily known as the computer and printer company.  They are one of the 3 leading PC manufacturers in the US.  But suddenly they are getting out of that market?  What are they thinking you may be asking?  It is very obvious that computers are becoming faster, smaller, and in the case of this story cheaper.  As the hardware gets cheaper, of course the profit margin that these manufacturers tap into is of course getting smaller.

Ten years ago, a PC half as powerful (if that) as an average use computer is now, would cost well over $1,000. My first Dell (purchased in 2004) cost me $1,100.  It was a Pentium 4 running 2.4GHz, with 1GB of RAM and an older Nvidia Gforce card (I can't remember it's specs).  My current rig is an Intel Core 2 Duo running a 3.0GHz with 2GB's of RAM with an nVidia 8600 GTS built almost 3 years ago for $400 with parts from Newegg.

The only company that seems to be able to make a rather substantial profit from their hardware sales appears to be Apple.  And they sell quite a few less machines, but make more money on what they sell than any other PC manufacturer in the US.  So, how do they do it?

Not sure, personally I believe it is smart implementation of their peripheral products.  Namely, the iPod brand.  Think about it.  Before Apple released it's very first iPod music player, Apple computers were basically commonly found in graphic design offices.  Applications were pretty scarce for it, and since their computers ran the older Power PC processors they were incompatible with anything else on the market.  Then came along the iPod and a small program called iTunes.

Now people who never thought about Apple were picking up iPod's and using iTunes.  The next step of course would be for a new customer to see what else Apple makes that might interest them.  So they get into the older iMacs or early MacBooks.  Fast forward several years, Apple makes a deal with Intel and replaces the Power PC processor for Intel.  Now you have the ability to pick between Windows or Mac OS X.  You can virtualize Windows using Parallels.  Now that their machines are 'Intel-Based' more software is being developed for their platform.  All the while, they continue to upgrade and build features into their devices that are based around apps like iTunes, easy use with their iPods.  Meanwhile, iPods are getting bigger and better and being turned into phones and tablet devices.  So in my opinion the iPod helped direct a lot of attention back to Apple over an extended period of time.  Instead of being one of these: "Hey, look what we have, shiny new tech" and then a couple years later they fizzle out.  Fast forward to 2011, people who own a Mac computer absolutely adore them.

Does this build up over time explain why Apple can sell a laptop and ask a substantially higher price for it and make more profit off of a single sale?  Maybe, I'm not market analyst but this makes sense to me.

As of late HP hasn't made the best business decisions, but at least they have taken risks other companies may have stayed away from.  For instance, remember when they bought out Palm?  They bought Palm for $1 billion dollars the other year.  Pretty much to strip out the webOS developed by Palm for the smart phone devices (which had a hard time selling) for use in future products.  Fast forward to now, they have released the HP TouchPad which has snazzy commercials being about the only thing going for it.  And in the meantime, will someone decide webOS is still valuable enough to invest in from HP?  Time will tell.





BTW, I love the Russell Brand 'Ostrich Commerical' for the TouchPad.  HP tried to do exactly what RIM did.  Both companies attempted to bring a tablet device into a market completely owned by Apple and Android at the moment.  As RIM found out with the Blackberry PlayBook, other devices are having a difficult time breaking through the crowd of Android devices and iPads.  Sure, they are nice devices.  But let's face it, why not go with the flow and ride the cash train while we can.  And it's at the point now that even Best Buy is trying desperately to be rid of the TouchPad.

So what does this mean for HP as a company?  Well, they are doing pretty much what IBM did years ago.  They are going to be focused more towards enterprise solutions where the sales are typically larger with a larger profit margin.  And for the most part, this has worked pretty well for IBM.

And what does this mean for the home PC market?  Is it dead?  Not quite.  There will always be a need (at least in our foreseeable future) for PC's.  After all, even devices that rely solely on the cloud (looking at you Google Chromebooks) without a PC or Server sitting in a data center somewhere, those devices will not have a reason to access the 'cloud'.  And let's face it, sure mobility is great.  But there comes a time (and some tasks) that a mobile device just can't handle yet.  Would Pixar be able to render another sequel to 'Cars' solely on an iPad?  Not currently.  Would Netflix be able to serve millions of subscribers using a data center of Android Tablets (definitely not at the rate they allow these devices access to their services).   So as far as I can see, PC's are going to be around for a while to come.  This doesn't mean they will be the most popular or most practical form of computing.  But they aren't going anywhere anytime soon.

Maybe one day a form of cluster computing may emerge that allows the internet to become a thriving, mobile entity as many devices are trying to make it now where everyone's computer serves everyone else's.  But that is a whole other security story in itself.  In the meantime, don't expect to see many TouchPad's floating around and the household HP Pavilion Laptop appears to be going the way of the dodo bird.