Why Michael Dell Is Right About PCs, And HP Could Be Wrong


Last week, HP announced it was considering spinning off its Personal Systems Group (PSG).

Or, maybe it was considering not spinning it off. Or, maybe, it was just considering considering spinning it off. Here’s what HP’s CEO Leo Apotheker said:

“We'll be looking at all of the various dis-synergies, supply chain mitigation issues. And once we'll be done with that work, we'll report back to the board and a decision will or will not be made.”

Got that? It’s not exactly a ringing endorsement of the largest PC operation in the world.

Michael Dell responded:

“Goodbye HP
“Sorry you don’t want to be in PCs any more
“But we do more than ever.”

Consider where Dell is coming from. In 2006, Dell’s company was in the midst of a major crisis and upheaval. Some questioned whether it could survive. In many ways, it was much more serious for Dell than HP’s current issues are for HP.

At the same time, IBM executives could be heard chuckling after spinning off their PC unit to Lenovo. HP, through all the turmoil in the market, ran away with market share lead in desktops and notebooks.

And then Dell re-invented his company by doubling down on manufacturing and technical quality for PCs and notebooks, and acquiring highly regarded enterprise storage businesses. Michael Dell considered buying EDS, and took a pass on it -- allowing HP to make that acquisition. Dell bought Perot Systems instead.

Importantly, Dell embraced the channel and, over the next five years, has put itself into a position where even a bumpy quarter or two won’t be a crisis for his business. If you can actually believe it, Michael Dell now seems to be having fun doing what he’s doing.

Speaking of fun, how about things over at HP?

According to Kara Swisher, Apotheker didn’t break the news to Jon Rubinstein, HP's former WebOS head Jon Rubinstein, and Todd Bradley, executive vice president of HP's Personal Systems Group, about his plans to throw the PSG group and Palm division under the bus until a Sunday night dinner three days before his decision started leaking out.

Getting out of the PC business might be, forgive the pun, PC these days. Tablets are eating into PC market share, the competition is fierce, margins will be under pressure, one bad product and reviewers will savage you. But here’s why Apotheker should want to double down his bets on desktops and notebooks, and why there’s still time to hold on to the PSG:

Companies like HP, Dell, IBM, Samsung and others aren’t just selling client devices, their products are becoming more important than ever to the data-management stack. Consider that a smart phone or tablet now has the ability to capture or create terabytes of data through scanning, video recording, photography, text input and more. Tablets, smart phones and PCs are now gateways to the cloud and gateways to the data center. However, tablets and smart phones can only store and process so much data -- they will inevitably become tied more and more closely to laptops, desktops, servers, enterprise storage and the cloud.

Apple gets this. That’s why the company is now poised to unleash iCloud on the world, and why it is more bullish than ever on Macs and Macbooks. Apple has now unified the data-management stack from the smart phone to the tablet to the PC to the cloud. It does lack a data center offering, but Apple doesn’t need to be there since it can more than make up for that with all of the other aspects of its lineup.

Michael Dell gets this, too. His company has regained lots of PC market share over the past five years, and Dell’s storage business is enjoying some success. Eventually, his company will come out with Android devices that will have enterprise stickiness to them (the Streak so far just hasn’t caught on, but Dell doesn’t appear ready to give up after six weeks, like HP has.)

Even HP's own engineers and PC group employees seem to understand this, because their most recently launched notebooks have been quality notebooks, with nice performance, and very cost competitive. HP is still a great PC manufacturer - and the evidence is in its work.

The PC itself is still the most powerful, cost-effective bridge from the palm of the hand to the enterprise in the data-management stack. It’s where the eyeballs and hands go to do work. And after millennia of human existence, work is still accomplished by people, not just some SAP back end.

Apotheker, a former top executive at SAP, may make a decision on what to do with the PSG. Or, as he said, he may not make a decision.

Apple has made its decision. So has Michael Dell. They seem to be having lots of fun, too.