Reports of the PC's death have been exaggerated

Electronics Times, Jan 22, 2001

Industry focus is shifting back to giving the PC a starring role in consumer electronics technology By Paul Dempsey

January has seen a clutch of leading US high-technology companies speaking up for that old war-horse, the PC.

At the 2001 Consumer Electronics Show (CES), Craig Barrett, Intel's CEO, was at pains to point out that the PC is becoming "the central nervous system for the entertainment system of the home".

During the same event, Bill Gates, chairman of Microsoft, offered some similar thinking. Perhaps he was unveiling the Xbox as a standalone games platform, but the overarching philosophy was one of "extreme entertainment" - with guess what at its core.

Then, only hours later at the separate MacWorld Expo, Steve Jobs, CEO of Apple Computer, tried to "start 2001 with a bang" by setting out his latest vision. Hold on tight, folks, PCs stand on the verge of a Third Golden Age.

"People are asking, `what's going to happen to the PC?'" Jobs asked his audience. "We think the PC is entering the age of the digital lifestyle. We believe the PC - more importantly, the Mac - will become the digital hub to add value to other digital services."

Finally, in the last few days, IBM, the father of PC technology, has added its corporate voice to those of this powerful triumvirate.

GLOBAL INCREASE

Adalio Sanchez, general manager for manufacturing operations in Big Blue's PC group, cited IDC's recent forecast of a global 15% increase in sales this year, recession or not, with mobile PC sales set to rise 25%. And how did he explain these figures?

"The PC will continue to add functions and become easier to use, with few compromises in performance," Sanchez said. "It has already grown into a games device, spreadsheet calculator, graphics-design workstation, radio, TV and jukebox. The versatile PC is and will remain the primary tool for knowledge creation."

It was all quite different last autumn. At Comdex, as senior a figure as Carly Fiorina, president, chairman and CEO of Hewlett-Packard, was willing to consider the marginalisation of the PC.

Her argument - and it was one shared by many others at the event - was that the increasing computing power of everything from handheld mobile devices to set-top boxes to cars and even fridges would reduce our dependence on the PC, even as an Internet access device.

It is no coincidence that the companies now speaking out against that view are those which depend heavily on the PC for their profits. For example, while Microsoft and Intel can be seen as moving beyond the PC arena, neither would say that their moves could yet be classed as fulfilled.

Microsoft has the Xbox as a first real bid in the hardware sector but we will only know about that later in the year. Intel has been trying break into communications and launched its own consumer devices like the Pocket Rocket MP3 player, but, again, it is very much early days.

The timing of these pro-PC comments is also noteworthy - around CES, when competitors really try to push their potentially marginalising wares.

And then there is a separate, more immediate, profitability issue.

Microsoft issued its first ever profit warning shortly before Christmas. Intel's market projections, as well as that quoted from IDC, are today more modest than those given during the first half of 2000. And as for Apple's intention to start 2001 with a `bang'? Well, analysts are expecting the company to report a quarter loss in the $225m to $250m region in the next few weeks.

But if you can put those vested interests aside, is the PC really set to reassert itself? To some extent, the shift in the dot.com market from stutter-to-slide-to-slump has crippled the market for many proposed mobile devices.

With e-business companies going to the wall worldwide on a daily basis, the number of services that these devices can access is shrinking and consumer confidence has taken a knock. Going further, the prospects for a new e-content provider to emerge at this time and get the funding to launch a `killer application' are bleak.

They may currently see them as the lesser of two evils after the Internet stocks, but investors in high technology are none the less moving back towards `traditional' players.

PC-FOCUSED DIRECTION

The financial mechanics to drive the Barrett-Gates-Jobs-IBM view are in place and could, arguably, have driven the market in a PC-focused direction even without the companies themselves speaking out.

But even when you disregard what could be seen as the sentimental part of the financial argument, there are some pretty good reasons for supporting a PC-centric view.

The PC has undoubtedly become the main Internet access device. But, as Barrett pointed out at CES, this is now also a world where MP3 players, PDAs and even children's microscopes can be plugged into that beige box.

"Metcalf's Law, which was really proven with the Internet, is that the value of a network equals the square of the number of nodes on the network," said Barrett. "I think that, increasingly, the value of the PC is really associated with the number of these consumer interface devices we can attach to it.