PC Makers Aren’t Learning From History

PC Makers Aren’t Learning From History

Reading a rather astonishing interview with Acer president Jim Wong this week, it hit me: PC makers continue to make the same mistakes that buried the PC industry under an avalanche of cheap netbooks that left these firms unable to respond properly to the growing tide of new tablet competitors. When will these companies collectively understand that low prices and good value aren’t synonymous?

Mr. Wong, if you’re not aware, is a vocal critic of Windows 8. And perhaps not coincidentally, he’s presiding over a company that is fairing far worse than its competitors. In Q4 2012, when PC sales fell about 5 percent year-over-year, Acer’s share of the market fell harder than any other top-tier PC maker: Sales of its products fell about 20 percent using figures from IDC and Gartner. And the firm has posted two consecutive annual losses.

This suggests to me that Acer’s problems have a lot to do with Acer and not a lot to do with Microsoft, Windows 8, or Surface. But Wong’s been criticizing all three since last year. And this week, he did it again. But Wong is wrong again.

Related: Surface with Windows RT is No PC Replacement

In an interview with Bloomberg this week, Mr. Wong said that Windows 8 hasn’t been a success, not just for Acer, but for the entire industry. “The whole market didn’t come back to growth after the Windows 8 launch,” he noted. “That’s a simple way to judge if it is successful or not.”

I understand his frustration, and it’s certainly fair to note that the Windows 8 launch didn’t usher in a PC sales bump. Microsoft happens to blame PC makers like Acer for that issue, and I agree with that assessment. But the crazy part -- the bit that’s been misreported everywhere, incidentally -- is that Mr. Wong appears to be quite excited about his firm’s sales of Chromebook portable computers. He claims that these computers accounted for 5 to 10 percent of the PCs Acer sold in the US in the fourth quarter.

Although it’s unclear why the president of Acer doesn’t have a firmer grip on how many Chromebooks were sold -- 5 to 10 percent? Seriously? -- there are two bigger issues here. First, many of the reports I’ve read claim that Acer sold more Chromebooks than Windows 8 PCs, which isn’t true. And second, why are Acer and other companies such as HP and Lenovo -- which will soon begin selling Chromebooks alongside Acer and Samsung -- making the same mistakes they made in the past?

Seven to eight years ago, in a last-ditch effort to jumpstart the dying Linux initiative on the PC desktop, PC makers began pushing a new kind of low-cost, low-capability PC that eventually became called netbooks. At first, netbooks shipped with Linux, and the timing was tough for Microsoft because at the time the company was pushing Windows Vista, which was ideally unsuited for these devices. Briefly, amazingly, Linux experienced a small leap in market share. But Microsoft responded by allowing these devices to ship with Windows XP instead of Vista. And then the company released Windows 7, with its smaller resource footprint, sealing the fate of Linux on the desktop for good.

So although Microsoft “won” the battle, it also managed to destroy the market for PCs in the process. Netbooks accelerated the downward spiral of PC prices, and although you can’t really find too many actual netbooks these days, their spiritual successors are all over the place in the form of bigger but still ultra-cheap PCs that cost as little as $299. In fact, the average price of a portable PC sold at retail in Q4 2012 was just $420. That’s not a sustainable business.

(I wrote more about the netbook’s role in killing the PC business in “Explaining Windows 8 PC Sales Over the Holidays.”)

The Chromebook is simply another take on the netbook: cheap, borderline useless computers sold at rock-bottom prices. (In many ways they’re even worse: Many Chromebook apps won’t work at all if the device is offline.) In fact, Mr. Wong specifically addressed the appeal of this system using language that could have been used to explain the rise of Linux-based netbooks years ago. Chrome has no "license fee," he noted, and is supposedly "more secure" than Windows.

Here’s the thing. Windows 8 was brought to market to specifically address the issues that brought the PC market to its knees. First, it was designed to address consumer excitement around multi-touch tablet devices, although PC makers did everything they could to undermine these capabilities by ignoring both touch and tablet devices in their launch wave of products last fall.

Second, and less well-known, Windows 8 was also designed to raise the average selling price of a PC to a more profitable range of $600 to $800. Those early Windows 8 tablet devices based on the Atom “Clover Trail” chipset are a netbook in sheep’s clothing, but they cost hundreds more than netbooks ever did. However, the theory is that consumers are comfortable paying $650+ for Apple’s iPad, so they will perhaps pay as much or more for what is presumably a more full-featured PC.

I refuse to believe that Chromebooks make any sense at all for businesses or educational institutions, and that the manageability of Windows RT and Windows 8, combined with still-reasonable pricing, the familiarity of the environments, and the cachet of modern, new tablet form factors, won’t just keep Microsoft in the game but will in fact allow the company to continue to set the pace. But rather than present this as an edict from on high, I’m honestly curious: Do Chromebooks in any way figure into a discussion about the devices you would roll out in your own environments? Or is this a rabbit hole that the PC makers are running down in yet another mad bid to push Microsoft aside in a market they want all to themselves?

Let me know what you think.

TAGS: Windows 8
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