The PC Industry: the times, they are a-changin’

January 11, 2001

T he PC industry is at a crossroads. Technology luminaries such as Compaq, Intel, Microsoft and Apple all posted lower-than expected revenues in the fourth quarter of last year, the demand for PCs has gone flabby with the slowing economy, and the thrashing the stock market has taken seems determined to continue. With these gray clouds hovering overhead, PC companies know that reinvention is crucial to their continued success.

Titanium Powerbook G4
Apple's new Titanium PowerBook G4
Meet the New New Us
Within the last two weeks, both Microsoft and Apple, two of technology's kingpins, attempted just that. Apple's Steven Jobs took his kick at the reinvention can at this year's MacWorld Expo, currently on until January 12th in San Francisco. His keynote speech presented revamped desktop models with faster processors and CD writing drives, a brand new, high-powered Powerbook laptop encased in titanium, and set a release day for Apple's eagerly awaited new operating system, OS X - March 24th.

Hardware company releases software…
What was the most intriguing, however, was the software he unveiled. There was iTunes, which is an all-in-one solution for digital music, and iDVD, a revolutionary piece of programming which radically shortens the amount of time it takes to transfer information onto a DVD disc. "We don't think the PC industry is dying at all," he explained, "We think it's evolving."

He then proclaimed a new strategy to position Apple's products as part of a third "golden age" in computers, with computers acting as a "digital hub", connecting the various electronic devices in their lives together.

Microsoft's Xbox
Microsoft's Xbox
… software company releases hardware…
Microsoft's new strategy took form at January's Consumer Electronics Show (CES), which is the king of all electronics expos. It was there Microsoft's Bill Gates took the wraps off of Xbox, which represents the software company's first volley into the lucrative and high-risk world of video game consoles.

"If there's an area where breakthroughs in hardware and software could really change the business," Gates said, "it's got to be video games."

If Microsoft's demonstration at the CES was any indication, they're well prepared to take on such entrenched companies such as Nintendo, Sega and especially industry leader Sony and its recently released Playstation 2. The games Microsoft exhibited featured graphics that look more like they came from a Disney movie than a video game, leaving analysts to speculate that Microsoft may have a monster on its hands.

Apple's revamped strategy is more crucial to its continued success: unlike Microsoft and the other PC companies, Apple's audience is heavily consumer-based and much smaller than that for Windows-based machines.

… analysts are unsure…
Analysts are split as to whether or not Apple's product announcements are enough to help the beleaguered company's fortunes this year.

"The new products, especially the hardware, are what Apple needs," MacWeek reported an analyst saying, "But I'm concerned… the short- to near-term outlook for Apple isn't so strong and bright, because of factors beyond what they can1t control."

An enlarged backlog of older inventory was also pointed to as a possible problem point. "They've got a lot of old machines to clear out, " another analyst said, "With a slowing economy affecting the entire PC industry, Apple always gets hit a little harder than say a Dell or a Compaq."

… but consumers are happy.
Consumers responded more positively to Apple's new products. "The new 'i' products I think were most significant," said Eric Moorehead, "I liked the new PowerBook too, but I think the software products will show new potential customers that have never used a Mac that Apple is on the cutting edge."

"I know executives who will really want this," said Sarah Ferguson of the new Powerbooks.

Response to Microsoft's Xbox has been generally positive. "No question about it," reported CNet News/ Gartner analyst Lou Latham, "the popularity and revenue of games and game devices are reason enough for Microsoft to enter this arena."

He then concludes, "Microsoft has begun to position itself to be once more the broad-spectrum, generic technology for the average user."

Still, even with the different opinions floating around, Daniel Kunstler, an analyst at J.P. Morgan H&Q has only one thing to say about the industry. "Just riding the PC market cycle is not anybody's idea of a good time."

Related Reading (These links will open in a new window.)
MacWeek Special Feature on MacWorld
The Official Xbox Web site
See Video Highlights of Steven Job's Keynote at MacWorld - QuickTime required
C|Net's Special feature on Macworld

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