Intel’s financial report is out and it’s really not bad. It largely beat the street and while its PC revenue declined a little, its diversification efforts have been bearing fruit and largely made up for that decline. Intel's valuation was down slightly on the news but, with a strongly higher EPS over what was expected, the 4th quarter was a decent quarter. But a look at Intel’s breadth of revenue shows it makes money from servers and IoT, is investing heavily in drones, and has a fairly significant automotive effort.
At the heart of Intel’s image, however, and likely part of why its valuation has fallen, is the largely unchanged perception that a personal computer is a device that largely stands alone.
It isn’t that anymore. Many of our PC experiences are actually coming from the cloud now, Microsoft is pushing the PC experience into its smartphones, and we even have HDMI sticks that are fully functional PCs.
Maybe the market’s problem is that even though PCs have undergone changes, buyers and investors still conceptually see them much like they were in the 80s and 90s.
Let’s explore that.
The Evolution of the PC
The general concept of a PC started either with Bill Gates or Steve Wozniak and Steve Jobs as they realized in their youth that a terminal into a mainframe wasn’t what most folks wanted. And, given recent history, all three of them were likely at least partially wrong. That’s because while folks couldn’t afford the expense of a mainframe, neither did they want to work closely with the kind of unresponsive IT (called MIS back then) organizations that existed. They didn’t want to be their own product support either.
They actually liked the idea that a computing device could operate more like an appliance and that someone else would worry about the magic sauce that caused it to run. But that isn’t the way the PC market came up. Founded by a bunch of computer hobbyists, it basically became a near do-it-yourself experience and it did OK with that until something better came out.
We initially jumped on smartphones and tablets because they did for us a lot of what we were doing on PCs but, at least initially, they were cheaper, more affordable, and more appliance like. They turned on, and instantly connected us to the web and to our friends and co-workers with less trouble, more convenience, and more fun than PCs were then able to do. PC sales slowed as we experienced the advantages of an appliance.
PCs Fought Back
But the PC market fought back. The devices got smaller, lighter and more smartphone-like in terms of booting and upkeep. They had much longer battery life (in tablet and smartphone range), and were far better for large screen activities like major games and movies. Perhaps the most impressive pushback was by Microsoft and the Surface line, which eventually emerged as one of the most desirable PCs in the segment. The Surface 4, in particular, blended size, battery life and a tablet-like attractive design with an affordable price, a combination that was so compelling it forced Apple to create a product to compete with it. To my knowledge, Apple has never before created a product to directly compete with a pre-existing Microsoft hardware offering.
Behind all of this, and largely in parallel, was the emergence of the cloud. For many, the personal computer isn’t a device anymore; it’s a set of services that seamlessly moves from device type to device type, which now includes TVs and, in some cases, an automobile dash.
The PC may not exist as a thing much longer; it’s a concept that can be purchased as a service and operate on any screen-enabled personal device, including Microsoft’s HoloLens concept.
Wrapping Up: Moving to the Virtual PC
I think we are moving to a virtual PC concept where our personal devices are going to become even more fluid in terms of design, and our pervasive consistent applications largely reside on some centralized service. The value won’t be in the device but in the total experience. The power will reside in folks who can provide the total solution, not just those who are focused on one part or the other.
We see parts of this in AWS, Microsoft’s Cloud services, in the vision behind Chromebooks, and in NVIDIA Grid, but we aren’t there yet. I do expect that once the back-end part of this fully matures, the devices we carry will change a lot and that design-forward products like the Surface Book will continue to define what people desire, if not what they actually buy, which will have a huge influence on the segment.
In the end, though, I think the PC is moving from being something we buy to a concept we rent and a service that resides in the cloud. An experience surprisingly similar to the mainframe experience we once cited as obsolete.
Rob Enderle is President and Principal Analyst of the Enderle Group, a forward-looking emerging technology advisory firm. With over 30 years’ experience in emerging technologies, he has provided regional and global companies with guidance in how to better target customer needs; create new business opportunities; anticipate technology changes; select vendors and products; and present their products in the best possible light. Rob covers the technology industry broadly. Before founding the Enderle Group, Rob was the Senior Research Fellow for Forrester Research and the Giga Information Group, and held senior positions at IBM and ROLM. Follow Rob on Twitter @enderle, on Facebook and on Google+