Well, revolutions are interesting at least, and we certainly have one now. HP has said it will be “considering” exiting the PC business, spinning off its PC unit and doing some M&A to boost itself as a player in the software and systems space. In fact, if you look at what seems the Plan of the Day, it seems as if HP wants to be Oracle; software-intensive, enterprise-focused. In their spring quarter, HP was hurt by the soft consumer PC market where Dell (who had less consumer exposure) did better. Now with Dell taking an outlook hit and HP following suit (again) there was little the company could do except to admit that PCs were not now, nor ever in the future, what they used to be.
Tablets and smartphones aren’t in HP’s future either; they’ve said they’re dumping the whole WebOS effort and all of the devices that came with it. The move is in some ways more dramatic than the decision to spin out PCs because it’s a retreat from the client business completely, a sharp turn toward the center of the action that would seem to be irreversible. Are they abandoning the client world to Asia or to Apple? Both.
To round out the move, HP will (buy a British software specialist, Autonomy, who has very strong credentials in database searching and business, as well as some expertise in content management. The price for the software company seems high to Wall Street; it’s probably one reason why HP’s shares have been off in pre-market. It’s the price and not the concept; HP has been buying software companies for some time as a part of a transformation that started with the hiring of former SAP CEO Apotheker. Most IT players at this point realize that software is the key to establishing a direct connection to the users’ business case, and HP is proving its commitment to that approach. But remember that HP is still a broad-based data center player, a giant in enterprise computing.
So is the PC now chopped liver? There is no denying the declining interest in the PC as the primary consumer appliance. That’s something that even Microsoft realizes, apparently. Their Windows 8 is obviously a transition product, something that would let them run the same basic OS across any suitable appliance. The announcement that Windows 8 will have its own app store seems to me to confirm a trend that’s been developing in the consumer market for several years. Driven largely by Apple, we’re seeing a transformation of “computing” into “appliancing”, a shift from designing personal computers as small computers to designing them as information portals. It’s not (at least not yet) as much about replacing the PC as about doing something the PC was never really needed for to begin with. The consumer wants entertainment, period. When PC games and PC browsers were their only conduit to that goal, that’s what they bought. With game consoles, tablets, and smartphones increasingly becoming the user’s window on the world, the PC is old news for consumers. Can the enterprise be far behind?
The HP move will certainly put pressure on a lot of players. To start off with, that means that Dell might find it necessary to do its own cut-and-run move. Their decision to get into networking with Force10 and their creation of a cloud-and-virtualization focus on the data center seems like it might be laying the groundwork. I think that the loss of the PC would help Dell’s overall financials and also help the company focus on the data center, where it’s been showing most of its strength. In any event, it may have little choice at this point.
IBM, of course, shed its PC business by selling it to Lenovo. As a pure play on enterprise computing, it’s had its ups and downs, but there is no question that IBM is still the big tech success story. They proved that making big moves to cut your losses is as important as making moves to cement gains. With IBM now seeing giant HP aiming at IBM’s turf without being encumbered by PC baggage, what does IBM do? Networking? HP has networking products; rival Dell just picked up a line. Does IBM follow suit, and if it does who does it pick up?
Before we go there, let’s look at an important point about enterprise networking. The only part of it that’s strategic is data center networking, and data center networking is about (you guessed it) the DATA CENTER, which is where servers and software and IBM and HP and Oracle and Dell all live. If “computer companies” are going to say that “computer” doesn’t include PCs then they’re focused totally on the data center, and unlikely to ignore the fact that the data center network is a big part of that picture. Networking first collapses into data center networking and unimportant branch junk, and then data center networking collapses into the server/storage technology plans of the buyer. That’s surely how the IT guys see it.
There are two players (IBM and Oracle) who might see themselves becoming a full-service data center company and who lack the network piece. There are probably four network vendors who might be targets of acquisition—Brocade, Extreme, F5, and Juniper. Only two players max from this group could be acquired. If enterprise networking commoditizes and gets subducted as the current moves suggest it will, then the rest of these, and other non-target players like Cisco, have got to make it on their own. In the new market, is that possible? Who might be forced to find out?
Cisco might be feeling good; they seem to have accidentally occupied the space that everyone else wants to converge on. With servers, networking, and a reduced consumer exposure they’re in a way a bit ahead of HP in terms of a transformation out of the business space. But Cisco isn’t an IT player no matter what they want to believe—at least not yet. Their understanding of IT is short of what’s needed to compete with the big boys, and they’ve got nothing in software despite continued efforts. In fact, Cisco may find itself under a bit more pressure as HP steps up the “we-do-all-the-data-center” story at the sales level.
