Feeds

Microsoft's Dell billions have Windows 8 strings attached

If you can't convince them, buy them...

Security for virtualized datacentres

Surface - more cost, more risk

Surface was meant as design concept, to inspire PC makers, but Surface is more expensive to make than an iPad and it has no track record. It is, therefore, a big risk. Worse, the existence of Surface has pitted Microsoft against its partners - PC makers who use its OS. As with Yahoo! and Nokia, before it, Microsoft wanted to outsource the risk and cost.

If it took a stake in Dell, Microsoft would likely try to exert more pressure on the PC maker to take the kinds of risk Redmond believes are worth taking - for example by producing the kinds of Windows 8 devices that its PC maker partners failed to churn out at Christmas time.

Would it work?

According to Gartner, the current dynamic of the PC market is this: consumers are replacing old PCs with brand-new tablets. That means the PC market as it has been traditionally defined - a place of high volume/low-price when compared to Apple - is a bad place to be. But how could the PC-makers break into the high-end/high-margin market and achieve volume?

The 2013 Consumer Electronics Show saw several high-end Ultrabooks, hybrid tablets and laptops that were all destined for high-price points. Many of them were priced at over $1,000 - with some coming in at $1,200 and $1,500. Those are some pretty Appley prices - the kinds of prices laptops where during the '90s, not what they became in the noughties.

Until recently, the PC market has rested on two principles: high-priced systems from Apple in a niche surrounded by a mass-market of low-priced PCs running Windows from any and all OEMs. The question is, how many PC makers could the niche support? The answer, logically, is "not many" - and certainly not the same number of "mass-market" PC makers operating now.

Never mind that PC makers must offer something more compelling than Apple, they'll also need to re-structure - cutting costs to support the new pricing model and possibly fewer sales - while diversifying sufficiently so that their businesses aren't reliant solely upon high-priced touch tablets. There will also need to be a significant culture shift, from the current mass-market-low-price mindset to which high margins are an afterthought.

Planes, cars and PC makers

Those who don't shape up face an uncertain future. The logic is that current PC-making companies will either go out of business, exit the PC sector (a la HP's threats of 2011), or be bought out through one of the ever-more-desperate acts of consolidation that have been working though the US car and airline businesses. This has only postponed the inevitable in these sectors, with corporations lurching on buying each other and taking on more costs along with additional new customers and periodically taking shelter from their creditors in bankruptcy protection as they indulge in periodic fits of cosmetic restructuring.

The implied objective for Dell's decision to go private is to whisk it away from the scrutinising gaze of Wall St and the pressure of share-price fluctuations so that a few brave corporate souls can implement the kinds of changes needed to reposition the PC business and better exploit operations that include servers, software, services and cloud.

Microsoft will have to tread carefully: while it will want to ensure Dell churns out more and more Windows 8 touch tablets, it should also avoid prescribing the kinds of haughty "we know the customer better than the PC makers" advice that proved so wrong - burning both OEMs and Microsoft - during the run-up to Christmas.

If Microsoft hands over the cash and infiltrates Dell, there are still two ways that its efforts could result in a giant fail. One would be if its voice was ignored inside Dell; the second that - if it was heeded - Redmond provided Dell with poor guidance, ensuring it took one bad decision after another and lost its chance being rescued from the mire of the struggling PC market. Either way, Microsoft would have wasted $3bn. ®

Beginner's guide to SSL certificates

More from The Register

next story
Microsoft WINDOWS 10: Seven ATE Nine. Or Eight did really
Windows NEIN skipped, tech preview due out on Wednesday
Business is back, baby! Hasta la VISTA, Win 8... Oh, yeah, Windows 9
Forget touchscreen millennials, Microsoft goes for mouse crowd
Apple: SO sorry for the iOS 8.0.1 UPDATE BUNGLE HORROR
Apple kills 'upgrade'. Hey, Microsoft. You sure you want to be like these guys?
ARM gives Internet of Things a piece of its mind – the Cortex-M7
32-bit core packs some DSP for VIP IoT CPU LOL
Microsoft on the Threshold of a new name for Windows next week
Rebranded OS reportedly set to be flung open by Redmond
Lotus Notes inventor Ozzie invents app to talk to people on your phone
Imagine that. Startup floats with voice collab app for Win iPhone
'Google is NOT the gatekeeper to the web, as some claim'
Plus: 'Pretty sure iOS 8.0.2 will just turn the iPhone into a fax machine'
prev story

Whitepapers

A strategic approach to identity relationship management
ForgeRock commissioned Forrester to evaluate companies’ IAM practices and requirements when it comes to customer-facing scenarios versus employee-facing ones.
Storage capacity and performance optimization at Mizuno USA
Mizuno USA turn to Tegile storage technology to solve both their SAN and backup issues.
High Performance for All
While HPC is not new, it has traditionally been seen as a specialist area – is it now geared up to meet more mainstream requirements?
Beginner's guide to SSL certificates
De-mystify the technology involved and give you the information you need to make the best decision when considering your online security options.
Security for virtualized datacentres
Legacy security solutions are inefficient due to the architectural differences between physical and virtual environments.