Innovate or perish: The mantra for PC makers

by CXOtoday News Desk    Nov 06, 2013

pcslump

With PC sales falling sharply quarter-on-quarter and the industry going through hard-hitting times, it is having a dramatic impact on PC makers who are either running huge losses or are reshuffling their businesses to compensate the growing losses.

The latest victim

One of the leading PC makers, Acer, has been the latest victim of the struggle faced by the PC industry. the number 4 PC maker recently announced that it has lost nearly half a billion dollars in the last three months, a loss that prompted CEO JT Wang to quit along with over 7% of the company employees.

The computer maker has been struggling to increase sales by shipping more tablets amid a weak global demand for laptops, which make up the majority of its business. In the third quarter of 2013, global laptop sales declined by 9.5%, according to research firm IDC. According to many, Acer’s worse-than-expected net loss of $446 million in the third quarter as well as losses in the previous quarters is a clear indication that those in the traditional computing business need to constantly innovate. Or else they will perish.

Winners and losers

According to Gartner, last quarter, Lenovo pulled ahead of HP, owning 17.7 percent of the PC market compared to 17.1 percent for HP. Acer and Asus took the hardest hits this quarter as both experienced double-digit shipment declines. That’s due, in large part, according to Gartner, to two reasons. One, the consumer-focused PC makers were hit by a slump in consumer PC sales in all parts of the world. Two, both companies are in a transition period, moving away from PC manufacturing and scaling up production of tablets. 

The overall sliding demand for traditional PCs including desktops and laptops, has already paved way for newer devices especially smartphones, tablets and other smart devices. According Gartner, tablet sales would overtake desktop sales by 2015 which is not even two years away from now. Gartner predicts that global shipments of tablets increased 53.4% in 2013, while PC shipments declined 8.4%.

“Tablets will become more and more preferable to PCs as more of the world comes online. While the smartphone remains the biggest selling device, tablets could start taking a chunk out of that market in the next few years, too,” mentions Gartner analyst Mikako Kiagawa.

The shift to mobility 

Experts believe iPad’s runaway success since 2011 that started the erosion of the PC business, prompted forward thinking PC makers already started to chalk out new strategies to stay in the business. Faced with this grim reality, Dell for example has gone private by reshuffling its business and diversified into other areas such as mobility and big data. Lenovo, the largest PC maker until recently, sells more mobile devices than traditional computers. AMD too has shifted focus to designing custom processors for large businesses and Microsoft has come up with Windows 8 to suit the requirement of the mobile users.

HP has also ditched its PC business that accounted for a little over 25% of its total revenue. Even though they were late to join the bandwagon, it is now banking on the upwardly mobile space. CEO Meg Whitman’s new style of IT driven by cloud computing, security, mobility, and Big Data will gain more prominence. Neelam Dhawan, MD at HP India, acknowledged in a recent interview that the company is focusing on tablets, desktops or laptops—to cater to consumers who access information anywhere, anytime and from any device.

As far as Acer’s story is concerned, the company too is set for a revamp. Not that it has much choice now. Wang said the company has “crafted a far-reaching plan for Acer’s transformation including the creation of an advisory committee that will propose changes in the company vision, strategy, and execution plans for the board’s approval.”

The company said after making structural adjustments, we will introduce more competitive products within the existing PC, tablet, and smartphone business and stabilize our market share. This the company believes will be the basis of its transformation and for developing new business opportunities.