Apple, Microsoft, and the Success of PCs

on February 25, 2015

Microsoft Signature

Maybe the disaster of Lenovo may help save the PC sales business.

The world’s leading brand of PCs got into a lot of trouble when customers discovered a program called Superfish, ostensibly designed as a shopping aid but leaving computers vulnerable to man-in-the-middle attacks, had been installed on Lenovo brand computers – not ThinkPads (( Computers, like ThinkPads, designed for business use are typically sold with much cleaner installations. Of course, a fair number of consumer units end up in businesses, especially small companies. )) — between September, 2014 and January, 2015. It was an obvious example of how PC makers load machines with junk to bring in a little more revenue.

But the Superfish (( Ars Technica offers a good technical piece describing Superfish and related offerings.)) mistake also illustrates an important reason why Microsoft has some serious work to be done on the practices of its partners. They’ll need it if Windows is to prevent the loss of the profitable end of the PC market to Apple, whose Mac sales are rising as the rest of the industry declines. When you buy a Mac, you don’t have to worry about what is on the machine. Third parties are never allowed to add applications and, should you for any reason not want one of the standard Apple apps, you may easily delete it.[pullquote]Retail margins are so small, manufacturers can’t bring themselves to reject the idea of third-party apps.[/pullquote]

Manufacturers of Windows PCs buy the OS from Microsoft but are free to add third-party applications. They can add programs they have actually designed themselves or third party products, like Superfish or the common anti-virus programs, in exchange for payment. Retail margins are so small, manufacturers can’t bring themselves to reject the idea.

Annoying but harmless Most of the stuff loaded on Windows PCs is annoying but harmless. Typically, it offers a brief amount of free use, requiring a payment or subscription to go on. I have seen many PCs of less-than-expert users that have been in use for years with uninstalled third party add-ons sitting on the desktop. But then, dangerous software like Superfish comes along. The only good news is, despite end-of-the-world warnings from some commentators, evidence of losses is rare. So far, there have been a couple of attempted class-action suits, one brought by a woman who complains Superfish caused pictures of “scantily clad women” to turn up on her Yoga PC.

Microsoft these days seems to realize the problem. It is offering a plan called Signature on PCs it sells itself, both online and through the limited number of Microsoft retail stores, with no software junk added. Microsoft even takes a poke at its own partners’  plans on its  Signature sales web site (see picture above.) And although many of the Windows PCs are top models at prices similar to Macs, the Signature includes some very inexpensive laptops, including the Hewlett-Packard Stream 11 for $199. The same Stream is available directly from HP for 99 cents more; it includes several HP apps (but no indication of third-party apps).

Un-Apple-like margins The problem the makers have is extremely low, un-Apple-like, margins. HP, Dell, and Lenovo can probably get decent margins out of lines their enterprise market PCs. The prices of those systems tend to be well below Macs but, by the time you upgrade their base capabilities to match a base Mac, the price is close to a MacBook. For example, a ThinkPad X1 Carbon laptop with a 14″ display costs just about the same as a $1,999 MacBook 15″ with a Retina display after you match MacBook components with an Intel i7 processor, maximum pixel display, and 256 GB in solid state storage.

Prices of retail laptop and desktop Windows units aimed at consumers, except for low volume but expensive game machines, are fiercely priced. Therefore, any addition they can add from a third party is attractive if it adds a bit of revenue.

I doubt Lenovo’s Superfish experience will lead it to drop third-party software, but it may at least make it and other manufacturers more careful. “We messed up,” Lenovo CTO Peter Hortensius told Ina Fried of Re/code (( Insiders looking for more on Lenovo’s challenge should check out The Lasting Impact of Lenovo’s Adware Crisis. )) “We should have known going in that that was the case. We just flat-out missed it on this one, and did not appreciate the problem it was going to create.”