Podcast: Microsoft Event, Dell and HP PCs

This week, Tim Bajarin, Jan Dawson, and Bob O’Donnell analyze the recent Microsoft hardware launch event, including their new Surface 2-in-1s and Lumia phones, and discuss new PC announcements from both Dell and HP.

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Bob O'Donnell

Bob O’Donnell is the president and chief analyst of TECHnalysis Research, LLC a technology consulting and market research firm that provides strategic consulting and market research services to the technology industry and professional financial community. You can follow him on Twitter @bobodtech.

10 thoughts on “Podcast: Microsoft Event, Dell and HP PCs”

  1. IMO you can’t blame OEMs for not innovating in this space. Before the original Surface Pro, there was Lenovo Yoga, and original Dell XPS 12.

    Both innovative 2-in-1 designs, and IMO both providing superior usability to Microsoft’s floppy keyboard model.

    Yet the media fell over itself fawning over Microsofts Surface Pro. And Microsoft threw millions (hundreds of?) at marketing. For a while it seemed like ever second commercial on TV was dancing and clicking magnetic keyboards.

    This is not Microsoft showing OEMs how it is done. This is Microsoft sucking the remaining profit out of the OEM business.

    No OEM has the resources to compete with Microsoft on R&D, and Marketing. Neither do they get the scale of free marketing Microsoft does for having a press conference. They also don’t have the advantage of controlling the software stack and building the HW and SW together.

    Microsoft is just driving OEMs further into the commodity space.

    I do agree it was a great show for Microsoft. They have finally learned the value of secrecy, and having a wow moment reveal.

    1. That’s a hugely sane conclusion. The high-end is definitely where the profits are, and the explanation that Microsoft is leaving the low- and middle-end to the OEMs so everything is OK, is not very palatable. Under normal circumstances, I would definitely think that DELL and HP should be mad. Remember why Steve Jobs killed Mac clones; he killed them because they were not sticking to the low-end and were eating into Apple’s high-end customers.


      However then, why are HP and DELL going to sell Surface devices themselves? Why are they agreeing to sell Microsoft products that compete with their own high-end models, and eat into their own profits? Is there some strategic agreement, or is it that the demands from their corporate IT customers requires something that HP/DELL alone cannot provide? This is what I am struggling to fully grasp. I believe that understanding this will tell us the true intention of the Surface, and my hope is that the analysts at Techpinions will help us get insights into this.

      1. “Why are they agreeing to sell Microsoft products that compete with their own high-end models, and eat into their own profits?”

        I never understood that myself either.

        Regarding the true intention Surface:

        I think MS knows that PC (as in traditional PC) sales are at best stagnated, and at worst are declining. Therefore, that ultimately means there’s no money to be made selling Windows licenses. The only way to make good margins selling Windows is selling your own hardware, high end hardware (IOW, the Apple business model). The Surface is a strategy to hopefully salvage any margins lost from declining Windows license sales.

        It comes from understanding this:


        1. The problem with going after Apple is that Apple only has a small fraction of PC sales. MS projects Surface sales to reach 3.5 billion USD/year which is only a few million units, about 1% of the global PC market. How far can they grow?

          The Mac has only about 5% share of the global PC market, but it has been reported that they already own more than 90% of the high-end market. This suggests that 5% is the market share ceiling if you duplicate Apple’s strategy.

          The question is then, why would Microsoft commit to a strategy that will only give them 5% market share at most, while infuriating the OEMs that supply the remaining 90%? It doesn’t make sense to me.

          1. I wouldn’t say they’re going after Apple but more so they’re mimicking Apple’s strategy by going after the high-end of the Windows PC market. And yes, market share wise that is a low amount but it might not matter.

            Right now, the Mac is approximately a $20 billion business for Apple. In calendar year, which is around 7.6%. MS’ revenue from OEM licensing was around $13.5 billion during all of 2014. So let’s say MS’ Surface division is able to also capture 7% market share. That would put the Surface business around the size as Apple’s Mac business.

            Knowing that the future for making money off of licensing Windows is virtually nil, a 7% market share for the Surface division would offset any revenue lost from declining Windows OEM sales.



            Now of course, that’s what I think the strategy is. Whether it works out that way or not is another story.

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