Early Compaq

The Computer Struggles: Apple vs. the Industry

Early Compaq

There was a time not that long ago that making a television was the pride of manufacturers. The U.S. industry was dominated by the likes of Motorola, RCA, and Magnavox (Philips). Today they have ceased to exist or have left the industry. The makers such as Sony want a way out, and the U.S business is dominated by Vizio and others who  have learned to sell at the bottom of the market.

Tech manufacturers have discovered that computer making is much like TV history. In the early days, there were lots of computer makers, but many of them failed attempts to make much money, from AT&T to Texas Instruments. Manufacturers such as Digital Equipment, Compaq, and Hewlett-Packard  consolidated. And now the successful survivors are forced to live off small margins in a commodity market.

Apple, of course, remains the huge exception. Though these days Apple relies on iPhones and iPads for the bulk of its sales, it sold $24 billion worth of Macs in fiscal 2014, an increase of 12% in a strongly shrinking industry. Unlike its competitors, Apple is not looking for an escape route.

The reason, of course, is that makers of PCs continue to live in an industry where the Microsoft software–particularly Windows and Office–are the same on everyone’s products. The manufactures other than Apple are forced to produce fundamentally products. The consumer market, which generates most of the volume, is a painful mess that is driving out many of the remaining competitors. Sony has left the business. Samsung, never a significant PC vendor in the U.S.,  is pulling both laptops and tablets out of the European market. LG is considering leaving the PC business. And HP, of course, has decided to dump its PC and printer makers into a startup called HP Inc. while its corporate storage and support business, Hewlett-Packard Enterprises, is keeping CEO Meg Whitman, most of the senior staff, and the bulk of the profits.

HP Stream 11 description.HP’s current PC competition is a tough business. The new Stream line of Windows notebooks is designed as a low-end offering and looks to be pretty well suited for customers who can get by fine with minimal service–when you realize minimal service includes a 1366×768 display, a 2.16 GHz processor and a 8.25 hour battery. The 11.6″ display (stats on the left) costs just $200, while a 13″ display costs $225. The laptop even includes a one-year subscription to Microsoft Office Personal with 1 TB of storage on Microsoft OneDrive cloud storage.

Not a bad deal at all for someone who has a decent connection setup and is using a laptop to pursue the internet, watch some video, do homework, and write the occasional letter. But not so great if you are a manufacturer trying to make a living. The prices of the Stream series suggests that HP is not going to do much more than break even on the sales.

The facts suggest that consumer computer sales are struggling mightily. Acer and Asus, both Taiwan-based, are having a tough time. Dell, which has been increasing on corporate rather than consumer business, saw its profits in its end-user computing business fall 5 percent in the quarter than ended in August. Lenovo, which bought IBM’s PC products, is probably the healthiest competitor, with a 24% increase in profit in the quarter ended in July, but that was still only about 2% of the total revenue for its computer and phone business.

Charles Arthur in The Guardian, argues that the Windows PC business is a value trap:

The value trap is deep, though. Because Windows and its apps are easily moved from one PC to another (which is a huge benefit to the consumer), it’s almost impossible for hardware makers to differentiate themselves from rivals. In the past, their best hope has been to encourage repeat buying through having extra hardware features; that’s what some are trying to do with touchscreen laptops and desktops now. But there’s little sign that buyers are enthusiastic about those, preferring instead to buy offerings that are just a little cheaper.

That means there is always downward pressure on both prices and margins, while the only way to make useful profits is to be able to build at scale.

John Kirk writes about how well Apple is doing in “Apple Takes Its Place in the Post-PC World.” Apple’s condition is dramatically different for the simple reason that only Apple makes Macs and only Apple makes money from the operating system and other software, whether included or sold at extra charge. At the same time that it has driven down Microsoft prices. And by offering a relatively limited line of Macs (especially compared to the offering of, say, HP) and offers only top-shelf equipment at top-line prices, Apple enjoys healthy profit margins.

There doesn’t seem to be an escape for the makers of Windows computers, or phones for that matter. The last real attempt by competition was the HP attempt to build on the webOS it acquired by buying Palm. Unfortunately, it has just brought out a couple of phones and a hurried, badly rushed tablet when HP CEO Léo Apotheker killed it off as part of his move to make corporate services the heart of the company’s efforts. Except for a handful of Google-based Chromebooks, the computer business is all Microsoft–and nearly all of  the profit is going to Microsoft.



Published by

Steve Wildstrom

Steve Wildstrom is veteran technology reporter, writer, and analyst based in the Washington, D.C. area. He created and wrote BusinessWeek’s Technology & You column for 15 years. Since leaving BusinessWeek in the fall of 2009, he has written his own blog, Wildstrom on Tech and has contributed to corporate blogs, including those of Cisco and AMD and also consults for major technology companies.

129 thoughts on “The Computer Struggles: Apple vs. the Industry”

  1. Aside from the Apple comparison, there’s an interesting one to make with Android, especially since Windows and Android have ended up being the mainstream OS in their respective markets.
    Windows’ OEMs can barely differentiate with features, because features have to be supported by the at least by the OS, at best by the ecosystem. You’re using touchscreens as an example of differentiation… except every body and their dogs has them now, because Windows 8+ has built-in support for them. Before windows 8, touchscreens were,in the end, app-specific, because Windows support for them was so minimal that the OS itself was unusable touch-only, and non-touch-specfic apps were unusable too. Ditto more behind-the-scenes differentiation: the was no running Windows on ARM until MS actually made it happen, USB support had to wait for MS… And for some reason, even the dreaded Metro UI, which had more traditional replacements from day 1, had to be included (I suspect contractual reasons)
    On the other hand, Android OEMs can differentiate. They can modify the OS, technically any way they want, contractually (if they want GMS) as long as they don’t break compatibility and include Google’s apps. That has let OEMs differentiate, with pen input, MIPS processors, unintended form factors (laptops, desktops and huge AIOs)… Funny thing is, that doesn’t seem to have prevented the race to the bottom much.

    1. That’s because the majority of the OEM’s just want to sell hardware to make some buck, instead of trying to build an ecosystem of product with one design language, interconnection and the same experience across many screen.

    2. “Android OEMs can differentiate” – obarthelemy

      If you believe that, you obviously haven’t been looking at the financials of those making Android hardware.

      1. I’m not seeing your point:

        – Facts first: Samsung have excellent financials, and in general GMS-Android OEMs have better financials than non-Android OEMs (that would be Nokia, RIM, Palm)

        – You seem to be saying that differentiation = financial success. Can you explain how that’s fully, always, true ? To me, differentiation can be botched/misdirected, irrelevant… The very differentiated Fire phone is a financial success then ?

        – Which AOSP suppliers do you think have differentiated, and how ? To me, there are no AOSP OEMs, only AOSP markets: China because Google just isn’t there, and poor countries where the handful of bucks to meet GMS’s hardware specs is meaningful. Poster child Xiaomi for example: http://www.cnet.com/products/xiaomi-mi-3/ , especially “it comes with all Google’s mobile software, including the Play Store.” I’m really interested in what you mean, here.

        – I’m giving specific examples of product differentiation: pen input, windowing, MIPS CPU. Are you saying that’s not differentiation ?

        1. “Facts first: Samsung have excellent financials,…” ???? profit dropping 60% I’ve read. Probably further than that.

          “You seem to be saying that differentiation = financial success.” Yes. He is….

          (Samsung can’t differentiate today vs Android’s HTC, Xiaomi, Nexus, and the Chinese “others” and poof! It’s lost its mojo, marketshare, rev, and profits.)

          1. Samsung’s differentiation vis a vis Android and other OEMs hasn’t changed since last year when their results were much better, so I’m not sure what you mean.

          2. “Samsung’s differentiation vis a vis Android and other OEMs hasn’t changed since last year” – Huh?

            Sorry. I don’t know where to go from here. Carry on, though.

          3. Possibly they can’t continue to spend 14B per year on marketing to get those better results?

          4. as opposed to Nokia, RIM and Palm who always were highly differentiated and have been runaway successes ?

            Analysts are peddling circular logic:
            1- you need to differentiate (used to be: innovate) to be successful
            2- differentiation is successful difference (and innovation is successful invention, cf H. Dediu).

            Which amounts to saying: “Do your thing, whenever you get successful we’ll start saying you’ve been innovating/differentiating”

  2. This makes me wonder whether there is any real incentive for the makers of Windows computers to remain in the business.

    1. Only if they want to lose more money apparently. The choice appears to be remain in business or in the business.

    2. Not really, no.

      That’s why you see HP dumping it on >someone else<. It's why you'll continue to see Dell de-emphasize PCs, except as gateways to sell up the value chain. It's why Sony got out, why Samsung mostly is gone.

      Ultimately, Lenovo is a better Vizio here, targeting a few more spots on the value chain and likely facing less competition from a strong player (Samsung in TVs for Vizio) and Chinese upstarts.

      This is an industry mostly in decline, but I'd look for someone to emerge downstream and figure out how to keep making money as PC sales won't dry up completely anytime soon.

      1. The logical conclusion of the trend is the industry ending up with one manufacturer. If that one manufacturer isn’t Microsoft then we’ll have front seats to a titanic battle for control of the Windows PC industry between MS and its sole Windows OS customer.

    3. Every manufacturer is hoping to be the last one, because then they can finally raise prices to make up for sunk costs. Every other manufacturer doesn’t want to let the other win, so they all sit there painfully making things for free for consumers.

      Consumers win. Google wins. Apple wins! (asia loses…)

  3. There may be another healthy segment in the PC business : gamers and power users. This would make the rest of the market look even more grim.

    1. If you read the comments sections on Anandtech or Tom’s hardware, you would realize that gamers are incredibly cheap. They don’t blink about dropping $500 on a video card, but just about every review, from laptops to monitors, will have someone complaining that the price needs to drop to some unrealistically low number before they would consider buying.

      1. I agree. I bet that many of those gamers are younger and do not have a lot of money to spend beyond the big purchase for a video card. It is just not a large market. Most gamers are the casual time that just wants to game and not tinker around with settings in Windows just to get a couple extra clock cycles on their CPU or GPU or deal with various driver issues.

        1. Well yes, that $500 part is going to give the machine exactly the boost it needs for it’s intended purpose. The latitude of the platform is it’s value proposition, not some cookie cutter, approach.

      2. ‘drop to some unrealistically low number before they consider buying.’
        You say that as if it’s a bad thing! 😉

    2. “There may be another healthy segment in the PC business : gamers and power users…” – Emmanuel

      As I pointed out in my latest article, power users are moving to the Mac and away from Windows.

    3. For the gamers they have a lot of choice now depending on the games they want to play. The consoles have gotten quite good and offer excellent gameplay. Even the previous generation of consoles like the XBox 360 and PS 3 do a great job of gaming and have good ecosystems of games and accessories that now are coming down in price so they can be had for a lot less. Plus you add in tablets and smartphones and even the most current set top boxes (Fire TV) and you have a lot of choice.

  4. Considering HP’s place in the environment that created Silicon Valley, I am sorry to see the mess they have made in the PC business. Lots of success, lots of brains, lots of potential. What happened? Was it the marketing guys taking over? Short-sightedness caused by playing to Wall Street? I would be interested, Steve, your assessment of their history, potential, errors and solutions. — It does my heart good to see you around the Techpinions Ranch.

    1. What happened to HP is that they messed up. 1st when they merged with Compaq. Then when they had Carly Fiorina focus on “maximizing shareholder value” over all other things and she destroyed the moral at HP. So yes, they where being short-sighted by listening too much to Wall Street instead of Main Street. So now HP and the rest are in a race to the bottom that will really not leave many PC OEM’s left. The thing is that is what that segment of the market wants so it is what they will get.

      Also, yes, I am glad that Steve is back writing for Tech.pinions.

      1. The biggest mistake HP made​​, no doubt, was the merger with Compaq. All the actions taken by Carli Fiorina were all wrong managed and created the worst place to work in the industry, a place where everyone looked like strangers and never achieved to create the necessary synergies to generate real teamwork. But not only employee moral was destroyed in HP, the Compaq crew also paid a high cost for the merger, starting, as always, by the layoffs.

        In my opinion, at the rate things are going, in a few years there will be only 4 or 5 computer manufacturers in the world: Apple, Microsoft, Lenovo, Google and any other that achieved to survive the carnage of low profits. And of those 4 or 5, only Apple has a real, strong and mature ecosystem, able to ensure the survival of that computer species. The new upcoming war will be no longer between OSs, but between brands.

        Finally, thanks a lot Mr Wildstrom, it was, as always, a great article.

  5. “And by offering a relatively limited line of Macs (especially compared to the offering of, say, HP) and offers only top-shelf equipment at top-line prices, Apple enjoys healthy profit margins.”

    I can’t understand why no other pc builder follows apple’s strategy of keeping their product line small and focused, with all the obvious benefits that accrue from that?

    1. It’s been tried, it’s been proven to be impossible. For any OS, cheaper models always beat out the fancy luxury models. Even Macs are subject to this, hence Steve Jobs killed the fledgling Mac clone manufacturers soon after he returned to Apple in ’97.

      1. No, not talking about the premium pricing, just the small and simple product line… Which you’d think would work on its own and which carries significant benefits in terms of simpler supply issues, fewer confused customers, etc.

        1. Android device makers would love to be able to just offer a simple product line like Apple. But they can’t. It’s the nature of the Android race to the bottom that they have to slice and dice the market in an effort to out-differentiate the other Android device makers. I.e. Find as many idiosyncratic niches as you can and hit each niche with a phone that perfectly addresses its unique product demands.

          1. Android does make great beta testers for apple in this regard though. Apple has a healthy future, even if it only has a billion users, there will always be developers producing for it, so no worries there.

    2. “I can’t understand why no other pc builder follows apple’s strategy of keeping their product line small and focused” – Glaurung-Quena

      Apple has a monopoly on their operating system. PC manufacturers can only differentiate themselves on hardware and there is always someone out there who will undercut you on price.

      1. It is not only that but Apple will not sell products that are not profitable. Way to many of the PC OEMs got seduced by the big number of consumers that had homes without one or more PC’s and thought that they could make money selling in that market. What they are finding out now is that those profits are short lived. They went after the numbers without looking after the profits.

      2. I’m sorry, I failed make my point clearly. Apple sells at a premium, yes, and nobody else can do that because they’re yoked to Microsoft which prevents them from creating differentiation.

        However, Apple ALSO has a focused product line — a limited array of PC models with a limited number of options. This benefits the efficiency of their operation greatly, and unless I’m missing something, those benefits are not necessarily linked to their pricing strategy or their degree of differentiation.

        Nobody else in the computer industry appears to have any interest in keeping their product lines focused on a small number of models, despite the obvious benefits. Why is that?

        1. I think no one else does that because, if they don’t give you model with X, their competitor will.

          Apple doesn’t have the problem, if they don’t give you X, you have to buy Y or Z from them or not have an Apple.

          1. You mean it’s a shame you don’t have one?

            Of course, one company can’t offer all the possible permutations of a product that every person on the planet may wish to purchase, ideally. And those that try, don’t have a very good business, and their products and users suffer as a result.

            No-one besides Apple offers an integrated product where care has been taken to bring the best out of both the hardware and software within one product, with a clear sense of responsibility and support for their product. And, I mean this sincerely, that’s a real shame. If some company did this, I would feel it worthwhile to consider buying such a product.

          2. It’s a shame Apple doesn’t have a modular product. That’s all. There are several Macs in my house. All but one are now gathering dust. With the exception of the first (2008), they all left me wanting.

          3. It really seems like you thought Apple was something it wasn’t when you purchased Apple products. Did you not know how integrated and closed Apple products were? That’s why many of us buy Apple products, for those benefits. And you clearly don’t see those characteristics as benefits, so I have to assume you simply didn’t do your homework before purchasing Apple gear. The only other option is you knew Apple gear wouldn’t suit your needs but you bought it anyway?

          4. I bought in at the wrong time. Just before they started getting really controlling. Just before Unibody. I still had PC expectations, and the first MBP not only met them, but exceeded them. I also had my first iPhone before there was an App Store, thus no controversy.

            The more they began exhorting control (over my property), the more I resented it. This, and an arrogant, upper handed customer service policy sealed the deal. I mentioned a couple of my Apple Store escapades before. I won’t repeat them here. Suffice it to say they ultimately reversed them, or lost in court after the fact. Those were the restocking fee, and the bogus water sensors in the iPhone. In fact, about three weeks ago I got a check for $304.20 from Apple as an outcome of the water sensors settlement. I used it towards my Note4. Vindictive? Yes. Irrational? Bingo! But satisfying…

          5. I’ve been an Apple customer since 1984. All I’ve seen are slow but steady improvements in their offerings. It was obvious to me when I saw the very first Mac (which we bought) that making the whole widget was the right approach.

            Apple isn’t the problem. You are. Apple doesn’t meet your needs and doesn’t focus on what you value. Of course there are always bad customer experiences, even with Apple, no company is perfect. But you went into the relationship with misguided expectations. Apple has exceeded my needs time and time again, but that is because my needs are different, what I value is different. They are not ‘less’ or ‘worse’ or ‘deficient’ in any way when compared with your needs and what you value (which you often imply by the way), simply different.

          6. Respectfully sir, I am not the problem, I am a customer. If I have to adapt to the device then the device should be giving me benefit I can’t get elsewhere. OSX alone, for me, is not enough. You can make the whole widget and not be closed. Imagine Apple’s version of the Surface, or a mid-tower Mac. I would love such a product.

            But you are right. It does not meet my needs, and for me, that’s a pity. I would love to love them.

          7. You are correct that you are a customer. But you are not an Apple customer. You want what Apple does not offer. You are going out to supper at a fine dining establishment and demanding they serve you a Whopper Jr. You are walking into a dealership that only sells Mercedes and demanding a new BMW. You are visiting Disneyworld and demanding they sell you tickets to Harry Potter Land. You are indeed the problem.

          8. No, I’m actually in a fine restaurant, but I want to salt my soup. All other restaurants offer that service.

          9. This goes way beyond adding salt to your soup. Your ideology is at odds with Apple’s value proposition. You can’t be an Apple customer. There’s no one reason why, your entire identity forbids satisfaction as an Apple customer. As I said, you are the problem. Now, that doesn’t mean you are deficient in any way, but you are the source of your trouble, disappointment, etc with Apple.

          10. Does it really go way beyond that?

            Anyway, considering that I AM an Apple customer, and the source of the problem, perhaps Apple should have an application, interview and revocable approval process to vet customers. An ‘Approved Customer Program’ ACP, if you will.

            The reason I voice myself is that I feel the need to counter all the gushing. It’s not all roses you know. It might even be a ‘a cookbook’. 😉

          11. It’s just that you’ve been hitting the same old note over and over: Apple is too closed, too controlling, should give Mac and iOS owners greater freedom to tinker and upgrade. No matter what the article’s topic is about, somehow your post eventually ends up playing that same old note. Everyone knows by now that’s your position, everyone knows by now that you shouldn’t buy Apple products if they don’t suit your needs or desires, everyone knows by now that even though you don’t agree with Apple’s product philosophy you somehow manage to still own quite a few of them. How about let’s move on and henceforth avoid that unresolvable dilemma?

          12. These analogies are getting out of hand. With Apple, you can walk into a store and get a repaired/replacement device in no time. No other manufacturer can say that. Imagine being on the phone with samsung for a month.. ha

          13. ” I’m actually in a fine restaurant, but I want to salt my soup”

            Based on your past comments, I’d say it is more you are in a fine restaurant and frustrated that they don’t have an all you can eat buffet and a build your own burger bar even though the restaurant never promised any such thing and has always been very clear and clearly reviewed about what they offer.

            Just an observation, not a judgement.


          14. I would say your statement is both correct and incorrect.

            Computers ARE all you can eat buffets, both traditionally, and otherwise competitively. It’s a recent advance that ecosystems be curated. This is an Apple innovation with straggling (partial) copiers along the way. It’s also unlikely I would eat at the same restaurant three times a day, every day. You’re not locked in to a restaurant, at most it’s for one meal.

            I’ve said this before, ‘computers are tools for the mind’. Control over my ‘mental diet’ is something I wouldn’t tolerate. When the first iPhone launched it was a breath of fresh air. It was awesome. There was no App store yet. What I loved most about it was that I could actually get a closer approximation of the desktop internet than I could on other mobile devices. Sure, there was no Flash or Java yet, no Java apps yet, but they surely were coming. It’s too new. Then ‘bam’ an innovation, the singular app store. ‘Singular’ is the objectionable point. It’s as if I were invited to an all you can eat buffet, upon the Grand Opening, then told that all subsequent servings would be appropriate to a ‘fruitarian diet’. You know, ‘for my own good’. Really?!

            So you’re correct that I have unmet expectations.

            Where you’re incorrect is on the matter of ownership. I ‘own’ the soup, and I have the choice of salting it, regardless of whether my experience is the one the chef wants me to have. That is not the chef’s decision. They fulfilled their obligation once it was served to me. When it comes to a computer, should I ‘over salt’, I can more easily remedy the situation. Which only makes my analogy even more stringent. That is, in a computer, if I make a mistake, it’s less relevant. So get out of my way, and let me make the mistake.

          15. I was just trying to keep the restaurant metaphor/analogy closer in comparison. You’re simply eating at the wrong restaurant. There is a Fuddrucker’s around the corner. You’re happier there. You should eat there.


          16. I choose the restaurants that are all you can eat buffets, that serve EVERYTHING from gastronomic delicacies to pork rinds. Because that’s what computer are…

            To look at it a little more deeply, the heart of the restaurant is the kitchen. An open kitchen is available to any cook, including the customer.

            Yes, there are Kosher kitchens, but they answer to a ‘higher authority’. There is no such figure in computerdom. 😉

          17. At least my car will get me to any of them… 🙂
            Android, OSX, and Windows let me eat wherever I like.

          18. In comment section of one of the recent articles of John Kirk I tried to say same to Klahanas but my effort gone wasted. I don’t know when he’ll(or she) understand.

          19. I’m referencing google’s actions to bring android in-house and more closed source every day 🙂


            In the near term it’s good for consumers. Heck, half of android phones on the planet are insanely susceptible to vulnerabilities that will not be patched because the OEMs don’t care (they can’t afford it since they aren’t making any money as it is).

            In the end, two american companies (apple and google) will dominate this space with huge profit margins while the Asian companies continue to put the stuff together below cost (because they aren’t advanced enough yet to price in difficult costs like quality of life, acid rivers, no visibility smog, lung cancer rates soaring through the roof, etc.)

          20. Okay. Thanks.
            I don’t have a problem with closed source, as long as it’s open. While that may be contradictory, that’s exactly what Windows and OSX (mostly) are. As long as it’s not curated, that Apps aren’t forbidden, it doesn’t bother me.

            If a platform is a viable competitor that meets those requirements, I’m a potential customer. I have ZERO loyalty. If they all become curated, then I wouldn’t have a choice.

          21. Apps aren’t forbidden on iOS, you just have to jailbreak. (Which is just as difficult as sideloading apps on android, except you won’t lose warranty like you do on knox based samsung phones).

          22. The jailbreak should be built in, as in ‘allow unknown sources’. Apple is firmly on record as saying that jailbreaking is a) a crime under DMCA b) Could potentially void the warranty.
            I assume you meant ‘just as difficult’ being a relative term, which makes it synonymous with ‘just as easy’.

          23. Not all android phones ‘allow unknown sources’. The extra step of jailbreaking is good for protecting the average dude from malware, which is why android has all the malware.

            Congress already decided it’s not illegal. Apple can complain, but that’s as far as their power goes. A factory reset leaves no trail of jailbreaking. On knox devices, side loading has a firmware switch that can physically damage parts of the phone circuit to prevent unknown sources. They have to go to that extent because android just doesn’t have the level of control that enterprises want. iOS is more locked down when not jailbroken when is a huge + for some applications.

          24. I see you are held up on the effort required to do what you want. Apple probably wont make a button in settings that removes security features like Android has, and that is one reason why iOS is dominating enterprise. However, in terms of total effort, it is only marginally more difficult to go to a website in safari to jailbreak… To each their own.

  6. I’m just wondering how many of the non-apple computer industry’s woes are self-inflicted, vs being due to lack of differentiation and Microsoft hoovering up all the profits.

    I mean, how the heck did HP manage to turn their printer business (which we all know is basically an ink refill business and thus basically a license to print money) so unprofitable that they want to dump it?

    I’m also wondering how much of their problems are due to chasing the consumer market instead of sticking with business computers and enterprise customers, with their lucrative service contracts and buyers who are willing to spend more for quality that leads to reduced downtime.

    1. The prime minister of Finland was complaining a few days ago about how his country’s paper industry (Finland sells a lot of paper) has been hit by the shrinking demand for paper and somewhat facetiously blamed the iPad. I presume the same forces are affecting the printer business. The long awaited digitization of documents might finally be upon us. (For a while their, computerization actually and unexpectedly raised the demand for paper as consumers and enterprises got printer-happy.)

      1. While it is true that devices like the iPad allow people to skip printing there still are many situations where printed documents are needed. More than likely the real cause of the country’s shrinking paper industry are competitors offering the same or similar products for less.

        1. Basic economics. A fall of just a few % in a commoditized market can take all the profit out of a industry no matter that 95% of the business remains. You either have to raise prices or lower costs to regain a profitable equilibrium. Either is painful and has transition costs. Reduced printing reduces ink use, printers last longer, refill and off brand is becoming cheaper. Hardly HPs (or Finland’s) fault 🙂

    2. The industry’s problems are most defiantly caused by chasing after the consumer market. It all started back in the Windows XP days. When Microsoft had saturated the business market they decided to go after the consumer market. So they made multiple versions of Windows XP. Windows XP Home Edition, Tablet Edition, Media Center Edition, Professional Edition and more. It looked like a good strategy at the time but it was doomed to fail. The part that most everyone in the Windows PC OEM market forgot is that consumers are not the same as business users. They need a different levels of support and ease of use. What they use their systems for is much different than a business do along with how much they are willing to spend is way less as well.

      When you are running a business you can afford to maintain Windows in a locked down environment and deal with upgrades as they come. You will have IT either on staff or as a consultant come in and resolve issues for you. This is just not the case with consumers. They expect their computers to be more like appliances. The problem is that Windows was never designed from the start to be that and no amount of patching and upgrades will solve it. This is why we see consumers moving away from Windows to either Tablets, iPads, SmartPhones, ChromeBooks or Mac’s. These products last a lot longer and are way less likely to have problems over their life. Not only that but many of the upgrades are free for the life of the products as well. So they are a much better value for them than your typical Windows PC.

  7. For that $200 Stream laptop HP offers a $110 extended service and support plan. If the user sticks with an Office subscription, that is $70/year. At what point do they just give away the hardware and just try to make money on support and services?

    1. If they are selling it at cost and I do suspect that they are. Then they are basically giving away the hardware as you really can not get any cheaper than cost. Also as we know from consumers they really are not interested in paying for support and services. Also I am willing to bet that once the one year is up on the Office subscription many of the buyers of this HP Stream device will not renew it and look for free alternatives such as Google Docs.

      1. “I am willing to bet that once the one year is up on the Office
        subscription many of the buyers of this HP Stream device will not renew
        it and look for free alternatives such as Google Docs.”

        Or an old secondhand version of Office…

        1. Yep. Many things people do with Microsoft Office do not require the newest version of Microsoft Office. Just as long as the older version can be loaded on to this system without too many issues getting Office 2010/2007. Of course there is also the free online only version of Microsoft Office or OpenOffice. So there are many options for the consumer on a budget.

    2. That is already happening. The price of android phones is much lower because the consumer is an advertising product, so the real value differential is in how much advertisers are willing to spend (unfortunately for them, the biggest spenders are iOS users).

      1. You do realize that you can get a version of Android, devoid of all other things Google. Right? All Apps, content, and media continue to work. You are not even bound to shop at their store on any Android device.

        Google offers ‘free’ services in exchange for your information. Everything is opt-in. But you’re right, even if you came to this page on your Mac, Google made some money from that. Lest you think I’m rooting for them, I believe that Google Search should be regulated as a public utility.

        1. You’re saying there are apps that rely on google map api’s to contextually realize your location and prescribe given benefits that still work on pure AOSP OS’s on devices where the developer hasn’t signed the Open Android developer agreement?


          Acer tried to pick and choose which API’s to use with google while trying to develop alternative in-house APIs for specific applications. They crossed the line and were destroyed. Samsung won’t dare make the move to Tizen.

          The only winners in this area are Google, Apple, and the other Silicon Valley tech giants (facebook/uber/etc.) that rely on their platforms.

          1. Oh, you want the Google Apps API…
            Google permits competitive API’s, they don’t have to give you theirs if you don’t agree. At least they don’t make you switch platforms, if you don’t like it. There a re several Map based Apps on Android that don’t rely on Google Maps. Telenav being but one of them.

            I’m curious though, by what method did Google destroy Acer? I’m genuinely curious. There’s plenty of room on my soapbox for both Apple and Google. 🙂

          2. They do make you switch platforms. If you start even developing one competing API you lose access to all…

          3. Again, they don’t prevent you out of the gate. If you want API’s, you can write API’s. Look at the Kindle’s. Just not an option on iOS. Can you even say you want your own API’s, and that you don’t want to sell through the App Store?

          4. Amazon is a very specific example. They aren’t members of the android alliance for that reason.

            I’m not arguing iOS isn’t locked down, but the difference is less and less each day. For some reason people still consider android open source, but they are talking about AOSP that has been left behind to linger for the chinese and indians to play with. Even xiaomai is making theirs closed source in order to dominate china.

  8. Steve, great, great article. And, of course, it’s great to see you writing long articles again. Looking forward to your next contribution to Techpinions.

  9. I am very curious about how manufacturers react to very low profits on hardware. In particular, I would be interested in knowing the significance of pre-installed crapware. How much money does it generate for the manufacturers, and more importantly, how significant is it as a portion of the profit generated from each PC sale?

    I just learnt today from an independent smartphone repair shop in Japan, that they can fix a phone for free if you agree to sign into 10 smartphone apps with monthly subscription fees. That is because the repair shop receives $90 from the crapware owners. You can terminate any of these services after one month (one month costs $30).

    If similar numbers apply to PCs, then it would mean that crapware could actually be the dominant source of profit. I want to know if this has indeed been the case.

    1. That would appear to be the case. You can’t keep losing money indefinitely. Blackmailing your customers still doesn’t seem like a long term business solution, at least not for hardware manufacturers.

    2. At one point Microsoft offered an in-store service where they removed all the crap-ware from your computer. They charged $99 for this service. I don’t know if they still offer this, but they still sell a “Signature” edition in their stores which is free of 3rd party junk.

      1. How much more is a “Signature” edition from the regular crapware loaded editions. That might give you some idea of how much money the crapware owners are paying the OEMs.

  10. Yes, it is a classic commodity product problem. Android is really very similar situation.

    Samsung may never recover from it’s mobile downturn. They really can’t do much that competitors can’t duplicate and sell for less.

  11. HP could have bought out Apple when it was on the brink, before Jobs returned. That way they could have killed it like Palm and Compaq. Then the world would have been one horrible place with Microsoft products ruling. There would have been no iTunes or iPhone or iPad or even Macbook Air. Imagine that!

  12. You make it sound like the PC market is collapsing with only Apple remaining…

    Which of course it’s totally false and this is trash writing.

    1. Profit vs. marketshare. Apple is the only one remaining in Profit, but marketshare matters for google’s profit and developer’s profit. OEMs are dying now (except for apple). Expect consolidation coming.

      1. OEMs will never die. One company goes down, 10 rise to fill their place. Have you seen the “other” column?!

        Lenovo is growing just as much for instance but God forbid they mention that. You wouldn’t want to say anything positive about Windows OEMs. /s

        And finally, why would anyone care about the profit margin of the company you’re buying a product from?! I really don’t care. But I do care what my colleagues, clients, family and friends use though. And 9/10 have Windows.

        1. You care because a healthy profit margin funds updates and the customer experience. The profit margin is a reason Apple has the highest customer satisfaction… Not everyone cares about that, and if you don’t more power to you! 🙂

          1. “The profit margin is a reason Apple has the highest customer satisfaction”

            It’s the other way around. The reason Apple can have such large profit margins is BECAUSE of their excellent customer service. You don’t need high profit margins for good service, Amazon is proof of that.

            Plus, 9 out of 10 people think it’s not worth the price, so there’s that.

          2. Apple isn’t trying to make a device for everyone… We have this crazy winner take all mentality in tech that doesn’t exist in any other non-government regulated industry.

          3. Right… The elitist Apple club I presume. /s

            If Apple is only trying to reach the consumers it already has, I guess you’re right. It’s not like you can extend that logic to every single company in existence…

            You’re basically saying that Apple has no interest in getting new customers, which is insane.

          4. Um, no. What I mean is that they have no desire in making a <$100 phone to win marketshare at zero profit, which is what google is doing (well not really, google always profits, the OEMs make it for them for zero profit for hope that one day they will profit or something. Same reason why microsoft gave away windows for free in china, look how well that's working out for them).

            Does that make Apple elitist? Is BMW elitist?

            Every question offends someone in the world.

          5. If what your saying is true, Apple would have never allowed carriers to subsidise the phone as it damages it’s “premium” brand.

            When a garbage man can afford to buy an iPhone, how premium is that at the end of the day?

            Let’s be real, Apple is very interested in getting the iPhone in as many people as it can, not just the rich.

          6. Welcome to the 21st century where garbage men in california make 6 figures along with life guards. You need to update your analogy. What you probably meant to say was black people, but that would make you a racist.

          7. “Black men are poor” is only a stereotype in America, sorry I don’t share your world ideology.

          8. You said it again. Garbage men aren’t poor. /facepalm.

            A high end smartphone is expensive even if it is subsidized, but maybe it’s hard for you to understand. If you want to understand this, look at data:


            There have been lots reports on this already, but look at these maps and find the ghettos, and you will see which OS is used.

            Apple is a premium device in comparison to android phones, and all the data back this up (look at how much apple pays developers, i.e. they pay out the most in absolute terms, even with 10% market share!!! That is a damning statistic for android)

          9. Ha!

            “A high end smartphone is expensive even if it is subsidized, but maybe it’s hard for you to understand.” it’s about PERCEIVED value, do you have any idea how many people actually refer to the iPhone as $200?! They actually believe that.

            Also, that map has been proven incorrect lots of times before. Not that the data is incorrect but that the iOS dots are bigger, brighter and overlap Android. Try disabling iOS and you’ll notice Android EVERYWHERE.

          10. You can face palm all you want but when 90% of people can afford your product, your comment that “Apple doesn’t build devices for everyone” falls to pieces.

          11. I’m not talking about the US, the ENTIRE WESTERN WORLD has subsidised smartphones plans. Apple itself is pushing for smartphone loans in China Mobile.

            Why would allow subsidises and loans for your product when “you don’t build for everyone”? Apple is fighting very hard to do just the opposite, it’s not complicated.

            How can you say “Apple doesn’t build for everyone ” when literally billions of people can get an iPhone very easily with a monthly contract.

          12. Um… 3 billion people can not afford a phone that costs more than $100. Apple will never make a phone that sells for less than $100. How is it a stretch (with that fact in mind) that ‘Apple doesn’t build for everyone’.

            I still stand by that statement.

          13. You’re just shifting the conversation to what “for everyone” means. We both know you didn’t mean literally everyone. NOBODY builds anything for literally everyone, what kind of dumb comment is that.

            Bonus point reading what you replied too and see if “doesn’t build for literally everyone” even makes sense.

            PS: There’s almost a billion iOS devices currently active man… that’s a big “not for everyone” club

        2. “And finally, why would anyone care about the profit margin of the company you’re buying a product from?”
          Because some of them want to be on the winning team. 🙂
          They also root for the dealer at their favorite casino. You know, because it funds better appetizers and drinks.

  13. Apple will continue to be the only profitable mobile device maker especially over the next 10 years. All android device makers are hemorrhaging for the reasons outlined above. We will expect a mass exodus of device manufacturers as they consolidate like the TV industry did.

    The only winners here are google and apple, one is an advertising company that sells the consumer as a product and the other is a device maker.

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