The penny finally drops for HP as it prepares to drop the PC business

It was inevitable that one day HP would tire of the high-volume but low-margin PC hardware business, and now that day has edged a little closer. By shoring up software and services it is following IBM's lead, however it should be noted that IBM - who started the whole "IBM-compatible PC" market in the first place - got out of the mass market for PC hardware years ago. HP will keep making printers but I suspect the lower-value consumer printers will slowly disappear, too, as HP looks for higher margins. But brand pride's at stake as well - so who knows what will happen, or when. HP will certainly look to divest itself of any left-over low-margin hardware or software and ditch any poorer-performing niche products. Why throw more money away when you have already thrown away a lot? So expect a few HP cut-and-run announcements from here, especially in areas where it doesn't really affect the HP brand itself. A prime driver behind these decisions has to be longer-term protection of the brand.

As for PCs overall, they remain a huge if slowly-declining market. When HP leaves the gap will be closed and life will go on. Whilst competition now takes many forms (smart phones and tablets for starters) there remains a need for the traditional big box and monitor, but at low-cost and low margin. We should also expect to see further aggregation into a smaller number of PC makers catering for the mass market as well as a continued splintering into smaller, more profitable niche markets at the top end.   

HP exploring PC spinoff, buying software company | thetelegraph.com.au

The purchase of Autonomy, which was founded in 1996 and makes software for companies to search and manage huge databases, fits the strategy of "building a successful software business," he said.

"Autonomy brings to HP higher value business solutions that will help customers manage the explosion of information," he said.

"Autonomy has an attractive business model, including a strong cloud based solution set, which is aligned with HP's efforts to improve our portfolio mix."

Technology analysts said HP's decision to abandon its PC unit recalls that of US computer giant IBM, which sold its PC business to China's Lenovo in 2004 for $1.25 billion.

Gartner analyst Mark Margevicius cautioned, however, that "we're not in an era when the PC is dead.

"The PC market is flat but it's still a huge business," Margevicius said.

It remains HP's largest single revenue generator, but it "just doesn't produce all that much profit," he said. "The PC market has transformed into a tactical, commoditized business.

"HP, as a vendor, has many, many things within its coffers to sell to its customers. It sells services, it sells online stuff, it's got networking stuff, it's got software," he said.

"It's got all kinds of other things that from a business point of view make far better margins and profit than does the PC business," Margevicius said.

"If the PC business was a business that generated 20 percent margins, HP's not dumping their PC business," the Gartner analyst said.

China's Huawei on convergence, last mile and growth markets #telecoms

What interests me is not just Huawei's growth in telecoms and plans for more, including the last-mile business in Australia, also but the acknowledgement that IBM is engaged to revamp and integrate their financial system (and Accenture for CRM, too). 

 Huawei’s Brave New World - Digits - WSJ

Mr. Zhang: In 2009, Huawei grew operating profit margin by 1.2% to 14.1%. Huawei is firmly committed to continually enhancing and managing our margins. We are working with IBM on implementing an integrated financial system across our organization, as well as working with Accenture to update our customer relationship management systems.

Dow Jones: Huawei has been expanding overseas, looking at growth opportunities. Which markets are attractive? And are you looking at any acquisition targets?

Mr. Zhang: One area that is particularly attractive is last mile connectivity for rural communities in both developed Australia and emerging markets India, Africa where Huawei has extensive experience we can share. Our strategy is to deliver customer-centric innovative systems that bring business value to our customers by being well positioned in the core competencies of mobile, fixed and IP data. We don’t exclude the possibility of acquisitions if it strengthens our competitiveness.

The mainframe goes green for IBM

One impact of global climate change will be the need to conserve resources - and one way to do that is by consolidation. In some ways this will seem like going 'back to the past'. For example more consolidated travel by public transport, less of the individual transport we have become accustomed to. The IT field is awash with individual manufactured items - from PCs to MP3 players - and unless the power needs of these devices can be met efficiently (perhaps more solar panels on MP3s and mobiles) then they too will need to be re-thought. Of course just making them is a resource hungry process, too.

The Australian Financial Review reports on IBM's mainframe resurgence. I work for IBM and own some shares, but this is not necessarily my opinion, or that of IBM itself. In any event, here's a bit of the article: Mainframes return to the main game, 30 April 2007, by Joshua Gliddon. "Some 130 kilometres east of Portland, Oregon, in a small US town called The Dalles, search engine company Google has built a giant data centre on the banks of the Columbia Rover. Its reasons for doing so have less to do with cheap labour and land than with access to cheap and relatively clean hydro-electric power.Google is not the only company building data centres where power is cheap. Both Yahoo! and Microsoft are in on the act. The latter has committed $US2 billion ($2.4 billion) to its data centre strategy. Many data centres are made up of thousands upon thousands of cheap, replaceable commodity computers. These computers can chew through huge amounts of power and generate extraordinary amounts of heat, The cooling towers in Google’s The Dalles facility are four storeys high."

Which highlights one problem - massive numbers of individual servers out there, all drawing power. And IBM's solution? IBM's Bill Zeitler said that, "instead of putting together lots of servers in a data centre, companies would move to high-end machines, or even mainframes that could “virtualise” or pretend they are lots of computers running on one box." And he went onto say, “Clients are telling us that they simply can’t get enough power into their data centres to deal with the increasing number of servers,” Mr Zeitler said. “If you can do 60 times the work using the same amount of power then there’s an incentive to move to the high-end UNIX or mainframe environment.”

Let's see what Google does to solve this problem. They are famous for re-using and chaining together massive numbers of 'el cheapo' servers in a fault-tolerant network, rather than designing or simply buying a high-end machine or 2 to do the job. It's a strategy that has paid dividends for Google. They may have more ideas up their sleeves... or they too will be looking at consolidation and vitualisation.