Business Blog: Hoover’s Business Insight Zone

Michael Dell on Apple, 1997:

“What would I do? I’d shut it down and give the money back to the shareholders.”

Apple’s performance for the 2007 quarter just passed:

• Apple Rises to a Record on Macintosh Sales, Outlook
• Apple results top targets, Mac sales strong

Dell’s performance for the 2007 quarter just passed:

• Dell shares fall 10% on poor results
• HP grabs punishing lead over Dell in PC market share

Percy Bysshe Shelley’s commentary on same, 1818:

. . . “My name is Ozymandias, king of kings:
Look on my works, ye mighty, and despair!”
Nothing beside remains: round the decay
Of that colossal wreck, boundless and bare,
The lone and level sands stretch far away.

~

* Not really, of course. Dell’s middle name is actually Saul. Which is no help at all for the writer trying to evoke something poetic about the problems at Dell’s company.

Charlie Stross, über-smart science fiction writer of instant classics like Accelerando, offers some intemperate but highly germane thoughts about one possible future for the PC business:

. . . For too long, the software and CPU giants had been treating the PC market as a cash cow, with a natural floor on the price of the product; the [One Laptop Per Child Project’s] XO-1 proved that they were overcharging grossly. Intel’s reaction was the Classmate reference design, their own purported rival to the XO-1; the Asus Eee is what you get when a large far eastern OEM thinks “hang on, can we commoditize this and sell it in bulk?” Microsoft, incidentally, failed to make it onto the Eee bandwagon because they wanted $40 for a Windows XP license — on a machine that starts at $250 for the stripped-down version. Mine runs Linux perfectly well, thank you, and comes with the basic stuff you need to be productive; OpenOffice, Thunderbird for email, Firefox as a web browser, and some other gadgets (like Skype and a webcam).

The Eee isn’t an order of magnitude cheaper than a normal laptop but it is close to an order of magnitude cheaper than previous ultra-lightweight subnotebooks. And I think I’m going to use it as a pointer to a future trend in the computer business, at the low end. The Eee is about 8 times as powerful as that 1998 Omnibook, at a quarter the price. That’s an improvement of half an order of magnitude in one direction and close to a full order in the other. And it’s a tipping point, I think, showing that the price points that have defined the goal posts for the personal computer business aren’t set in stone.

The dirty little fact everybody in the consumer computer trade have been trying to ignore — Dell, HP, Microsoft, Intel, AMD, Apple, all of them — is that the computer biz is overdue for commoditization. There is no intrinsic reason why a kilogram of plastic and metal with a couple of silicon chips in it should sell for more than its weight in silver. . . .

Very much worth a read, on two levels: 1. The specifics of potential PC commoditization. 2. To remind us that existing ways of doing business aren’t set in stone. We humans have these neurological quirks that get us down; one of them is that we tend to take the status quo as a given until something comes along to upset it, or unless we specifically think our way around it. Asus is doing that now with the Eee subnotebook; Johnathan Goodwin would do that to the stick-in-the-mud ways of the automotive industry (not just moribund Detroit, but all major car makers).

It usually seems like things must be the way they are only until someone — an inventor, a company, an organization, whoever — helps us to remove the scales from our eyes.

Former Wired editor-in-chief and current thinker-of-big-thoughts Kevin Kelly offers some interesting reflections on the “global machine” or “planetary computer” of which the Web is the current operating system.

One thing to note is that there are just as many processing chips in the Machine (one billion from the one billion online PCs) as there transitors in an Itanium chip. The Machine is a super computer where each “transistor” is computer.  A very rough estimate of the computing power of this Machine then is that it contains a billion times a billion, or one quintillion (10 ^ 18) transistors. Since only the newest servers have a billion processors, the figure is probably an order of magnitude smaller. When we add the transistors for cell phones, handhelds, it calculates out to about 170 quadrillion (10^17) transistors wired into the Machine

There are about 100 billion neurons in the human brain. Today the Machine has as 5 orders more transistors than you have neurons in your head. And the Machine, unlike your brain, is doubling in power every couple of years at the minimum.

He goes on to offer estimates for how much information flows through this machine and how much energy it consumes.  The piece is worth reading to stimulate your thinking about where computing may take us in the coming decades.

Link.

Google’s $700 share price has understandably gotten lots of press in the past couple of days, as has Dell’s accounting restatement. But here’s a thought as I reflect on many years of daily reading of the business press:

Reports of Google’s invulnerability have been greatly exaggerated.

From what I can tell — based on news accounts, feature stories, financial reporting, and Google’s track record for hiring some of my smartest friends — the company is excellent. It seems to be maintaining that excellence as it expands. It won’t surprise me if its share price passes $1,000 a year from now. Bully for Google.

But I remember, not so long ago, when Dell got the same kind of press. Dell is crazy-good at what they do. Dell is awesome. Dell’s business model can’t be beat. Dell kicks butt in 17 languages. Et cetera. But now their PC business is in disarray.

I know this is a simple — even simplistic — historical perspective, but it bears repeating:

• Once upon a time, Ford was unbeatable . . . until GM beat it.
• GM was unbeatable . . . until Toyota beat it.
• A&P was unbeatable . . . until it wasn’t.
• IBM was unbeatable . . . until PCs upset the apple cart, at which point IBM was really beatable . . . until Lou Gerstner turned it around.
• Dell was unbeatable . . . until H-P beat it.

Any of us could proliferate examples, but the point is obvious. When a company is on top, when it has achieved the business-as-usual superiority that Google enjoys today, it’s hard to imagine what will upset the status quo. But something always does. Rome’s dominance of the Western world seemed unshakeable, until . . . Britannia ruled the waves, until . . .

Something will put the fear of Armageddon into Google. Somewhere, someone is imagining a future status quo in which Google’s dominance is as long-gone as A&P’s is today. (That someone, by the way, is likely to end up very rich.)

The rest of us just don’t see it yet.

Here Sony’s been going after high-end gamers — and losing lotsa money in the process — when they could have been pursuing the astrophysicist market.

Astrophysicist Replaces Supercomputer with Eight PlayStation 3s

…Right now, a cluster of eight interlinked PS3s is busy solving a celestial mystery involving gravitational waves and what happens when a super-massive black hole, about a million times the mass of our own sun, swallows up a star.

As the architect of this research, Dr. Gaurav Khanna is employing his so-called “gravity grid” of PS3s to help measure these theoretical gravity waves — ripples in space-time that travel at the speed of light — that Einstein’s Theory of Relativity predicted would emerge when such an event takes place….

One of life’s weird coincidences: my wife and I were just talking about black hole-induced gravity waves during the commercial breaks of last night’s Sox-Indians game. She specifically raised the point that the issue is so hard to study because it’s so hard to find a spare supercomputer for running the numbers. And then today I find out Prof. Khanna’s got his little PS3 farm up an running. Weird!

(Okay, so none of that is true except for the part about Khanna.)

Still, you’d think that Sony would figure out a way to promote hardware hacks like this for folks who might not like the PS3’s price point as a gaming system, but who might have other creative uses for all that gorgeous computing power.

(Thanks to John for the link.)

Last week I talked a bit about Dell in a post that drew the attention of Dell’s own blogger. (See the comments section for that post.)

Today I came across this tidbit from ZDnet, which breaks down the latest UBS poll of CIOs in the US and Europe. While it’s not as though Dell is hemorrhaging, the report reflects chunks of bad news for the erstwhile king of the computing mountain, especially when it compares Dell to archrival Hewlett-Packard.

A key tidbit:

The UBS survey also reveals some early vendor specific concerns. For instance, more CIOs indicated that they planned to spend less on Dell desktops compared to March. According to UBS only 9 percent said they expected to increase spending with Dell in the second half of 2007 compared to 23 percent in March. Twelve percent of respondents plan to decrease spending on Dell desktops. HP appears to be the beneficiary with 16 percent of CIOs expecting to increase spending on HP desktops with 11 percent reducing spending.

The whole piece is worth reading if you’re interested in trends for corporate spending on computing equipment. Among other things, the piece includes some information on trends in uptake of server virtualization, the business pioneered by VMware (discussed further in this August 15 post).