Analyst: PC industry must evolve [Austin American-Statesman, Texas]

Aug. 12--Patrick Moorhead is a veteran computer industry insider who last year became an outside observer -- an industry analyst and consultant at his Austin company, Moor Insights & Strategy. Moorhead, 44, worked 21 years for such technology players as Advanced Micro Devices Inc., Compaq Computer Corp., AT&T and Alta Vista Co. At AMD, he held a variety of strategic marketing jobs, eventually becoming a corporate vice president and corporate fellow in the company's strategy group.

Now that he is on the outside, Moorhead has consulted with a number of tech companies, written for a range of online business and technology publications, presented at technical conferences and appeared on television business shows and in major print media.

Statesman: What are analysts used for, and who uses them?

Moorhead: Industry analysts are essentially the bridge between technology companies, the press, investors and the technology buyer.

Analysts provide expert and independent opinions on what is really happening now, what has really happened in the past and what will likely happen in the future. They get at the root of the dynamics and trends determining the winners and losers in new or future markets, geographies, distribution channels, products, technologies and end-usage models.

What are the qualities of a good analyst?

What makes a good analyst has been changing over the past few years. Many analysts misjudged major disruptions like Apple's iPhone, tablets and advancements in human-computer interface, which affected their credibility.

The best analysts have the ability to predict the most disruptive activities. They do this by taking a holistic, ecosystem approach to their analysis. Also, many do this by drawing from their real-world technology experience they gained at leading technology companies at which they worked. Trust is also a very key element, as many companies share much of their proprietary knowledge with analysts. The last things clients want is their secrets distributed amongst the industry.

You are a veteran of the personal computer industry, which appears to be going through some turmoil after decades of rapid expansion. Can you help us understand what's going on there?

The biggest issue to the PC industry is growth. After years of global double-digit growth, the PC industry is entering a much slower age of single-digit increases. This is driven by a few things, including saturation in traditional regions, a general slowdown in the global economy, and pressure from smartphones and tablets.

These devices do not replace a PC, but many consumers are choosing to extend the life of their current PC and instead buy a new smartphone or tablet. This phenomenon is benefitting Apple and Samsung, but that's about it among the device makers. We have yet to see the results of Intel's new Ultrabook initiative, but that could be just the thing which rejuvenates the PC industry. Ultrabooks are sleek and light laptop computers.

Profits and differentiation are other key issues. Apple looks to dominate the highest end of the PC market, where most of the profits exist, leaving the remaining lower-profit markets for everyone else. To add onto that, PC makers are now even competing with their partners, including Microsoft Corp. and Google Inc., as both have introduced devices that compete directly with the computer companies.

Can you paint a picture of what the PC client business might look like in three to four years?

I see some of today's major PC makers scaling back their PC businesses even more by focusing on the commercial market and leaving the consumer market, or simply exiting the PC category. The landscape will look very different in three to four years, that's for sure.

For the consumer market, in addition to extremely thin and light notebooks, competitive tablets and convertibles will be the price of admission in North America and Western Europe. Notebooks will be just as important in emerging regions as tablets and convertibles, as many are experiencing their first computing device, and they cannot afford too many devices.

The commercial market will slightly lag the consumer market in the mass adoption of tablets and convertibles, and PC devices will still rule. The wild-card here are convertible PCs that can play a dual tablet-notebook role that, if they provide high performance and are 10 millimeters thick, could be a huge future category.

What are the opportunities being created by all this industry turmoil?

The PC market is still a huge, 400-million-unit market and will continue to grow in emerging regions. But to fundamentally change the dynamics of the traditional consumer PC market and significantly increase profits, computer-makers need to build an alternative ecosystem to Microsoft Windows or Google's Android. HP made a multi-billion dollar investment in Web OS mobile operating system software, and it failed miserably, while other players didn't make any major investments in a new PC ecosystem.

Given the low, short-term likelihood of building a relevant consumer ecosystem, the biggest growth opportunities, though, will be in tablets, smartphones, and the cloud data center ecosystems. It is obvious there are opportunities in making the hardware for these categories. What is less obvious is what software will be used, and how these new devices will be deployed and managed. There are huge opportunities in the software and services to securely and conveniently connect devices to corporate infrastructures and to consumer pay services.

Another growth opportunity is the small-business market. Small businesses have yet to wholeheartedly dive into a cloud services and using mobile applications as a way to interact with employees, partners and customers.

How do some of the traditional players in the industry need to rethink their businesses to cope with this expected period of change?

The traditional PC players first need to internalize a few harsh realities. First, the new game is a battle of ecosystems, not of products, and this is true in consumer and commercial markets. The best products don't win if they're not part of a preferred ecosystem. Secondly, they need to realize their own suppliers like Microsoft and Google will continue to compete with them even more, making their jobs even harder than they were before.

PC players need to focus on where they can win in an ecosystem and develop the plan to go after it. This will actually take an investment in research and development, sales, and marketing and even some acquisitions, things most PC companies just aren't prepared to do as profits fall.

The biggest area of concern is around being "half-in" the PC market. I have seen many PC businesses simply fade away as executive management and board of directors decided the best plan was to de-emphasize PCs. The problem is that it's never a secret to the PC ecosystem. Customers, distribution partners and suppliers all know who is committed and will slowly disconnect from the uncommitted PC players.

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