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2009: A transcendent year for the PC industry? February 11, 2009

Posted by John Taylor in netbooks, PC Industry.
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Yes, he’s already contended with his first “screw up,” but I’m compelled to reflect on something that has stayed with me since President Obama’s Inauguration Day. After listening to pre-Inauguration on NPR while commuting, watching the oath-taking in a colleague’s cube, and tuning in again on the drive home, I wanted more that night. So I watched the Frontline special “Dreams of Obama.”

The meaningful moment for me came in the story of how Obama dealt with the Rev. Jeremiah Wright issue at its height. It is both the descriptions of what made this a pivotal moment, and how Obama responded, that lingered with me:

·         “His hand is forced” to deal with the Rev. Wright issue.

·         It is a moment of “maximum peril” for his campaign.

·         Jeremiah Wright allows Obama to “confront this issue sooner rather than later.”

Obama chooses rather than continuing to tactically deal with Rev. Wright’s sermons, to transcend the debate. He decides to write a very personal speech to address race in a much broader and more meaningful context. In delivering the speech on a Monday morning in Philadelphia, Obama regains control of his campaign’s narrative.

The personal computing industry — faced with global economy-driven reductions in demand, 20 million cheap-n-crappy netbooks sold in 2008 (and expected to quadruple by 2013?), dysfunctional and unfair competition, cloud computing/storage and more — perhaps faces just such a moment.

·         OEMs and chipmakers alike may “have their hand forced” to try new things and rise above classic PC industry tactics.

·         It feels like a “moment of peril” for dinosaurs like the “Intel Inside” iron fist that grips the industry. The prospect of 100+ million netbooks selling in a few years could unhinge Intel’s ability to keep the global PC industry under its thumb. If consumers by the tens of millions will buy an Atom-powered netbook with all its limitations – because they just want to surf, e-mail, Twitter and use cloud computing on a very portable device — what will that do to errode the potential returns on bringing arguably overwrought and reportedly underselling processors like Core i7 to a declining desktop tower PC market?

·         And with economic forecasts showing no immediate relief for the PC industry, perhaps the OEMs and chipmakers that “confront the issue sooner rather than later” will emerge as the new leaders.

2009 presents clear and immediate opportunity to transcend traditional PC industry dynamics and, hopefully, mature to a logical and healthier state sooner.

Transcendent Opportunities

 

  • Stickers be gone: My three-year-old likes stickers and sometimes puts them places where they don’t belong. But I don’t know anyone who thinks they belong on a $1,000 consumer electronics device, especially one made by OEMs hungry to match Apple’s mastery of the aesthetic. When I bought my wife a new notebook about 6 months ago, my little boy saw all the stickers on the wristpad (yes, these included an AMD logo), and logically concluded “This is a place to put stickers.” The next time my wife opened her notebook, Jabba the Hut was looking back at her.
Should one of these ship with every PC sold?

Should one of these ship with every PC sold?

  • Netbooks that have it all (or most of it): AMD Yukon ultrathin platform is coming soon with the HP dv2 that plays 1080P video. The Nvidia Ion chipset is coming this summer, which reportedly brings 1080P video to Intel Atom-based netbooks. Faced with an HD chasm forming between AMD and Nvidia ultraportable PC capabilities and its own, Intel last week said it will pair a 720P-capabale Integrated Graphics Processor with its new Atom N280 processor some time this year. Two points on this: 1. The dark days of frustrating netbook experiences can come to an end and consumers will get the affordable, ultraportable experience they deserve. 2. What does this do to Centrino, which had an I-can’t-do-HD identity crisis of its own even at high-end mainstream notebook prices? (Note: go to 1:00 on the video.)

 

  • Product tags that tell you something about the experience: Best Buy is a clear leader, but when I bought my wife that notebook there recently, this is what Best Buy considered the key information to put on the product tag as the consumer agonizes over a $700 to $1,700 PC purchase:
    • 3GB or 4GB of RAM
    • 250 GB or 320 GB hard drive
    • Windows Vista 32-bit or Windows Vista 64-bit
    • The price

None of which tells you a damned thing about the experience or design point of the product. Let’s tell the consumer something useful, like usage scenario categories: Good at HD video. Good at mainstream games. Good at high-end games. Good at video transcoding. Good at not using electricity or long battery life. All you need for a basic Web/cloud experience.

 

  • Hot-Swap Desktop PCs: Another seemingly simple one, but one that actually requires innovation and R&D. One of the best and cheapest ways consumers can give PCs a makeover is to upgrade to discrete graphics. But they shouldn’t have to get all McGiever to do it. I LOVE building PCs, but I know I am in the EXTREME minority. Make plugging in a graphics card, or new memory, as easy as plugging an SD memory card into the reader on the side of your notebook. We do some of this with hot-swap server storage arrays. Let’s sprinkle a little of that on the consumer desktop market. Rahul Sood at HP with his BlackBird Hard Drives and the AMD GPG division with its Graphics Boosters are pointing the way for others to build on.

 

  • Far more attention paid to the PC aesthetic with affordability: About 3 weeks before the initial iPhone launch, I was in Washington D.C. with Patrick Moorhead on a press tour. We met with an editor who had his iPhone review unit on him. He showed it to us without ever letting it leave his hands (don’t worry Apple, no protocol was breached). That Friday night, I remember having a fire going in the backyard with my boys, and thinking “Everything is about to change in the phone market. When the iPhone comes out, it will instantly make every other phone and smartphone seem sadly dated.” Where is THAT brand of UI and style innovation in the PC market? Apple itself took a big swing with the Mac Book Air, but perhaps overpriced. Dell? HP? Acer? Toshiba? Watcha’ got that we’ll love AND we can afford? Is the HP dv2 just such a step?

 

  • Make it brain dead simple for PC salespeople: All this taken into consideration, you can see that much is left in the hands of the salesperson. It shouldn’t be. If $170 pocket cams can create HD video, $399 netbooks should be able to play it back. If $199 Xbox 360s play gorgeous games in HD, so should $1,000 notebooks. But today, most of them don’t. AMD introduced the 1stmainstream HD notebook platform in 2008, and this year we’ll introduce the first affordable HD ultrathin notebook platform. Take away all the incompatibilities, up the bar on the graphics processing of everything the consumer buys, and salespeople stand to see far fewer of their customers come back only to stand in the “returns” line.

 

True story. My parents, both in their 70s but spry PC-users, needed a new notebook a couple months ago. They wanted AMD, being loving, supporting parents and all. First stop was a big box store. Actual conversation:

Mom: “Can we see your notebooks with AMD processors?”

Salesperson: “We have them, but I don’t recommend AMD. They are two years behind Intel in technology.”

Mom: “How so?”

Salesperson: “It’s how Intel makes their chips smaller and some materials they use.”

Mom: “Can you show me how that affects the way the notebook works?”

Salesperson: “Uhhhh…”   It’s not an easy question to answer with a straight face, especially to someone buying an $800 notebook. (Intel is fond of saying “We’re years ahead of the competition” based on the date it begins a transistor process node transition. Now, without using bar charts or saying the words “Hi-k” and “Hafnium,” Intel, please show us what 2 years into the future looks like with your products on the shelves at the big box store today. Something we can actually see and experience. In this new era of HD video and highly popular mainstream gaming, in fact Intel’s shortcomings in graphics are the easiest difference for the PC buyer to see for themselves.)

 

Next stop, Best Buy. Actual conversation:

Mom: “Can we see your notebooks with AMD processors?”

Salesman: “Sure! I love AMD. It’s all I use – best value by far.”

 As happy as I am that Best Buy set my folks up with a new HP notebook based on the AMD “Puma” platform, this should not have been their experience. Diametrically opposed opinions at their first two stops, with the AMD naysayer offering hype over sensibility.

 

And therein lies the opportunity for transcendence, but there will be winners and losers. It can’t be both ways. The big box store can’t go on selling increasing numbers of netbooks on an endcap, powered by processors that Intel says equate to 6-year old PCs, while upselling mainstream notebooks 10 feet away based on the materials used in the semiconductor manufacturing process. But that’s the paradox we saw for the first time during the 2008 holiday season.

 

Big changes are in store before the 2009 holiday season. Something’s got to give, consumers will benefit, and the PC industry will hopefully progress out of suspended adolescence as a result.

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Comments»

1. Ian - February 11, 2009

John,
Great post, love the insight…

Does a netbook really have a market, will Blackberry or Apple not quickly consume that space in terms of portability and connectivity?

Cheers,
Ian

2. David - February 11, 2009

Very well said on all accounts. I hope, for all our sakes, more people are reading this.

3. Ed Borden - February 15, 2009

If I’m being honest, I’d say that that situation in your “big box retailer” example is your salespeople’s fault, and perfectly illustrates some big opportunity for AMD. Why is that sales rep saying that stuff about Intel? Why aren’t your guys in there with the OEM and with the retailer’s marketing people, making sure that those salespeople are educated and “sold” on AMD. That’s a pretty targeted group of people that you guys could be focusing on to make big changes in consumer buying patterns.

Isn’t better to do that, than to criticize the sales guy for giving his opinion, which is actually based in fact, irregardless of “spin” or whatever.

Same thing with the sticker example you gave. Sounds like AMD needs a new retail marketing strategy! This is good stuff! First is the recognition of the problem, now it just has to actually get attacked.

jtrex - April 3, 2009

Ed, thanks for posting in response to my empassioned post on what I call the suspended adolesence of the PC industry. It was not my intent to come across as “complaining” as you stated in your blog today. I can’t entirely agree with you that my parents’ experience in retail is the fault of AMD salespoeple. Think about that for a moment. You are saying that it is the job of AMD – a processor/platform company – to educate all the world’s retail sales staff on our processors, which we sell to OEMs. As if, the most important thing for a consumer to determine at retail is what processor is INSIDE the PC they are buying? This is the evil genius of Intel Inside. Decades later, after billions in advertising and billions spent in co-marketing dollars, you are arguing that the onus is on AMD to fix this issue by spending millions if not billions on salesperson education.

I’m sorry, but that is not the inevitable logical future of the PC industry in my opinion: Intel and AMD outspending each other to confuse consumers over the internals of a PC. Look to netbook popularity (it’s not about processor performance), cloud computing, and Apple for the future of computing. It’s about the experience, not the internals, for the consumer. There is no visible difference between the experience delivered by an AMD processor and an Intel processor for your typical retail customer. The true difference-makers are the work done by OEMs with system form factor and aesthtic, and the graphics, which do impact what you can actually see.

4. Cliff Forster - April 3, 2009

They fundamental problem with the “salespeople” in the big box stores is in the fact that they are not realy trained expert salespeople. In part its consumer apathy, we have just come to expect sub standard service.

When I was going to school, I worked as a hardware salesman at a Sears store in Baltimore. I took a great deal of pride in my customer relationships. I had regulars that I would depended on for my commissions, and I enjoyed talking in a frank and honest nature on the products. Sears at the time did place some value in product education. We had regular training on various products, and it would show who paid attention because a few folks consistently outperformed others in sales and service ratings. To actually be able to qualify your customer, size them up, and convince them not based on what you thought you might know, but what they actually required, now that’s service.

Is Best Buy making this investment in service and training? From my experience I doubt it. If I were with AMD, I might look to leverage that to say, here is an opportunity to better educate your salespeople, and I tell you what, its not just going to be a pro AMD sales pitch. We will send some reps around to stores to hold special training sessions to go over the complete nuts and bolts of a PC system. Features, what they are, how they fit, what value they have to the customer, and most importantly how to qualify your customers for what they realy desire so they are satisfied, and less likely to return costing your company precious money. The kids that work in those stores, they realy want to please people, they just don’t have the tools.

We had outside reps do this at Sears. The DeWalt guy might come in, sure with and agenda to forward his brand, but what he talked about more was on how to identity your customers needs, and what offerings made sense for a specific application. He was not saying, Buy DeWalt!!, Not Craftsman!! It was softer, its like hey, I’m the DeWalt guy, pleased to meet you, how can I help you better assist Sears customers? Reminds me of my days in MRO sales when Armstrong Tool’s used to do a hand tool safety course, not realy a sales pitch, if it was, it was just in brand exposure. They would come out, do a couple of hours on hand tool safety training, and leave some contact info, never with the hard agenda to sell anything specific, but more to say, hey, we want to help you educate your customers and we thought we could add value to the relationship this way.

Its going to start there, a more educated sales force. AMD could use a few smart people to travel to the big box stores, get the sales force in a room, and realy deliver a message that says, we just want you to be educated to better serve your customers, and in the message, there is a soft sell to lead with AMD, but tech education is the hard agenda.

If you need someone for the job, let me know.

jtrex - April 3, 2009

Cliff, thanks for posting. These are such good insights. I may repeat myself a little, but I feel there’s a difference between a DeWalt salesperson and an AMD salesperson. We sell through OEMS, system builders, distributors, and yes, direct to the most knowledgeable of consumers in small volumes. For example, I buy my processors and PC gear direct from newegg.com.

But my post is talking about retail-minded consumers. Yes, there is an opportunity for AMD to always be of better service to major retail customers like Best Buy. But nowhere else in Best Buy is something similar happening. You don’t walk up to the HDTVs and ask what’s the differnece between the ones with Broadcom image processing chips and the TI chips. No, the discussion is about Samsung, Sony, Toshiba, Panasonic, etc. and their latest models. On the game console isle, the discussion is not about the AMD chip in the Xbox 360 and Wii vs. the Nvidia chip in the PS3. On the home theater isle, again the discussion is not about TI vs. Broadcom DSPs inside the systems. When you are talking mainstream PCs, used by mainstream users, shopping at retail – the discussion should be about the experience. How it looks and feels. What usage model it was designed for. NOT whether the processor inside is 65nm or 45nm, or has 8mb of L3 cache vs. 4mb of L3. The people who care about that, who use PCs for extreme purposes or as a hobby, build their own systems. Or spend ridiculous amounts with companies like FalconNW.

I argue that this Intel Inside way of selling PCs at retail is on its last legs in how it tries to attach giant importance to differences that are imperceivable to the consumer. I believe market dynamics like netbooks, cloud computing and Apple will eventually topple it once and forever. And that will be a very good thing.

5. Cliff Forster - April 4, 2009

Its just frustrating to the educated consumer.

I would bet my left arm, if I walked into any retail establishement today, asked all the salespeople who has the superior platform, Intel gets picked each time, and its just not true in many cases. Even if this is not where the majority of systems are purchased, I guarantee you the misinformation that people read and hear each time they walk into a retail establishment shapes thier opinion to a point of only trusting brand blue.

John, Each and every time I build a system, and I mean, every single time, I quote AMD parts, and people are like “what is that, why would I want it, where are the Intel parts, are you sure AMD is not junk?” So I explain, I educate, I sell, and it may not amount to alot for one small side buisness, but it makes me feel better that I am serving my customers best intrest by offering them the best value possible for their applications.

Going back a step, where did these people get their misinformation? Not the TV, not the radio, not an OEMs website, they got it from some kid in Best Buy or Staples, usuealy an outdated small conversation browsing one day in a store, and the kid tells em flat out, AMD is junk, buy Intel if you want a computer that will perform and last. Now that guy may not buy that day in the brick and mortor, he may go order online, he may come talk to somebody like me who would like to build something for him, but ultimately the conversation always starts the same way, “I wan’t Intel, well just because I hear its the best”. And frankly John, its good that I enjoy the challenge, because it would be easier to just give it to them.

The long term AMD startegy may be to change how the game is played, and you are right that a paradigm shift is coming, but I think the cloud is a little further off from mainstream acceptance than its current hype suggests, years IMO.

So as long as there are traditional computer systems, people are going to shape their perception inside of those big box stores before they make a purchase, weather its there, or somewhere else later on, your fate rests in the hands of an uneducated eighteen year old kid just trying to get through his freshman year at college. I am affriad that kid is far more destrutive to your buisness than you give him credit for.


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