The flourishing tablet market is taking its toll in the PC business as more people prefer purchasing the lighter portable slates than the bulky, space-hugging desktops or even laptops and netbooks.
Hewlett-Packard and Dell competed for years over becoming the world’s number one PC maker. They were so focused on the competition they forgot to take a look around. The two companies did not see tablets as a threat to their business so they didn’t pay much attention until now – after tablet uptake has already put huge hole in their pockets.
HP posted a five percent decline in revenue due to an accounting rule that requires them to reflect the diminished value of past acquisitions, such as the $13 billion acquisition of technology consulting firm Electronic Data Systems, which hasn’t benefitted the company as they’d envisioned. That write-down costed them $9.2 billion.
Dell wasn’t doing great either, as they reported an eight percent revenue decline. They also reported that the company experienced an 18 percent profit decline because of the shift in consumer preference for tablets.
Analyst Rob Cihra of Evercore Partners states that the two companies acknowledge the fact that tablets and smartphones are chomping into their business but they cannot transition fast enough to do damage control. However, both Dell and HP are hopeful for Microsoft’s Windows 8 platform, which will offer a fresh start for tablet offerings across the board.
The two companies may not be directly abandoning the PC business but they’ve shifted their focus to selling other products. Dell is already reorienting their business to focus on selling things like servers, networking gear and storage systems to businesses and extend consulting services. HP on the other hand still believes that their PC business is the backbone of the company, and is what drives their other “businesses with purchasing power and supply-chain management.” Nevertheless they too have begun branching out to enterprise hardware, software and services, even dabbling in security and other products.