Apple is the No. 1 Client Device

A report out by Canalys on the final quarter of 2011 puts Apple ahead of HP as the preferred client device amongst corporates and consumers. Who would have ever thought that? Apple as the domain of geeks and marketing agencies is officially a thing of the past. Ty, you were right all along.

Some will say that this is wrong accounting as it includes iPads and iPhones in the total - but this is the entire point about the rapidly shifting client device market in corporations, the device is fast becoming the choice of the user not the company.

Bring Your Own Device (BYOD) is a real phenomenon and it is helping Apple become a corporate standard in a world traditionally dominated by PCs and Microsoft. 

Learn a lesson, everyone. There is not a penny of discount given for Apple products whether it be an iPod, iPad, iPhone or a Mac and they are top of the range end user prices. The PC market has been long rated as a commodity market and wags will tell you that Apple would never become a corporate standard as resellers and Apple itself never negotiate. That's another myth busted as Macs continue to grow and take market share off all the main players like HP, Dell, Lenovo and the rest. The PC market is no longer a price sensitive, high competition market - Apple have redefined the way to sell.

How did Apple do it? By winning the hearts, minds and wallets of real users through innovation, ease of use and entire new ways to buy products and applications. Incredibly, real users have gone back into corporations and not asked but demanded that their tablets, smartphones and, now, Macs be attached to the network even if they foot the bill themselves.

Microsoft, HP, Dell, everyone, never saw this coming that not just Apple but their operating system would take a massive chunk of the world dominated by the PC. Recent figures released by Microsoft show that they can no longer rely on consumers for their profit - now they are being squeezed in corporations.

The pace of change is incredible and none of the mighty companies saw it coming. Apple is the No. 1 client in corporations.

Pinch yourself, it's real.

Acer - The Untold Story?

Finding $150 million of inventory you 'thought' you didn't have is quite a mishap.

I mean, it isn't that easy to miss a pile of computers that high. So when this small line in $4bn+ quarter of sales that Acer reported cropped up it was very big and bad news. But it's a governance thing really as a write off of that size isn't that huge, it's only Europe that had the problem and it's a one off anyway.

It is a one off, isn't it?

The share price over the last 3 months has halved, the CEO, JT Wang, has foregone his salary and 300 staff will be fired in Europe. I am not sure what percentage of the European staff that is but Acer are traditionally a lean and mean company in Europe so I would venture not for off a third of the staff in the region. That's a big, big mistake then.

Against the back drop of the actual performance numbers, this write off, embarrassing as it is, should not be such a massive blow to the company. And that sort of makes you think, 'What other bad news is to come?' Not that I am rumour mongering but it does reflect a feeling in the channel.

The trouble is that some pundits believe that this little accounting error has been going on a while. When you take industry figures there always seemed to be a mismatch in sales in and sales out data at Acer. In the old days a distributor might have thought about having a lorry circling the M25 at year end with excess inventory 'sold' on phantom orders to be booked back in on day 1 of the new year as 'returns' but in these modern times to do so would be to cheat investors and markets don't forgive.

So are there bigger and wider problems at Acer? We know the PC market has taken a bashing and figures suggest as much as 14% down for Europe, and as Acer is a big share of that it has to hurt. But such figures could be aimed at HP, Dell, IBM and others generally.

I think this story has a way to run. Yesterday alone, Acer shares hit the Taipei stock market limit for a fall in a single day. There may be no smoke without fire.

The Battle of The Giants

It had to happen. One of the outcomes of most recessions is that there are some fearfully large consolidations of big companies - and yesterday saw another big announcement in a market sector that is heating up big time.

Hewlett Packard announced it was acquiring networking company, 3 Com, for around $2.7bn in the same breath as producing better than expected profits on lower sales last year. For those in the industry, this the annual musical chairs time at the computer giant, HP, and many will find that a few more chairs than usual have been whipped away as they keep making sure they are as lean as possible.

Ostensibly, the acquisition is to give HP a footprint in the lucrative Chinese market where 55% of 3 Com's sales come from. However, there are other motives as there have been major moves by networking giant Cisco to move into the server market at the datacentre which is a direct threat to the giants of that market, HP, Dell and Sun. The 3 Com acquisition, in that context, is all about augmenting HP's portfolio of networking switches and infrastructure devices to ensure they have all the pieces of the server, storage and networking products required to maintain their market position as Cisco put their formidable weight into this market.

There is more. Cisco's market play into the server market takes it from its luxurious, high profit network business where it dominates into the grimy and lower margin world of PCs and servers where HP have great skill in thriving. It could be argued that Cisco will find it hard to apply its typical cost models in the server market to be able to compete or make a decent profit. HP's move is certainly a clever defence of their position, although in reality, 3 Com has only a single digit market share in Cisco's core markets and was no longer the big player it used to be. Some analysts feel that companies like Brocade would have been a better buy, but in the great scheme of things, any old company in networking would have done.

HP have learned how to acquire and absorb big companies very quickly. Starting with the huge takeover of Compaq which cost Carly Fiorini her job, they have more recently acquired EDS which almost doubled their workforce. Meanwhile, their arch rivals in the PC and server market, Dell, has been building out its portfolio to compete by adding Equalogic and Perot into its midst making it a much stronger company.

What does this all mean for companies, large and small? Well this period of formidable consolidation will likely increase the massive competition in what is already a highly competitive market for PCs, servers, storage and networking. It is likely to drive prices down further which may be a good thing - but for those companies who sell these products, the decreasing profit margins in selling solutions based around these companies and Microsoft is squeezing the life out of what was a vibrant market to be in. I don't think this will make life much better for them.

It certainly means that Cisco and HP are now toe to toe and head to head in the market. It will be a battle royal to win the loyalty of the customers.

One Way To Alienate Customers

I mentioned some while ago that the Sun-Oracle proposed hook up was going to be an uneasy marriage. Their latest marketing effort illustrates how silly this can get.

On the back page of The Economist is an expensive advertisement that proclaims that the performance of Oracle working on Sun machines is better than the same software running on IBM machines. Thus, they proclaim that ‘Sun + Oracle is Faster’. The proof of this claim rather bizarrely will be published or at least be available from 14 October. It does not actually say which October this will be, but we can only assume that it is this year. IBM, meanwhile has about one month to respond to this claim and before they twist the argument, this is as compared to an IBM Power 595 Server Model 9119-FHA to be exact (plus a few caveat figures to prove they actually ran a test) but they do point out in the same small print that this model was available back in December of 2008. So Sun and Oracle have had around 9-10 months in order to beat the performance of that IBM machine and have not considered any subsequent models in between. Oh, and the model, or at least the solution package, is presumably not available until 14 October of some indeterminate year in the future.


So what does this advert say to Oracle users? Not much really. The software is not getting any better and that you need a damn powerful machine to get performance out of it. And if you bought an IBM server to run it, then you are a chump, basically. Yes, in the world of negative advertising this takes a good bite of biscuit. You can infer from the new line of advertising that there must be some kind of ‘tuning’ going on by Oracle to make the behemoth software (they are the second largest vendor of software worldwide with over 50% of their market) run slightly faster on their now home brand hardware – making any other type of Oracle user at a disadvantage. The advert does not mention Dell or HP or any other brand of hardware but one can infer that if the software is now specially tuned for Sun then users of those other brands will also be disadvantaged for the future, if not by 14 October.

What would happen if Microsoft adopted the same approach? It would alienate just about every other manufacturer of PCs should they throw their lot in with, say, HP. Immediately, all those years of careful building of an independent software brand that runs on any x86 chip at speeds controlled by the manufacturer (but the user gets a consistent look, feel and features no matter which one they choose) would be lost as Microsoft would be saying, ‘run it on any other brand than HP and you are getting less than your money’s worth’.

That’s effectively what Oracle has done. Many market analysts saw this as a natural move by Oracle to fight IBM, but it just erodes the software vendor’s independence on hardware. Whether they like it or not, there is a vast world of business users out there that have chosen platforms other than Sun to run their software – now they would really have to start questioning whether their software company is committed to their end user customers or ONLY those end users who run Sun hardware. And remember, Sun were struggling prior to this $7.4bn proposed takeover.

From a customer perception, this advert is the first major manifestation that Oracle has ditched its independence and will be preferentially developing software tuned for the Sun platform only in the future and that there is even now a risk that subsequent versions of Oracle will only run on Sun. So if you are an Oracle user today and not using the Sun platform, perhaps this advert poses two questions rather than the one intended: 1) Should I buy Sun in the future and if not, 2) Should I be reconsidering my choice of software for the future?

In the world of large scale software sales, while you can have umpteen nice OEM deals, latest offers and special relationships with lots of hardware vendors but, ultimately, the last thing you want to do is to lose a deal because of hardware allegiance. Better to make sure they buy your software because it best fits their needs rather than the needs of the hardware they run.

Maybe I am being pedantic here, but I found this advert astounding – then again, I thought the Sun-Oracle tie up a big mistake and smacked more of desperation by one or other of the companies rather than of real strategic thinking.