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Should Microsoft Buy HP PC?

It is an interesting opportunity, question, or dilemma, depending on your perspective. Before jumping into the pros and cons—a quick level-set.

1. Conventional wisdom in the US is hardware is bad. Most companies strive to distance themselves from hardware. Software is the place to be and Microsoft is the model here.

2. HP recently declared it would like to exit the PC business. HP is the largest maker of PCs thanks largely to Carly’s vision which involved purchasing Compaq computer. Carly was a visionary, or at least subject to hallucinations.

3. There are no logical takers to buy HP PC—Samsung has vehemently said no, Acer can’t afford it. Dell sort of makes sense, but the two have been such fierce competitors for so long that it would be a difficult move and likely prevented by the DoJ. Possible, but difficult.

4. Meanwhile, Apple through its closed proprietary solutions and tight integration with hardware became the most valuable company in the world. Apple showed that hardware design and manufacturing are different things and only one should be sent offshore.

5. Microsoft tried to emulate Apple in many ways; one example is the new Microsoft stores which really don’t have much to sell. Half the store is other brands—hardware or third party games. The other half is Xbox.

6. Microsoft does have a hardware practice. It does quite well with keyboards and mice. Also, its Xbox is now the number one game console.

7. HP cited several reasons for wanting to exit, but partially because it sees the PC as low margin (AKA commodity) business. There are likely similar thoughts among other PC players. The Microsoft ecosystem is becoming as exciting as pork bellies.

8. Microsoft is at a critical juncture—its traditional model and enterprise software strategy is at risk due to the cloud, it is weak in tablets and phones, and its PC OS business is beginning to show weakness too. The company is very healthy and has plenty of cash —the time is right for big ideas.

So back to the question, should Microsoft buy the HP PC business? Doing so would obviously l have significant ramifications. Microsoft’s remaining best partners would declare war and earnestly evaluate new business models including Linux. It would mean a huge disruption in revenue, not to mention the revenue loss from HP itself as its largest customer.

On the other hand, perhaps it is time to reconsider the benefits of the open PC model. Microsoft, Intel, Dell, Compaq, and HP among many others became giants with this model. The PC proliferated into all kinds of industries in specialized machines. But that was the past.

Today, Linux is grabbing the embedded OS market: You will find Linux running on PCs, DVRs, phone systems, and laptops. Even Apple is running a derivative in MacOS and IOS. Android too. Companies like SCO, Novell, and Sun never stood a chance against Linux, and Microsoft is now feeling the pressure too. Windows Server is under attack from Linux as well as Amazon Cloud services and VMware. The move to the cloud is reducing the need for the Windows desktop operating systems. Wyse thin clients, VMware View, and Google’s ChromeOS do pretty well for cloud centric implementations (which the world is shifting toward). Next comes virtualized desktop infrastructure (VDI).

There is a compelling argument that the lack of integrated hardware is hurting Microsoft. The company may not be in the hardware business, but spends a huge amount of resources working with hardware vendors—and is dependent on them. The PC was designed in the 1980s and has slowly evolved, but it’s time for a revolution. That’s what Apple has been doing. The iPod and iPad were the invented by a hardware company. Apple leverage’s hardware pretty impressively—Firewire came before USB, DVI came to the Macs first, Macs even switched to USB keyboards before the PC did so, and the Mac popularized the mouse.

I look at my current PC and it is woefully out of date. It has three USB slots—all of which were committed right out of the box: A wireless keyboard and mouse using one USB, an HD webcam, and a headset. My monitor uses three separate connections for video, speakers, and microphone. The monitor is a great example of evolution failure—three connections are understood, but it is now one device. All of my connections are standard issue for a basic UC knowledge worker. The future desktop needs to be optimized for unified communications, and the current evolutionary path isn’t going to get us there.

Then there is the keyboard itself. Isn’t it due for a giant makeover? I admit that the letter keys may be hard to reorganize, but how about keys for Save, Print, Power, and media controls (Play, stop, pause, etc.) and a single key for ALT-TAB. I would like clear four-function math keys instead of shift8 for * (multiplication).

Microsoft could reinvigorate the industry and take us to a new level if they would re-evaluate the decision made some 30 years ago about not being in the hardware business. Apple’s tightly integrated hardware has done wonders for it, Mac, iPods, iPhones, and iPads.

Another key benefit Apple demonstrated was supportability. The PC is not easily supported! If you call your OEM about a Windows issue they will insist it’s not their problem. Conversely, you can actually get support from Apple—even drop in at an Apple store. Don’t call Microsoft for support, it’s probably a hardware problem. Not all, but some of the complexity of Windows comes from this lack of integration. Have you seen the McDonald’s quick start guide to Wi-Fi setup? Two pages for PC users and three steps for Mac users (as depicted in this photo.

The Consumerization of IT isn’t about consumer vs. business users, it is about selling directly to the one that consumes the product or service. Basically, if you deal with the end-user (consumer) smartly, then everything else follows. Microsoft doesn’t really sell to end users. It sells to huge PC manufacturing companies and IT departments—both intermediaries. This wasn’t a problem before because no tech giant sold to the end user. But that’s changed.

Microsoft buying HP-PC won’t be simple. Microsoft would be betting its future on integrated hardware.

But perhaps the real question should be: Can Microsoft afford not to buy HP-PC?

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