Many analysts are pointing to Microsoft's recent $2 billion loan to Michael Dell as a sign of a growing irrelevance for the PC industry, for Microsoft's Windows platform, or both. It's a sign of the fading importance of the PC industry, one even said, as consumers turn to smartphones and tablets for their daily computing needs.
Microsoft's loan was part of a $24.4 billion move to make Dell private so that it can transform without having to face shareholders each quarter. But analysts believe that the loan came with strings attached, AKA a "gentleman's agreement", that may cause some concern with other Microsoft OEMs. Google's Android partners faced the same threat when the company purchased Motorola Mobility: a possible "most favored nation" scenario.
One of the rumored strings is that Dell would stay in the PC business despite wanting to focus on the Enterprise sector. Another string supposedly forced Dell to stick with Windows and not follow rival HP's footing by using another platform like Google's Chrome OS. Similar to its deal with Nokia, Microsoft will want Dell as the leading OEM for Windows 8 and beyond.
Naturally Dell hasn't fessed up to any "strings", reporting in its filing on Tuesday with the U.S. Securities & Exchange Commission (SEC) that the loan and [Microsoft] will not have a direct role in day-to-day operations of Dell. "Microsoft is making a loan that allows Dell to independently execute its long-term strategy," the company said.
But the whole loan issue is only a minor complaint compared to what it seemingly signifies. Allan Krans, an analyst with Technology Business Research, called the transaction in a Tuesday interview unprecedented. "But the shift in PC buying [to other devices] is also unprecedented," Krans said. "After a couple of decades of growth, computing is changing. It's not just about the PC any more."
Krans went on to say that the top tier of OEMs is in a period of realignment as they face a shift in consumer spending. "They're in flux and need a lot of help," he added, referring to Dell. "And Microsoft has the deepest pockets of anyone in the ecosystem, and they needed to take more of a leadership role. Someone needed to come in and make sure that there's stability there."
Dell, which at one time was the world's leader in consumer PCs from 2001 to 2006, has dropped to the third largest PC maker since 2011, falling behind HP and Lenovo. The company only shipped 9.5 million PCs during the last quarter, more than 4 million units behind its two rivals, accounting for a mere 11-percent of the global market.
But that's just Dell. The PC industry itself is seemingly being cannibalized by tablets and smartphones. "I've been saying for years that the PC business has been in decline," said Michael Cherry, analyst with Directions on Microsoft. "I realized that when people started looking at the PC like they looked at a TV set. The picture may be small or the colors may be off, but they don't buy a new TV until the old one conks out."
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