Today we learned that Sony has sold off their PC business, although from the sounds of it (and certainly for anyone outside Japan) Vaio PCs are just history. In my view this is a healthy development. Too many airlines with too many seats meant that under anything other than ideal conditions an airline couldn’t sell a seat for enough money to make a profit. So it was a race to the bottom in prices, but also in service and customer-friendly policies. And lots of trips to bankruptcy court. It took industry consolidation, and discipline from the remaining players, to start that industry on a path back to health. And it definitely is still a work in progress. The PC industry has some of the same business dynamics, and I wish the comparisons ended there.
It’s too easy to get into the PC business and too hard to differentiate products within it. The good news has been a race to the bottom in prices, but that has brought with it mediocrity in design, spotty quality, crapware, crapware, and more crapware, and incredible customer confusion as they try to figure out what the difference is between two PCs priced 2x-3x differently. And no PC maker is healthy on a per-unit profitability basis, except for Apple of course. Apple, via its monopoly on OS X, has very different market dynamics than anyone running a broadly available operating system can achieve.
Assume a company developed a supersonic transport and created their own airline around it, refusing to sell to other airlines. They would have a unique service for which they could charge a premium, and assuming they found the price point for maximizing revenue and profitability and maintained margin over market share discipline, they could become the most profitable airline in the world (by a wide margin). That’s because all other airlines would be flying the same Boeing and Airbus planes with the same characteristics, economics and competition for the same passengers to fill their seats.
In the computing world we have that supersonic transport airline equivalent, Apple with IOS and OS X. Then we have the numerous minimally undifferentiated companies flying “Boeing” (Microsoft Windows and Windows Phone) and “Airbus” (Google Android and Chrome OS). So we have the race to the bottom with all its negatives and a problem with sustainable profitability and health for all PC makers.
Part of the solution in the PC industry is the same one that is happening in the airline industry. You need fewer players and you need the remaining ones to exercise increased discipline (that it, margins over market share). And once you’ve achieved that, and have a few healthy participants, they can focus on greater innovation, better service, higher quality, etc. as differentiators.
The problem with Sony is that while they imagined themselves as the airline with a supersonic transport all they really had was the same old 737s and A330s with better paint jobs and prettier interiors. They tried to use that to justify supersonic transport like premium prices over their competitors, but potential customers generally found the premium greater than the perceived value. This indirectly added to the mindset that, just as with airline tickets, customers go for the lowest price and ignore the other differentiators.
On top of the general problem that Sony hasn’t even been delivering what they promised; I think over the last few years they just failed to introduce breakthrough products. Why is it that Dell and Lenovo are leading the charge on 8″ Windows tablets? Even in the 10″ space Sony was essentially a non-player. And their 2-in-1s featured some of the oddest, and least usable, design choices any player brought to the table. Pay more, get less. Does that really work?
I’m not an Apple fanboy, but I do believe you get value for the extra money Apple demands. The question with Apple is “do you value those things enough to justify the extra cost, plus the negatives that come from leaving the Windows ecosystem”? For 5-10% of the world’s population the answer is yes. And Apple has per-unit profitability to make it interesting to focus on that 10% rather than get into a price war trying to go for the other 90%. Sony was not Apple.
Sony leaving the playing field creates opportunity for others. Everyone needs excellent cost control, but not everyone needs to be an ultra-low cost carrier. With Sony out of the picture other PC makers can look at trying to push a little more into the premium PC space. Samsung already seems on its way out of the Windows world, or at least on its way to niche player status. Perhaps we can lose one more global PC maker, such as Acer, which would really open the door to a healthier PC industry. A Dell or HP will continue their focus shift more towards enterprises, or perhaps re-find their MoJo in the consumer space (as Dell seems to have done with the Venue 8 Pro) and take advantage of a smaller set of competitors to become both more aggressive and profitable. Lenovo will continue their march to being the top global player. And Microsoft can take the niche that Sony always wanted, providing premium products, but at competitive yet profitable prices. ASUS could regain its footing, perhaps becoming the global “Low Cost Carrier”. Specialized ultra low-price local market players could thrive with less pressure on the “majors” to compete with them primarily on price.
Of course Sony is leaving the PC world but is remaining in the Android Mobile Device world. Acer, if it left the PC world, would remain in the Android and ChromeOS worlds. There is an overabundance of players in the Android (and increasingly ChromeOS) world, Yet only Samsung is making serious money. They’ll have their shakeout eventually, but right now we need to see the Windows PC world rationalized. Sony’s departure indicates that is really starting to happen.