Where to now for Dell, Apple and the rest?
So now Michael Dell is reduced to eating the bitterest of humble pies, raising $24.4 billion to bring his company private.
But some of those billions have come from a potentially unhelpful source – Microsoft. As the ever-insightful former Apple executive Jean-Louis Gassée points out, Steve Ballmer has bought “better vertical integration without having to pay the full price for ownership . . .This is completely at odds with the buyout’s supposed intent: getting out of the PC clone race to the bottom.”
Here we see the last vestiges of the once-vaunted horizontally integrated computer business spluttering to some sort of endgame – all the PC companies were effectively serfs in Microsoft’s kingdom, and now they’re all desperately trying to find a way out through some form of vertical integration, aka independence, while Microsoft tries to keep them indentured.
The lesson is not lost on those companies competing in the post-PC world of mobile computing – Apple has perfected the art of vertical integration and as a result is eating up the vast majority of mobile profits through the iPhone and iPad, while everyone else is left strategising about how to follow suit.
Most obviously, Google bought Motorola, a madcap $12 billion move for patents, yes, but also vertical agility – it remains to be seen how effectively that will ever work. Microsoft’s approach with its own Surface tablet has not been immediately successful, but the fact it was willing to try in the first place shows how far things have changed.
It will also be fascinating to see how Samsung forges an independent, vertical path – it currently extracts the lion’s share of Android profits these days but crucially lacks real software pedigree of its own, making it the company most at risk of Dell’s fate in the smartphone business.
The Korean giant is making lots of noise about experiments with the Bada and Tizen smartphone operating systems, but Android is so huge now it’s difficult to see how either could gain traction.
There are no guarantees, of course – if your product is mediocre, no amount of verticality can help you, as RIM and Nokia have painfully discovered.
But the larger lesson is that fundamentals change – this year’s gospel can become next year’s superstition, eventually becoming full-blown fallacy sometime in the next decade.