Sony has recently announced that they are selling off their PC division to investment fund, Japan Industrial Partners for $490 million. Many of us has seen it coming, as the PC industry has generally been a hard market the last year, as only Lenovo and a few others including Apple made money while most PC makers floundered, as tablets ate into the marketshare of PCs.
Interestingly, both Gartner and IDC reported that sales of PC has dropped by 10% in 2013. The decline follows 5 successive quarters of decline of the industry in a shocking deterioration of the industry which grew healthy 13.8% in what seem a long while ago at 2010.
The problem with the PC industry has always been that, profits from the PC business usually comes from services, not from selling hardware. As such, selling hardware only brings 2 to 3% margins to the PC Makers. Furthermore, as tablets like iPad becomes more powerful with each iteration, and the lack of need to upgrade PCs for existing users, the PC business is a rapidly fading one, just like the photography industry.
Looking back on hindsight, as mobile devices and smart phones, just like PDAs (remember Palm?), mp3 players and HD recorders, the rise of mobile devices like the iPhone has led to the demise of older technologies as convergence happens. After all, how many of us would like to carry a Palm PDA, Kodak zi8 and an iPod, in addition to a phone?
However, the convergence in technology and the slow improvements in battery life has spawn the external USB battery market, led by brands like Anker and others. (You may buy them on TechGarage to support our writing)
It was only in 2001, when Steve Jobs approached Sony on having the Apple OS X on the then much sought after Sony laptops. During that period, Sony laptops were praised for their design and utility, while Apple was a recovering brand under Steve Jobs. And it was a few years later that the Macbook took off and has remained profitable, while PC makers like Sony have seen their fortunes go through a down turn.
Ranjit Atwal, a devices analyst at the Gartner research firm believes that the companies at the bottom are the ones facing the most pressure. Other than Sony, the other brands at the bottom include Toshiba, Fujitsu and Samsung, with the combined marketshare of only 12% last year.
Why should Sony exit the PC business?
“They’ve lost market share, and the market they’re in has shrunk as well. Scale is everything in this market. If you haven’t got economies of scale then the underlying costs of getting to market, retail and so on, is too great to be profitable,” he said.
Sony is instead refocusing their priorities on digital imaging, gaming and mobile. However, the smart phone and tablet market are not easy to break in, as Apple holds a lion share of the premium priced models, while Samsung has been working hard on the low end scale of the market. Without their own operating system, and relying only on the Android, Sony might face a battle of their life to even do well in smart phones and tablets.
Also, as we have written in articles before this, the digital imaging industry has also stagnated. As such, perhaps Sony should invest money in creating its own OS, just like how Samsung did with the Tizen.
What do you feel? Should Sony have exited the PC business? Would the PC business survive in 5 years time? Let us hear your opinion.