Morningstar.com has published a piece by Pat Dorsey that takes a critical look at the Hewlett-Packard buyout of Compaq. Mr. Dorsey sees the merger between the two computing giants as being flawed from the outset, and he accuses the companiesi leaders of not understanding the issues. Even more important to Mac fans and AAPL investors, Mr. Dorsey offered some comments about Apple that we found interesting. From the article:
First, the PC industry isnit innovating because PCs are just boxes stuffed with components that run software--aside from making the box a different shape, the innovation occurs completely at the levels of components and software. There isnit much opportunity for product differentiation by putting a super-duper video card or microprocessor inside a PC because PC makers use essentially the same broad group of components, and any innovative component thatis available to one is usually available to all. Wintel PCs themselves are a commodity in the purest sense of the word, which is why being the low-cost producer is the only viable strategy at this point.
At the end of the day, it is about "the hottest box at the lowest price"--especially when all of the boxes are essentially the same. Compaq and HP canit do a darned thing to make their boxes better at digital music and imaging than anyone elseis boxes, because the stuff that makes them better--software and components--is available to any PC manufacturer. (Apple, of course, is a different story, since it builds its own operating system and has proprietary components. Apple sells a differentiated product; the Wintel crowd sells a commodity.)
Unless the merged "Hewpaqii plans to roll out is own operating system (a la Apple), get into the chip business to compete with Intel, or write proprietary software, its boxes will be essentially the same as those made by Dell, and Dell will always have a lower unit cost. But trying to compete in consumer PCs against a low-cost producer (Dell), the maker of a radically differentiated product (Apple), and the worldis pre-eminent marketer and designer of consumer electronics (Sony)? No way, Carly and Mike. Youive got a tough enough job ahead of you running this second-rate behemoth--donit make it any harder than you have to.
There is a lot more in this article about the HP-Compaq mega-merger-buyout in this article, and it makes for an interesting read. It is certainly a good analysis of the computer industry and though the article is not Apple-centric, much of the analysis certainly relates to Appleis place in the world.