2.05.2007
Watching the PC Industry
Posted by Randy Copeland - President & CEO

Velocity Micro is certainly on the move upward in the PC industry, growing by triple digits again in 2006, but what is driving our success? The old guard OEMs are doing everything they can to help us, and I personally appreciate their efforts. What I'm talking about is the continued push for cheaper, less enjoyable computers that have less to do with an immersive computing experience and more about driving higher revenues, unit counts, and market share to satisfy Wall Street. By the way, this approach doesn't seem to be working. Ask Kevin Rollins.

Back when I first saw the opportunity to create and grow a new computer brand, around 1997, the computer giants were growing sales by billions of dollars per year by cutting the cost, quality, and support of their products. Everyone was becoming disgusted with the declining service, sagging performance, and general back biting between the big brands. Many other boutiques started popping up during this time, too, because the OEMs were no longer building the dream systems that had caused us to all fall in love with our computers in the late 80's.

My chance to create a company that hadn't, and wouldn't, cheat the customer out of a divine PC ownership experience was a temptation I couldn't resist, and www.VelocityMicro.com was launched in 1997 after several years of building computers for local Virginia customers. A simple formula of premium components, fair pricing, and my dedication to the ultimate support experience have made our company a national contender.

These days, the proof of the predestined OEM stagnation is clear. Dell is no longer the darling of the stock market, and acquired Alienware to try to spruce up their slumping image as a high end manufacturer. We are all awaiting any evidence that the two companies can actually benefit from each other except in the form of lower component costs for Alienware and liquid cooling at Dell. HP followed by picking up Voodoo, mostly so they could get the Sood brothers to show them how to build compelling mainstream computers. I look forward to competing against new models from HP in the coming year that have enticing color schemes, more expensive graphics cards, and better cooling, but mass produced overseas like widgets for the appearance of a custom PC experience at a bargain price. Gateway, well they again launched new systems with colored sides and second tier performance parts to claim they are in the performance space, albeit on the low end. Take a look at their financial performance over the past ten years and you'll immediately notice the issues they are working with. I wonder if they have enough brand image to pull back in to the premium space, especially with Emachines driving their bus. We will certainly see soon enough. Apple has now changed to Intel for processors after making fun of all of us for many years, and seem to be happier making gadgets and accessories than mainstream computers that do anything more than look great. Venerable IBM gave up and sold out to China's Lenovo Group, a low end PC powerhouse with big plans for North America.

Besides Velocity Micro's amazing growth, I'm witnessing foreign brands such as Acer, Medion, Asus and plenty smaller names make increasing US inroads because of the same dissatisfaction American consumers are experiencing from the old OEM stalwarts. They see an opening and want to fill the void left in consumers' heart, too. Let's see if these makers can muster the high quality, premium service, and reliable support any reasonable North American PC user should expect, but I'm skeptical, based on the satisfaction numbers I've seen so far.

That leaves whitebox builders who by definition have no brand equity but low prices and local service. There will always be a market for whitebox integrators, but it's becoming more price competitive every day, and they will survive on added services instead of the hardware. The early adopter can't get leading edge products from whiteboxes because they can't secure the latest technologies, so they will stay more in the lower end of the PC market for the forseeable future, and many will defect to the lower priced foreign brands instead of building systems in their shops.

Where does this all take us? I expect to see continued growth from smaller brands and stagnation, except in the business category, for the old multinationals. As long as they can sell more and more $299 computers to keep stock holders happy, the total ownership experience for their customer will not get any better.

And that sounds good to me.

For Velocity Micro, we'll stick to our original formula. Long live the dream PC!

[2.05.2007 @ 3:52 PM]  [Digg it]