PC Industry Gets a Taste of the Real World : Technology: At a meeting of computer firm executives, there is uneasiness over shrinking profit and brutal competition.
Intel Chief Executive Andrew S. Grove calls it a “malaise.” Industry pundit Stewart Alsop refers to it as an “unsettled feeling.” Whatever the terminology, a gathering of personal computer industry executives meeting here this week gave a clear sense that all is not well in the PC kingdom.
That’s a bit of a paradox. To be sure, the PC business has been hurt by the economic downturn, a brutal price war and the failure of some new products to catch on quickly.
But given the debilitating woes of some industries, one might expect that the millionaire entrepreneurs and financiers who met at the plush Ritz-Carlton hotel here would be counting their blessings instead of complaining about the many complex issues that any technology-based business confronts.
Several electronic polls taken during the conference hinted at the group’s frustration. The high-tech executives, who typically have supported Republican Party policies and long been committed to lower taxes above all else, voted 57% to 43% in favor of Bill Clinton for President.
The discontent was also obvious in criticism heaped on Microsoft Corp., the 800-pound gorilla of the PC business. Many in the industry have long complained that the Redmond, Wash., company uses its near-monopoly position as the supplier of the basic PC operating software to gain leverage in selling other types of software, such as word processors and spreadsheets.
Those complaints were given renewed attention by a report in Business Week magazine last week that cited a source at the Federal Trade Commission saying the agency staff may recommend legal action against the software giant for unfair trade practices.
The conference’s opening session focused on how to compete in a Microsoft-dominated world, giving executives such as Jim P. Manzi of Lotus Development, Scott McNealy of Sun Microsystems and Steven Jobs of Next Inc. the chance to voice their varied critiques of the company.
Microsoft Chairman William H. Gates absorbed the attacks in silence, rocking back and forth in his chair in his trademark style.
But he vigorously defended himself in the hallways, even engaging in an impromptu debate with rival Philippe Kahn of Borland International that quickly drew a crowd.
As the conference’s final speaker, Gates had the last word, rhetorically asking the audience how he could command his employees to compete less effectively.
“What should I tell them? Don’t be so smart? Take more time off?”
Other executives blunted the criticism of Microsoft, more or less telling the audience to quit whining and get to work. Grove said the preoccupation with Microsoft was distracting the industry from more important issues, such as a recent congressional action that could limit the development of mobile computing.
Even Kahn, an outspoken critic of Microsoft, devoted his speech to the idea that one could compete with the software leader simply by creating better technology. Added Michael Dell, chairman of Dell Computer: “There’s too much criticism. It’s not too different from the way people used to talk about IBM.”
IBM, of course, used to be the 800-pound gorilla of the computer business, until it was blind-sided by technological changes that few people saw coming.
Much of the discontent at the conference--an annual event sponsored by Alsop, editor of the trade newspaper Infoworld--seemed rooted in the uncomfortable reality that technological progress often doesn’t proceed as planned.
A year ago, this same group of executives was sure that small portable computers that use a pen instead of a keyboard were poised to develop into a multibillion-dollar industry.
But the pen market has developed much slower than expected, and was barely discussed at this year’s conference. The biggest news on that front came when Apple Computer Chairman John Sculley officially acknowledged that his company’s pocket-sized Newton computer would likely be too expensive and not useful enough to be a true mass-market consumer product.
And few would have predicted 18 months ago that the industry would now be engaged in nasty price cutting that has rendered it very difficult for major PC manufacturers to make money.
Yet in many respects, the fact that one can walk into any mass-merchandising outlet today and buy an extremely powerful PC for $1,000 is a measure of the industry’s success.
