Do You Really Need These ‘Tech Commodities’?

What Happened?

People have forecast the death of the personal computer (PC) for as long as it existed.

Remember that it was back in 1978, Ken Olsen, the founder of Digital Equipment Corporation said in 1977, ‘There is no reason anyone would want a computer in their home.’

Some folks argue he wasn’t really talking about PCs, which didn’t exist at that time. He was talking about big mainframe computing machines.

Regardless, he wasn’t the first to doubt the longevity of PCs. As the Apple iPhone and iPad started to gain fans over the past 10-plus years, there were thoughts that those devices would result in the end of the PC.

Of course, all that talk ended in 2020, when people were forced to work from home, which heralded a big demand for PCs as people and businesses were forced to buy new or to upgrade.

But the work-from-home boom is over. And maybe now, PC firms are starting to feel the pinch…

Why it Matters

The PC market really is a commoditized business.

The market has moved past the stage when people cared about ‘brand name’ PCs.

Even cheap to moderately priced PCs give the average user more than enough computing power for most of what they need.

And if you need a computer for graphics — most designers choose Apple products. And if you need a computer for gaming — there are specialist computer gaming firms. Not to mention that the fully committed gamer will ‘build’ their own PC.

So, it’s little surprise that Bloomberg News reports:

‘Dell Technologies Inc. and HP Inc. report quarterly financial results that suggest a long-awaited recovery of the personal computer market is stalling. The shares of each company dropped in extended trading.

‘Revenue generated by Dell’s PC business declined 1% to $12.1 billion in the fiscal third quarter, falling short of estimates. While sales in HP’s PC unit rose 2% to $9.59 billion in the similar three-month period, that too missed the average analyst estimate.’

In after-hours trading yesterday, Dell Technologies (DELL) was down 11.3%. HP Inc. (HPQ) was down 7.4%.

Both stocks are still significantly above where they were back in 2020.

But while it may be a risk calling for the end of the PC market and these two stocks’ relatively good run (remember, they aren’t exciting AI picks, so they’ve performed reasonably well), now feels more than ever like it’s the moment to ‘call time’ on both these stocks.

How it Affects You

The problem they have, as with any commoditized industry, is how does the company differentiate its product from any other product.

The generation who was in their teens or working age during the 1980s and 1990s may still have some affinity with these brand names and others.

But the same or similar demographic today doesn’t care. They’re purely looking at computing power or price. Or a combination.

The current generation are more familiar with Apple and Samsung on the hardware side, and a myriad of applications on the software side. Dell and HP are stuck in between… in the one spot that no-one else in the industry wants to be.

As we say, both stocks have had a reasonably good run. The next few days — at least to us — feels like it’s the right time to get out and bid them goodbye.