Google Pixel signals a shift in PC market

22 Feb 2013

The Google Pixel Chromebook has a screen 18 percent larger than normal laptops the firm claims

By Larry Walsh

Analysts are mixed on Google’s prospects for becoming a full-fledged PC manufacturer and wonder why it would launch Pixel, its latest and most expensive Chromebook, at a time when PC sales are falling.

Pixel is a wonder. It’s a larger notebook than any of the previous Chromebook models produced by Google. Like its tablets, it has a touch-screen interface, which is quickly becoming a must-have feature on all computers. And its glass screen has more pixels than the average high-definition television, giving it crystal clear resolution.

On top all that, Pixel has the same Internet-connected, as-a-service model of other Chromebooks, that users pay for a subscription to the operating system and backend resources in exchange for automated management.

Pixel even comes with 1 TB of online storage. Just how well Pixel will fare against entrenched premium rivals such as Apple Macs or the plethora of Microsoft notebooks on the market? Chances are initial sales won’t be stellar, especially since the PC market is in a near free fall. PC sales, particularly notebooks, are off by as much as 8 percent.

Hewlett-Packard’s quarterly earnings report revealed notebook sales are down again, this time 16 percent. Against this backdrop, tablet sales continue to rise. Tablets of all styles and operating systems are selling at a rate of 55 million to 60 million units a quarter; PCs continue to sell at a rate of 80 million units a quarter, most notebook/laptops.

Some analysts predict tablets will overtake PCs sometime this year, shifting the balance of computing platforms squarely in favor of mobile devices. More interesting, though, is how Google plans to sell Pixel. The PC is manufactured in Taiwan by an unnamed supplier, and will be sold direct through Google’s Web site and in Best Buy stores.

If history proves true, Pixels will quickly find their way into the gray market as well. But, like existing Chromebooks, sales through Google’s own channel network or those of its OEM partners – Acer, Hewlett-Packard, Lenovo and Samsung – is few and far between. Perhaps asking when Chromebooks and Pixel will come to the channel is the wrong question. Perhaps the right question is “when will PCs no longer be sold in the channel”?

While solution providers to sell tablets, it is limited to a few models by a few vendors. Even channel-friendly Microsoft hasn’t released its Surface tablet to the channel, despite calls from partners to allow them to take the Windows 8 device to market. And every major PC vendor sells products direct through their own direct sales and online portals.

At the beginning of PCs in the channel, desktops and notebooks carried high margins. Vendors were able to offer promotions, special pricing and rebates because they had a lot of profit flexibility. Over the years, commoditisation sets in. As component and manufacturing costs come down, shaving 10 percent of costs in the next model won’t help improve profitability.

Today, the average PC sold through resellers nets 3 percent margins – hardly enough to make it worthwhile. Solution providers agree, but still balk when vendors sell direct or skimp on support programs. Vendors, on the other

Hardly. Personal computers, like tablets and soon smart TVs, are the interface platform through which applications and content are consumed and manipulated. Much business can be built on top of and through PCs, and solution providers will need to know about PC capabilities.

But none of that means the channel has to sell PCs.

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