Dell is a computer company desperately in search of a new market as the desktop and laptop PCs dwindles. But the Austin-based company is finding that that an elusive target.

Public Cloud? That's So 2011

Yesterday the company announced it was dropping Dell Cloud, its home-grown infrastructure-as-a-service public cloud service. It is also pulling the plug on its planned OpenStack-based public cloud service and online storage service before they even get off the ground.

Dell isn't out the cloud game altogether, mind you - it will be reselling public cloud services through its new Dell Cloud Partner Program. And it's still working on private cloud offerings.

Dell's decision to drop its program after only two years isn't terribly surprising - it was regarded as pricey compared to similar offerings from HP and IBM, and going head to head with similar services from Amazon Web Services and Google without good pricing and a very solid support system is tantamount to suicide these days.

Bring On The Dongles

But Dell is still on the hunt for new revenue. Reports out today indicate that the hardware maker will be releasing a new thumb-drive PC, codenamed Project Ophelia, this July for a reported $100.

PC World has revealed that the device will be based on Android and can be plugged into a TV or monitor via the HDMI port. File storage will be handled via Wyse's PocketCloud.

Dell wants to get this device in the hands of telecomm carriers, who could use Ophelia to deliver streaming TV to customers who don't currently have smart TVs or devices like Roku or Apple TV to pull in online content.

Developers will get their hands on the PC-on-a-stick first, in order to build Android apps and build up a collection of TV-friendly apps. Since there's a lot of Wyse thin-client tech packed into this thing, presumably there will be some capability to have portability between home and work.

This is an interesting concept, save for the fact that there are already similar and cheaper devices on the market now. The concept of a dongle PC is not new, and to date, they haven't really taken off.

The idea also ignores the very real trend away from vertical screen and keyboard/mouse devices to handheld tablets and smartphones. While Ophelia devices would give you portability, you still need a mouse, keyboard and screen to use these things… so the portability is constrained. And if I'm essentially recreating a PC-like portable work setup anyway, why not just use a laptop?

I suspect that's why Dell is emphasizing the telecom angle when it pitches these things. Carriers could offer Ophelia with video and data plans, maybe. But it's hard to imagine consumers buying these things off the shelf when there are other similarly priced set-top devices already on the market and proven to work.

Dell is clearly throwing a lot of things against the wall to see what sticks. Public cloud didn't work, and it's difficult to see Project Ophelia working out, either. Servers, however, aren't doing badly right now. Perhaps Dell should stick to what it knows best.

Notorious activist investor Carl Icahn has officially filed an offer for Dell that would let investors keep their stake in the company while forcing out CEO and founder Michael Dell. See his full interview with Bloomberg below:

IBM has no stomach for low-margin businesses, which is why Big Blue may be ready to dump its commodity server business — i.e., servers that run on Intel-compatible "x86" processors. If the reported talks with Lenovo lead to a sale, the move would mark IBM's final break with the low-end computer business.

A Win-Win

The deal would be a win-win for both companies. Lenovo, which bought IBM's PC business in 2005 for $1.75 billion, would immediately become the third largest maker  of x86 servers, behind market leader Hewlett-Packard and runner-up Dell. Thanks to its market clout in its homeland, the Chinese company has risen to become the second largest PC maker worldwide, according to the latest numbers from IDC. 

Adding x86 servers to its portfolio makes perfect sense for Lenovo, which has shown in PCs that it can do well in a low-margin, commodity market. For IBM, the opposite is true. The company's strength in hardware is in selling expensive — and profitable — mainframes.

IBM's mainframe business is the reason the company leads the global server market, at least in revenue terms. To give you some sense of how expensive these systems are, IBM's "System z" mainframe represented more than 12% of all server revenue worldwide in the fourth quarter. Because of a refresh in the product line, along with the introduction of new products, such as the zEnterprise, revenue from IBM's mainframe business rose almost 56% year over year in the quarter, according to IDC.

"Although revenue results for System z are traditionally heavier in the fourth quarter, this accelerated acquisition shows the breadth and depth of the IBM mainframe installed base," Jean Bozman, analyst for IDC said in a statement.

Lenovo would be a good buyer for IBM, because it doesn't compete in any of the markets IBM cares about, namely software and IT services. That wouldn't be the case if HP or Oracle were the buyer.

Disruption In Server Market

IBM may also have decided it wants no part of the disruption heading for the server market like a freight train. The increasing number of companies adopting cloud computing will mean fewer server sales, Larry Dignan points out at ZDNet. In addition, Internet companies with large server farms, such as Facebook and Google, buy customized white-box servers, which can't be good in the long term for traditional sellers, like HP, Dell and IBM.

While no one outside of IBM or Lenovo know how much the business would fetch, someone familiar with the talks told Bloomberg that the price would range from $2.5 billion to $4.5 billion, depending on the assets and liabilities included.

Lenovo Is Fired Up And Ready To Go

Not everyone agrees that IBM would be doing itself a favor by selling its x86 business. Gartner analyst Sergis Mushell says that without x86, IBM only non-mainframe servers would be its lineup of machines that run its Power processors — and that demand for those products is shrinking.

In other words, IBM would miss out on the opportunities to build systems based on x86 "while [its Power] architecture's ecosystem is shrinking," Mushell said. "Do you see how it would not make a lot of sense?"

Lenovo, meanwhile, is hungry to move beyond the PC market. The company announced last year a partnership with EMC in which Lenovo planned to introduce x86 servers that would include EMC storage systems. As part of the deal, Lenovo agreed to sell EMC networked storage products in China.

Given the jumpstart it would get from owning IBM's x86 business, Lenovo may be willing to make an offer that's hard for IBM to refuse.

Image courtesy of Shutterstock

In 2010, Apple captivated PC users with the release of the iPad. The thin and light tablet with exceptional battery life, ease of use and attractive design became the must-have mobile device for many corporate executives and employees. With nothing comparable in the Windows PC world, Apple had the business market to itself.

But Apple is a consumer electronics company at heart; so future iPad models remained devoid of features that were needed to meet corporate requirements for security, deployment, manageability, up-time, support and training. In the meantime, Microsoft, Intel and PC manufacturers picked themselves up and plotted their comeback. After three hard years, PC makers have finally released Windows tablets that tech analyst firm Moor Insights & Strategy says will likely reverse Apple's gains in the corporate market.

Apple's Party Is Over

"Enterprise tablets now exist that provide the best of both worlds between end user and IT, which puts the Apple in a precarious position of needing to add more robust enterprise features," Moor says in a white paper released Monday. "Until that point, Moor Insights & Strategy recommends enterprises re-evaluate their iPad pilot and deployments."

In other words, the enterprise party is over for Apple's tablets.

The new Windows tablets that finally get it right when it comes to meeting the needs of corporations and their employees are the Hewlett-Packard ElitePad 900, the Dell Latitude 10 and the Lenovo ThinkPad Tablet 2. Moor makes a convincing argument as to why it believes these three devices will steer companies away from the iPad.

What's In the New Windows Tablets

Two crucial components are Microsoft's Windows 8 and Intel's Atom processor Z2760. The former provides a touch-based interface that's a key element of any tablet's appeal, while the former delivers the performance and battery life. In fact, a comparison review by AnandTech found that battery life with the Z2760 surpassed the iPad 4 when Web browsing.

Because Intel has built a competitive chip based on the X86 instruction set, the three tablets can run the latest touch-enabled apps for Windows 8, as well as Windows 7 apps. Among the most important app is Microsoft Office, the enterprise standard for office productivity. Office doesn't run on the iPad, and Apple's productivity tools are not regarded as being on par with Microsoft's.

There's also more baseline expandability with the Windows tablets. Depending on the vendor, the devices can come with a dock, USB, miniHDMI and microSD. Add other optional manufacturer-supported accessories and the iPad is left in the dust.

Other pluses include playing nicely with Active Directory, Microsoft's directory service for authenticating and authorizing users and computers in a Windows network. The tablets, through the Atom processor, also offer Intel security, which includes Secure Boot and the firmware-based Platform Trust Technology.

Overall, the fourth-generation iPad provides roughly a half-dozen enterprise features, while the Windows tablets have more than a dozen. Most important, those features are already in use in corporations, so there's no need to evaluate them before deployment, train IT staff or purchase new tools.

What this ultimately means is the Windows tablets will be less expensive when considering the total cost owning and managing the devices. In addition, they are more durable and as nicely designed as the new iPads, and have larger displays. The resolutions are less, but still more than adequate for businesses.

Some Disagreement

How much of a head start Apple has in the enterprise is tough to determine, since the company won't say how many iPads have been sold to businesses. However, a running tally of the top 100 iPad rollouts kept by SAP show that nearly 70 are K-12 schools, where Apple has always done well. Nevertheless, there are some notable names on the list, including the U.S. Air Force, United Airlines, British Airways, General Electric and the Walt Disney Company.

Not everyone agrees with Moor. Jack Gold, principal analyst for J. Gold Associates, believes the market momentum is still behind the iPad. Units within an organization, not the IT department, will often choose the tablet they want to use and many want the iPad.

"The iPad, and Android (tablets), will have a place as long as users demand it," Gold said. "And the Win8 devices will find a niche, particularly in those organizations that have company-owned assets that IT fully controls."

While Gold has a point, the advantages the latest Windows tablets have are too numerous for corporations to ignore.

Image courtesy of Wikimedia.

It seemed bad enough to me that Michael Dell was going to get in bed with private equity sharks (and Microsoft) and try to take his company private, which is why I wrote "Michael Dell Goes To Hell" a few weeks ago.

Now things have taken a turn for the worse, as devil incarnate Carl Icahn has jumped into the deal, vowing to block it because he says it's not fair to Dell shareholders.

Dell proposes to buy out shareholders at $13.65 a share, but Icahn says this "significantly undervalues" the company. And he promises to bring "years of litigation" against Dell if the deal goes through.

Translation: Pay me and I'll go away.

Shakedown Artist?

To get some perspective on Icahn, read this New York Times story from 2011 where hedge fund manager Bill Ackman says of Icahn, "The guy is a shakedown artist. His word is worthless."

Icahn was the real-life inspiration for the character of Gordon Gekko. In 2008 he decided to torment Yahoo, and managed to get a seat on its board but never accomplished much except being a royal pain in the ass before stepping down in 2009.

Now poor old Michael Dell has to deal with this guy. Apparently Icahn could manage to scuttle the deal.

As bad as things were a month ago, they're even worse now.

(See also Michael Dell Goes To Hell.)

And whatever happens with the buyout, Dell still needs to find a solution to its central problem, which has nothing to do with whether or not the company is publicly traded and everything to do with the fact that Dell has become a big, boring company that hasn't made an exciting product in more than a decade.

With IBM tossing its might behind OpenStack, the open source software used to run cloud-computing installations is in a strong position to become the dominant platform in the industry.

OpenStack Rising

IBM announced Monday that it will make OpenStack the foundation of its cloud services and software. In backing the open source project, Big Blue joined other tech heavyweights behind the technology, including Hewlett-Packard, Dell, Cisco, Red Hat and Rackspace.

"IBM is the big fish in the sea and for them to make the level of commitment that they did today is a big deal," said James Staten, analyst for Forrester Research. "That's the kind of heft OpenStack needs."

The announcement is likely to send OpenStack's two main competitors VMware and CloudStack, another open source cloud computing platform, into a battle for second place.

“OpenStack has won the race to become the standard, and it has done it rapidly,” Ann Winblad, a venture capitalist and a managing director of Hummer Winblad Venture Partners, told AllThingsD.

IBM And Open Source

IBM has conducted a long love affair with open source software. In 2000, it backed Linux and a year later committed $1 billion to the development of the operating system. IBM's support helped drive Linux into large organizations and made it a viable competitor against Microsoft as a server platform.

"IBM could have the same impact on OpenStack as it did on the Linux world," Staten said.

IBM recognized years ago that open source code fit its business strategy a lot better than proprietary technology. The company draws most of its $100 billion in annual revenue from providing IT services. By basing a lot of its own technology on the code from various open source projects, as well as industry standards, IBM is able to work its hardware and software into what enterprise types call "heterogeneous computing environments" — the combinations of patched-together technology from a variety of vendors typically found in large companies, the segment of the tech market IBM is strongest.

"IBM has really great credibility in the open source community," Gary Chen, analyst for International Data Corp., said. "They really do understand open source."

IBM's First OpenStack Product

IBM followed its announcement with the introduction of its first OpenStack-based product, SmartCloud Orchestrator. SmartCloud is the brand name for IBM's platform for running cloud installations in customers' or IBM's data centers or in a combination of both. Orchestrator is a service customers use to configure the computing, storage and networking resources for cloud applications.

One unanswered question is how IBM will integrate its current SmartCloud code base with OpenStack. In an interview with NetworkWorld, Robert LeBlanc, a senior vice president of software for IBM, waxed mystical in describing how Big Blue will handle the transition.

"We're on a continual journey," LeBlanc said. "But we think this is a major step in that journey."

Cloud Standards

IBM clearly wants to influence OpenStack's technological direction and efforts to develop industry standards for cloud computing, which is still a relatively immature architecture. IBM has formed a 400-member Cloud Standards Customer Council to help push other tech vendors in a direction favorable to IBM. The company says it has more than 5,000 customers running private clouds on its platform.

IBM is also a major player in standards bodies, such as the World Wide Web Consortium and the Organization for the Advancement of Structured Information Standards (OASIS).

While standards are key to making different technologies work together, they won't help companies make the cultural changes necessary to adopt cloud computing and make it work. Delivering applications as a Web service dramatically changes the role of IT departments and affects how employees interact with software, too.

Because of its success in professional services, IBM is in a strong position to help companies make those cultural changes, but it won't be easy. "A lot of enterprises are not ready to hear it," Staten said.

Nevertheless, the momentum in the tech industry is behind cloud computing. The public cloud service market alone is expected to grow 18.5% this year to $131 billion worldwide.

With that much money on the table, IBM plans to become a major player in the market and is betting that OpenStack can help it achieve that goal.

Image courtesy of ShutterStock

Remember when "Other" was just a rounding error in market share reports? Now in the server market, it just might be the main event, as Facebook's Open Compute project, cloud computing, and other trends drive buyers to no-name server vendors instead of IBM, HP, and Dell. Time to short the incumbents?

According to new research from Gartner, server veterans like IBM and HP took a beating last quarter, with shipments plummeting 11.5% and 5.9%, respectively, contributing to an overall 0.2% server shipment slowdown. Meanwhile, so-called "whitebox" vendors that make up the "Other" category saw a 22% rise in revenues, and now account for 35.2% of global units shipped. IDC's market data showed largely the same incumbent malaise, with "Other" pumping revenues 14% year-over-year.

It used to be that such whitebox vendors like Quanta Computer, Wistron and Compal Electronics, all based in Taiwan, could be counted on to quietly build products for their name-brand American partners like Dell. No more. As Chris Gonsalves reports, companies like Google and Rackspace have looked to tailor servers to their requirements by going direct to Taiwan's leading ODMs, which has encouraged these vendors to start selling directly to more traditional enterprise accounts.

It's only going to get worse for the incumbents.

Cloud: Friend or Foe?

After all, the whole focus of cloud computing is to commoditize the server, making it a compute resource enterprises rent rather than buy. While not all workloads will move to the cloud, a big percentage will. In the cloud, enterprises simply aren't going to care whose logo sits on a box they can't even see.

And for those who do persist in managing their own datacenters, things like Facebook's Open Compute project may drive enterprises toward designing in lots of "Other." While Open Compute may not matter to most mainstream enterprises, as Mark Hachman points out, it's one more pressure point that incumbent server vendors could do without.

(See also The 5 Big Questions Dell Will Have To Answer To Survive.)

Ironically, the very thing that most threatens legacy server vendors could also save them, and then ruin them anyway: cloud.

IBM just announced it's getting behind OpenStack in a big way, basing all of its cloud services and software on an open cloud architecture. HP and others have also committed to OpenStack or other cloud platforms. Rather than be cannibalized by the public cloud, these server vendors are trying to extend their brands to private clouds, allowing enterprise customers to rent what they used to buy.

The problem, however, is that these vendors might be too successful. 

A Catch-22 in the Cloud

While public clouds like Amazon's AWS have been on a tear, they've still largely been relegated to test and development workloads. What happens when IBM and HP help make CIOs comfortable with the cloud? It's possible that those risk-averse CIOs will stick with the tried and true incumbents. 

But it's just as possible that once enterprises get comfortable with running mission-critical workloads on a private cloud that carries a shiny Dell logo, they'll take the next step into the public cloud, projected to be a $131 billion market by 2017, according to Gartner. Amazon has long argued that the real benefits of cloud computing are lost when trying to replicate them in private cloud deployments. While it's possible that IT will effectively mimic the public cloud, it's just as possible that developers and line-of-business executives will take their CIOs newfound enthusiasm for the cloud and run with it...straight to Amazon, Rackspace, or another public cloud provider.

In so doing, they'll inadvertently be growing "Other's" share of the global server market... and legacy server vendors' desperation to embrace the very thing that may kill them: the cloud. 

Image courtesy of Shutterstock.

On Tuesday, Dell faced Wall Street analysts for what could be the last time, as Michael Dell and a collection of investors prepare to take the company private. And though Dell Inc. reportedly exceeded Wall Street's expectations, the results were disappointing overall. And in some ways, that's a good thing.

Dell revenues fell 11% to $14.3 billion. Profits were down, too: 31% to $534 million. Dell's consumer business fell by a whopping 24% to $2.8 billion; The slogan "Dude, you're getting a Dell" is now a distant memory.

The earnings call is a unique event in American business; although chief executives occasionally deign to hear questions from business reporters, rarely do they sit down with their upper management and submit to questions about their past and future financial and operational performance. Calls following quarters in which a business dramatically exceeds expectations, taking a drink each time an analyst congratulates execs ("Great quarter, guys!") will usually result in a long nap under one's desk.

After a lousy quarter, on the other hand, analysts feel unusually liberated to ask the pointed questions that should always be asked. And - hurray! - some of them did their jobs on Tuesday.

Here are the five questions that Dell will need to answer going forward:

1. Does Dell Belong In The PC Market?

In many ways, this is the same question that Hewlett-Packard faced in the wake of Leo Apotheker's decision to shop the PC business, Meg Whitman's decision to retain it, and then the ultimate reorganization into a combined printer/PC business. With very little room for adding value besides bundling a printer with a PC, adding the crapware software that users hate, and striking out into relatively untested waters such as ultraportables and tablets, the answer seems to be: "Yes, but barely."

Dell's strengths are its XPS tier and its Latitude line of business PCs. But as Dell chief financial officer Brian Gladden noted, the growth continues to be in tablets and in the low-value desktop and notebook space - both areas where Dell, seeking higher profits, has consciously avoided.

2. Is There An Opportunity To Refresh Older Corporate PCs?

Yes, definitely. And that's the primary reason Dell won't bail out of the PC market any time soon - it has established longstanding ties with corporate America. This was one of the most telling quotes of the call:

"I think that’s really tough to get at, but the data that we’ve seen would suggest there’s still somewhere in the range of 40% of the corporate installed base for PCs that is XP or Vista that needs to be upgraded," Gladden said. "So that’s, I think, pretty consistent with the data that we see for our installed base, and for what we hear from our corporate customers."

Corporate IT departments rarely, if ever, update a PC operating system without refreshing the hardware, too. Microsoft may have to worry about corporate customers turning to Windows 7 rather than 8, but Dell doesn't care either way. And with support ending for Windows XP in April 2014, Dell knows there's a windfall ahead.

"All the data that we’ve seen, all the conversations we’ve had with customers, would lead us to believe that there’s still a significant refresh activity that has to happen in the next 12-14 months," Gladden said.

3. Is BYOD (Bring Your Own Device) The Answer?

Yes. Or it was in December, when Michael Dell said exactly that. 

"And in the customer conversations that we’ve been having, the interest in Windows 8 is quite high, even with commercial customers, who would normally wait a few releases to adopt the new versions," Dell said. "What we’re seeing here is really an immediate need, because CIOs are worried about the ramifications of a BYOD world. With Windows 8 products... we’re pleased with the incredible experience that they expect, while you get the security and versatility and reliability that your enterprise really requires."

Since then, Microsoft has reported terrific Windows 8 numbers, although there has been some suspicion that the company hid behind previouslysold Windows 8 licenses. Still, Dell and the rest of the PC industry will certainly help try and make Windows 8 a success. Ultimately, however, Michael Dell has bet his farm on Windows, while other hardware makers, like Samsung, have diversified into Android and phones. Time will tell who made the right choice.

4.) Will Server Customers Keep Buying From Dell, Or Roll Their Own?

If you're not following the datacenter market that runs the cloud services we use and love, you're may be unaware that Facebook has pioneered an industry-wide program called Open Compute, which publishes detailed specifications on building your own servers via components from no-name manufacturers. Facebook recently said that a major European datacenter would be constructed entirely from these "white box" servers, and companies like Rackspace have also signed on.

Revenue-wise, Dell’s Server and Networking Business unit grew 11% in the last quarter, to $9.3 billion. But ISI Group's Brian Marshall asked one of the key questions: given the Open Compute model, will the trend continue? Gladden waved off the question.

"It is relatively isolated to a few number of large-scale customers who can make the economics work, and given that, we’re still seeing strong growth in that business, and significant opportunities to continue to grow the hyperscale business," Gladden said. "So I don’t think it’s a new dynamic."

Gladden's right; most companies are not going to exert the time and effort to design their own servers, Open Compute or no. But over time, this may eat into the server businesses of Dell and others.

5.) What Effects Will Virtualization, Consolidation and the Cloud Have On Servers?

Virtualization, where a number of "virtual servers" can share computing resources, helps effectively consume underutilized servers, especially older hardware. Some of the older hardware can be retired, as data centers "consolidate" their hardware and run virtual machines on top of them to maximize their use. At the same time, as more cloud services are deployed, the number of servers they require goes up. Unfortunately, analysts have reported that the number of servers sold has flattened - the trends of consolidation and virtualization are holding down sales, and revenues are actually decreasing.

For a long time, notebooks became the escape route out of the quicksand of commoditization that has dragged the industry down. Then servers were the answer. Now, they're apparently sinking into the mud, too.

Dell may in fact continue to provide updates to Wall Street as it goes private; it hinted as much when it talked about a fiscal first-quarter earnings release. But as the company moves into the financial shadows, away from public scrutiny, it did not provide any guidance for the future. One can wonder whether its outlook is equally cloudy.

You know things are bad when HP is making fun of you. But that's what's happening to Dell today, after its decision to take the company private in a leveraged buyout.

HP just issued a statement warning Dell's customers that Dell "faces an extended period of uncertainty and transition that will not be good for its customers."

The statement is basically an invitation to customers to check out HP. "We believe Dell's customers will now be eager to explore alternatives, and HP plans to take full advantage of that opportunity."

Carter Lusher, chief IT analyst at market researcher Ovum, put out a statement warning that Dell customers need to pay close attention to this deal. One challenge is that Dell has already been going through a "wrenching transition" from being a supplier of cheap PCs to being a vendor that can sell enterprise infrastructure equipment. 

And now comes this leveraged buyout, which will only add to the confusion. "Ovum recommends that CIOs need to assess the risk to their infrastructure and put into place plans should Dell's radical hardware, software and services shifts require changes to procurement plans," Lusher says in the statement.

HP points out that Dell will now be saddled with debt, which will make it harder for Dell to invest in creating new products. And that's true.

What Happens Next

For a good take on how the money works, check out Henry Blodget's piece on Business Insider about how deals like this usually work when a private equity fund like Silver Lake Partners take over a company.

The gist is that the private equity guys usually take some of the company's cash on hand (at Dell there's a pool of $15 billion) and pay themselves a huge dividend, enough to cover all the money they've put into the deal, so from there on out they have no risk at all. (This is why an MIT professor once famously said, "Private equity is a little bit like sex. When it's good, it's very, very good. When it's bad, it's still pretty good.")

They'll use some of the remaining cash to pay down debt. Then they'll start cutting employees and selling off parts of the business. 

Maybe it seems nasty for HP to be pointing all this out, but hey, this is business. You can be sure every HP enterprise sales person is hitting the phones hard right now. And every big Dell account must be getting lit up with phone calls from HP and others.

Larry Dignan of ZDNet calls the HP statement a "rapid-fire FUD campaign," and maybe it is. But Dignan also points out the "10 big unknowns" in the deal. And Dell's uncertainty is a huge opportunity for others.

One of the things for which Michael Dell will be best remembered is a famous quip he made about Apple back in the 1990s when Apple was struggling to stay alive and Steve Jobs had just returned to turn the place around. Asked what he'd do if he were in Jobs's shoes, Dell said, "I'd shut it down and give the money back to the shareholders." Not long after that, someone at an Apple all-company meeting asked Steve Jobs about that comment, and Jobs delivered one of the best lines in the history of tech: "Fuck Michael Dell."

Yes indeed. Fuck Michael Dell. That was our Steve, and guess what? He was right. Apple's recovery and rise to world dominance has been well chronicled. In all the excitement nobody noticed how Dell was over in the corner, quietly fading away. In the end, nobody needed to fuck Michael Dell, because he fucked himself. 

Dell hasn't made an exciting product or even had an exciting idea in more than a decade. The only thing Dell ever did of note was that they found a way to make PCs a little bit cheaper than everyone else. That was it. Their innovation was about process, not about product. And that advantage got erased when everyone else started making stuff in China.

By the time I was writing the Fake Steve blog, Dell had become a running joke, as in this one: "Every time you buy a Dell, a baby seal dies." I actually had a T-shirt made up out of that one.

Going Private

Today the news is that Dell, the company, is going private, in a leveraged buyout valued at $24.4 billion and led by Silver Lake Partners, a private equity company. Michael Dell is kicking in some billions, and Microsoft is contributing as well. In a statement, Dell said the deal "will open an exciting new chapter for Dell, our customers and team members."

(See also: Dell Takes Itself Private In $24.4 Billion Deal - With Help From Microsoft.)

Please. Deals like this are where big companies go to die. Michael Dell has gone to hell. He's now in bed with a bunch of ruthless private equity guys whose role in this world is not to build things, but to take them apart and sell the pieces. They're corporate chop shops. 

As if that weren't bad enough, Dell also now finds himself on the end of Microsoft's leash. That would have been a tough fate back in the days when Microsoft was just evil. But now Microsoft is stagnant too, bereft of big ideas, behind the curve in every area. Won't it be great having them at the controls? 

Microsoft is a hollowed-out shell, a place so lame that it reaches for relevance by clinging to hardware partners. First came the deal with Nokia where Microsoft spent billions so it would have at least one phone maker committed to using Windows Phone 8, and hey, look at how well that one has worked out for both parties!  Now Microsoft will have Dell as its prisoner. God only knows why, or what the Borg will do with Dell. The PR guys will come up with some guff about synergy and the power of this great partnership between Dell and Microsoft.

But right now the quips come rushing at me so fast I can't process them all: Rats swimming toward a sinking ship; yoking boat anchors together and hoping they'll float. 

A Colossal Wreck

Back in the 1990s I used to cover Dell for Forbes, and I visited the company a few times. They were riding high then, and boy did they let you know it. They were perhaps not as arrogant as Apple is today, but close. I recall very clearly a conversation with Michael Dell where he told me that these little PDAs and phones were never going to be a big deal because who would ever want to read things on such a tiny screen? No, he assured me, the PC had a strong, vibrant future ahead of it.

And now here we are, and I'm thinking about "Ozymandias," and thinking how grateful I am that my high school English teacher made us read that. 

Good luck, Michael Dell, and Godspeed. I am pretty sure that I will never use a Dell product, ever, for the rest of my life. But I suppose other people will. I will pray for their souls.

Image courtesy of Reuters.

Dell Inc. confirmed Tuesday that it has agreed to a $24.4 billion deal that will take the company private, removing the second-largest PC company from the prying eyes of investors, analysts and regulators. But its partner Microsoft may provide at least a small window into the company's finances.

(See also: Michael Dell Goes To Hell.)

What The Deal Looks Like

Michael Dell and a collection of financial partners, including Silver Lake and MSD Capital, will buy up Dell's outstanding shares at $13.65 apiece, representing a 25% premium over Dell's closing price on Jan. 11., the day before the rumors of Dell going private surfaced. (A company like Dell that goes private must buy up all the company's outstanding shares, which means offering shareholders an incentive - a better price on their shares then they could otherwise get.)

The deal also includes a $2 billion loan from Microsoft, which is not a permanent investment. Terms of the loan were not disclosed. In addition, debt financing was provided by a number of Wall Street banks. Dell Inc. also said that a Special Committee in charge of the deal would be open to alternative proposals during a 45-day "go shop" period, although the person or group that proposed an alternative deal could be subject to termination fees of between $180 million to $450 million.

Michael Dell will retain his title as CEO and chairman, and will contribute his 14% stake in the company; which means that the company will buy up his shares, paying him a very large sum in return. Dell approached Silver Lake last August to take the company private, and the company formed a special committee at the time to evaluate its options.

What The Deal Means For Dell

“I believe this transaction will open an exciting new chapter for Dell, our customers and team members,"  Michael Dell said in a statement.

For Dell, going private means that the company can invest in new technologies and otherwise pursue risky strategies that shareholders could otherwise criticize. With the buyout, Dell Inc. answers to no one, save for the banks and Microsoft, who are funding the deal. It also gives Michael Dell himself an exit strategy, should he wish to step down or if the banks choose to replace him.

"We can deliver immediate value to stockholders, while we continue the execution of our long-term strategy and focus on delivering best-in-class solutions to our customers as a private enterprise," Dell added. "Dell has made solid progress executing this strategy over the past four years, but we recognize that it will still take more time, investment and patience, and I believe our efforts will be better supported by partnering with Silver Lake in our shared vision. I am committed to this journey and I have put a substantial amount of my own capital at risk together with Silver Lake, a world-class investor with an outstanding reputation. We are committed to delivering an unmatched customer experience and excited to pursue the path ahead.”

Microsoft: A Window into Dell's Finances

It's possible, however, that Dell won't go completely private. For the period of time that Microsoft's loan is active, Microsoft's shareholders are going to want to know how its investment is doing. Microsoft accounts for its investments on its income statement, and could break out the Dell investment as a separate line item. That number won't offer much insight into how profitable the newly private Dell is, or what revenues it will have pulled in, but it will indicate whether Dell's business is going in a positive or negative direction. 

“Microsoft has provided a $2 billion loan to the group that has proposed to take Dell private," Microsoft said in a statement. "Microsoft is committed to the long term success of the entire PC ecosystem and invests heavily in a variety of ways to build that ecosystem for the future.

“We're in an industry that is constantly evolving," the company added. "As always, we will continue to look for opportunities to support partners who are committed to innovating and driving business for their devices and services built on the Microsoft platform.”

So why Dell? Influence.

"Microsoft, with a $3 billion investment, would get a certain amount of control and influence over Dell," wrote Patrick Moorhead, a former corporate fellow with AMD and now principal of his own analyst firm, Moor Insights, in an email earlier this month. "Dell has pulled back from the PC business as of late and that is not good for Microsoft as its cash cow is Windows. An investment of this size could guarantee a longer term Windows customer."

Besides the consumer market, Microsoft could steer Dell toward being more focused on the Windows platform for the data center, rather than "trying to do everything for everybody," said David Johnson, analyst for Forrester Research, in an earlier interview with ReadWrite's Antone Gonsalves. In addition, Microsoft could get access to Dell's enterprise sales force and could provide a "converged infrastructure" that unifies the silicon, the hardware, the operating system platform and the management and operation tools.

The deal is expected to be completed by the end of the second quarter. Dell's future will become a bit more shadowed then, by its own choice.

On Wednesday, Bloomberg released a new website for its Bloomberg Billionaires Index, complete with some snappy data visualization tools. While we'd like to see a few more features added to the mix (a year-by-year progression of adds and drops would be great), it's a fun tool, and it makes certain trends easy to spot. For those of us who watch the tech community, the list provides a quick gut-check about where the tech sector fits into the larger world's priorities.

Technology Isn't Everything

Technology is important, but don't forget that people need to build things, buy things and pay for them, and those industries generate revenue, too. Only 12 of the world's 100 richest hail from the tech industry, so it's far from a dominating presence. The tech billionaires are well distributed throughout the list, with only Bill Gates and Larry Ellison in the top 10, and half the techies landing the bottom 50. Tech has a significant showing on the list, but its not as strong as retail (17 total, with 9 in the top 20). Overall, technology seems to be about as lucrative as mining or finance. It's still a much better bet than newspapers, though. Only three of the top 100 hail from the media world.

Almost All-American - For Now

All but two of the tech 12 are Americans. The others – Wipro CEO Azim Premji, (India, #49) and Samsung Chairman Lee Kun Hee (South Korea, #91) – are the first of what is likely to be many more future overseas members of the club. The U.S .list is still weighted pretty heavily toward the heavy hitters of the 1990s. SAS, Microsoft, Oracle, and Dell are solid companies, but most people wouldn't consider them the future of tech. Yet these "legacy" companies account for 6 of the 10 Americans on the list. It's a pretty sure bet that 5 to 10 years from now, we'll see a lot more members from South Korea, China, India and Russia.

$10 Billion Takes Time

Becoming an overnight millionaire in the tech industry is no big deal, but there's no shortcut to the top 100 billionairs. Well, there might be just one. Mark Zuckerberg. Zuck is the only person under 30 in any industry to make the list. Even stepping up to the sub-40 bracket, there are only three more additions: Larry Page, Sergey Brin, and Colombia's Alejandro Santo Domingo, who manages a collection of media companies and SABMiller. Technology can certainly make you rich in a hurry, but to join the ranks of the mega-mega-rich, even geeks have to work at it for a while.

Family Planning

One bonus for the children of tech billionaires is inheritance. While many of the more traditional industries seem to favor having lots of children, the tech industry tends toward a more reasonable family size. The sweet spot seems to be 2-3 children - which leaves lots more cash for each offspring. Zuckerberg and Paul Allen have no children (yet), while Jeff Bezos and Michael Dell each have 4. On the rest of the list, 21 have 5 or more kids, and Malaysia's Robert Kuok has 8! Of course, since many of the techies on the list have already signed Bill Gates' Giving Pledge to donate the bulk of their fortunes to charity, those kids might have to settle for measly single-digit billions, anyway.

With an eroding PC market causing mayhem among its allies, Microsoft is reportedly talking about investing big in Dell to help take the troubled company private.

(See Why Would Microsoft Invest $3 Billion Into Dell?)

Such a dramatic move would inject Microsoft much deeper into the hardware business, giving it the chance to help drive the kind of innovation that has recently eluded the PC industry. But it would also blow up its longstanding partnerships with computer makers.

Shaking Up The Industry

Microsoft is only in discussions to join an investor group for a Dell buyout, and has made no commitment, according to The Wall Street Journal. If Microsoft were to follow through, than its investment would likely be around $2 billion. And Microsoft refuses to even discuss the report. "We do not comment on rumors or speculation," a company spokesperson said. Computer makers are also staying mum. Asus, Lenovo and Hewlett-Packard either declined comment or did not respond. 

However, there's no reason why the rest of us cannot have a little fun exploring the implications of a deep Microsoft/Dell partnership.

First of all, this would simply be another step in Microsoft's push to shake up the moribund PC industry. Microsoft has good reason to take charge of its own destiny, rather than leave it to a bunch of partners that are more Keystone Cops than PC innovators. Since the release of the first iPad in 2010, tablets have joined smartphones in eating away at PC sales. During the last quarter of 2012, shipments fell more than 6%, marking the first time in over five years that the PC market has recorded a decline during the holiday season, according to International Data Corp.

So far, PC makers' most promising response has been the ultrabook, a thin and light laptop that is the Windows version of Apple's MacBook Air. Ultrabook specs, including size, weight and battery life, are dictated by Intel, which owns the name. So far, manufacturers have been unable to produce ultrabooks at a price low enough to attract consumers. As a result, PC makers are confusing customers with cheap alternatives with names like Sleekbook, which is made by HP.

That's clearly not good enough for Microsoft, which has made a radical overhaul of its operating system with Windows 8 and launched its own tablet after computer makers failed to slow sales of Apple's iPad, which dominates the tablet market today. 

Microsoft + Dell

Microsoft has apparently grown tired of this bonehead behavior, and Dell offers a way out. For starters, the computer maker has deep expertise in PC manufacturing and support, neither of which Microsoft knows how to do well.

Besides the consumer market, Microsoft could steer Dell toward being more focused on the Windows platform for the data center, rather than "trying to do everything for everybody," said David Johnson, analyst for Forrester Research. In addition, Microsoft could get access to Dell's enterprise sales force.

Finally, a Dell/Microsoft partnership could lead to "converged infrastructure" that unifies the silicon, the hardware, the operating system platform and the management and operation tools. Such systems, which are a relatively new trend in the enterprise market, enable companies to use the same infrastructure for multiple purchases, such as running applications and storage. "It would be a potential game changer," Johnson said.

Of course, other computer makers would unlikely be happy with Microsoft working so closely with Dell - and perhaps giving it preferential treatment. However, Microsoft has already become a competitor with the Surface tablet, and largely gotten away with it.

(See Acer Begins Competing Against Microsoft's Surface Tablet - In The Press)

Microsoft's hardware partners would likely have even bigger issues with a Microsoft-Dell hookup, but there's not really much they can do about it. "Once you decide you're competing with the OEMs (original equipment manufacturers), you're competing with the OEMs," said Michael Cherry at Directions on Microsoft. "You're already there. The investment just makes [Microsoft] a bigger OEM."

No one knows whether Microsoft will actually structure a deal to make Dell a premiere partner. But if it does, then Microsoft will effectively redefine its relationship with PC makers, creating a far different industry than exists now. And that could be a very good thing.

Best of all from Microsoft's perspective, investing in taking Dell private could give it most of these benefits for less than $3 billion, not the $24 billion and major complications a complete buyout might cost, if Dell were even for sale.

Image source: Dell and ReadWrite.

Microsoft may be planning to invest between $1 billion and $3 billion into Dell as part of a leveraged buyout that would take the company private, CNBC reported Tuesday. 

The report claims that Silver Lake Partners is acting as matchmaker, negotiating an investment between Dell and a special committee representing Dell's shareholders. The Wall Street Journal confirmed CNBC's report, suggesting that any Microsoft investment could be on the order of a couple billion dollars. Microsoft and Silver Lake's relationship dates back to May 2011, the WSJ reported, as the equity group architected the $8.5 billion deal for Skype.

(See Secrecy: The Real Reason Taking Dell Private Makes Sense.)

Dell has been said to be negotiating a deal that would take the company private, valued at about $23 billion to $24 billion. Under the new ownership, Dell would be owned by founder Michael Dell as well as Evercore Partners and Silver Lake, according to Bloomberg. Mr. Dell himself owns about 15.7% of the company's shares, worth $3.45 billion at today's deflated prices.

Dell, of course, made its mark by stripping costs out of the PC supply chain and persuading customers to pay up front for a personal computer that it hadn't even built yet. Over time, however, the trend of PC commoditization it helped establish caught up with the company, and the balance of power in PC manufacturing has swung toward Asian countries with lower labor costs.

So Why Microsoft?

Microsoft, of course, is facing its own pressures, as customers shift away from Windows and to smartphones and tablets. Under this scenario, one analyst explained, Microsoft would essentially be buying a customer base. And with $5 billion in cash on hand at the end of the September quarter, Microsoft could theoretically afford it.

"Microsoft, with a $3 billion investment, would get a certain amount of control and influence over Dell," wrote Patrick Moorhead, a former corporate fellow with AMD and now principal of his own analyst firm, Moor Insights, in an email. "Dell has pulled back from the PC business as of late and that is not good for Microsoft as its cash cow is Windows. An investment of this size could guarantee a longer term Windows customer."

Dell, unfortunately, has never had much luck in either tablets or smartphones. After periodically trying and failing to launch a tablet and phone, the company has always returned to its bread-and-butter product: the PC.

It's not hard to believe that Microsoft might also be trying to pursue the sort of deal that brought Motorola under Google's fold. Ironically, Google has done everything but tap into Motorola's manufacturing; the word was that Google bought Motorola for its patent portfolio, and every Nexus device that Google announces without a Motorola logo on it gives more credence to that theory.

Today, however, Dell is more than just an expert in cost-cutting; the company has been working hard to beef up its services business. And cost-cutting is a service: in a meeting last week, Tracy Davis, vice president of Dell's data-center solutions group, explained that if customers wanted to build Open Compute servers based on the Common Slot or "Group Hug" board, they should turn to Dell - the only company with the global supply-chain expertise to search out the best deals.

Misery Loves Company

But if the PC really is on the wane, just as desktops eventually gave way to laptops and so on to tablets, then a Microsoft-Dell relationship might by trying to prop up a pair of companies facing the same underlying problems. It's a little hard to believe that a company as large as Dell would go out of business, but to that I would say two words: Creative Technology. More than a decade ago, the company's sound cards were in virtually every PC. Then sound functions became integrated into PC motherboards and processors and the company's music business was steamrolled by the Apple iPod. Today, Creative Labs, its U.S. subsidiary, sells the sort of headphones you can find in the back aisles at Target.

Microsoft hasn't commented on any particular investment, and I don't expect it to. But with the company's quarterly earnings call due Thursday, Wall Street analysts will undoubtedly broach the subject, especially if Microsoft has nothing to say before then.

Image source: Dell.com.

There's been a lot of talk about why the proposed Dell buyback doesn't add up. Some of it dates back more than two years, and the arguments all center on one thing – money. 

The problem, as critics see it, is that going private robs Dell of critical cash at the time it most needs to spend that cash to acquire companies that diversify its lineup. It's a valid point, but that doesn't mean it's the only way to look at the situation. Even with a cash crunch, pulling Dell off the public market might be exactly what the company needs to avoid prying eyes that could toast its chances for future success.

Source: Dell.com The IBM Ideal

When IBM sold its PC business to Lenovo in 2004, everybody won. IBM pulled in some needed cash, exited a low-margin business and focused on the enterprise. Lenovo got instant credibility and brought efficiencies to a market that still had years of oomph.

Nearly everyone predicts that Dell wants to do the same with its buyback, but today's market is fundamentally different. PC sales are dropping, and Dell's share of that market is falling even faster. Plenty of PC manufacturers would be willing to fold Dell's brand into their lineup, but not at the premium investors would ask. Time isn't on Dell's side. The longer it waits to offload its PC business, the worse the deal will get. Going private would at least shield the company from having to make those details pubic.

The HP Boondoggle

Dell is smaller and more dependent on PCs than is HP, but the two companies line up well enough to illustrate how  a reinvention of Dell might work. 

HP is an absolute wreck. Investors are shaky, key executives are fleeing, and even Meg Whitman's rosiest turnaround scenario offers years of bleeding to come. HP has product problems, legal problems and PR problems, and it's headed for a fire sale. Seven out of the ten first-page results on a Google News search for "HP" were negative. HP is floundering in full view, and all the negativity is making it difficult for the company to manuever. 

So why didn't HP go private?

According to Gartner Senior Research Analyst Chris Gaun, "HP has a larger market capitalization, and going private might not have been an option." Raising $15 billion for a Dell buyout is pushing the envelope. $34 billion for HP would be in a completely different zip code. Gaun also points out other complications, such as the Autonomy investigation, which would add substantial risk and complexity to any buyout. HP is too big and too messy for a buyback.

HP CEO Meg Whitman claims low-margin PCs are essential to HP's survival as a full-spectrum technology provider. Lets' say Dell agrees. Going private still makes sense. 

According to Reticle Research Principal Analyst Ross Rubin, a buyback could benefit Dell, regardless of its goal. "Going private would insulate Dell from investor scrutiny and the expenses of running a public company. It would have more flexibility to continue the low-margin PC business if, like HP, it continued to see it as part of a solution - or spin it out and take the revenue hit, as HP was considering."

Source: Shutterstock Protecting The Brand

Even the high-margin products and services Dell wants to protect are being pushed toward commodity status. In the end, Dell will be trading on its name. Insulating that name from controversy that might cheapen it could be worth some belt-tightening.

Michael Dell photo from Dell. 

The case for Windows 8 is a response to the Bring Your Own Device (BYOD) trend?

That's the take of Dell founder Michael Dell, who told customers and partners Wednesday that corporate interest for Windows 8 is, surprisingly, "quite high."

It's Dell's World

Michael Dell opened Dell World, its annual partner and customer showcase, by announcing a slew of service offerings, including support services aimed at PowerEdge server customers and a managed threat protection appliance. But Dell hasn't forgotten its roots as a PC supplier, and offered hearty support for Windows 8, including an 18-inch all-in-one PC whose screen apparently snaps out, like a tablet, to create a massive personal workstation.

Users and customers have already questioned the need for Windows 8, with some saying that they preferred Windows 7 - or even WIndows XP - over the new OS. And research firms IDC and NPD have followed suit, sharing numbers or anecdotes that indicate that Windows 8 support hasn't been as strong as predicted or hoped for.

But Michael Dell, who built his company on the back of the personal computer (and a well-managed supply chain), apparently feels differently.

The PC Ain't Dead Yet

"As I’ve said, we strongly believe that PCs are important. There are about a quarter billion PCs sold every year," Dell said Wednesday. "And the installed base of PCs is about a billion and a half. Overwhelmingly, PCs are how business gets done in the world today.

"And now with Windows 8, we’re on the cusp of the next revolution of Windows hardware and software, bringing together the laptop and the touch screen," Dell added. "And as you see here in Dell World and across the expo, we have a really compelling full line of touch-enabled products from our XPS 10 tablet, to the stunning XPS 27, with its quad HD display, 27-inch touch display, and every kind of imaginable product you can think of in between."

Dell also announced a new 18-inch all-in-one PC, presumably a variant of the One family, "where the screen just pops out, snaps out, just take it with you. and you’ve got a full, portable, 4.5-pound, workstation or entertainment center. You’ll have to wait a bit to see that, but you’ll think that’s very cool,” Dell said. "The possibilities are limitless, and as adoption accelerates for Windows 8, and for touch, it will give the billion and a half users of the installed base the reason to get a new PC," he added.

The argument Dell made - the consumer argument - has been well understood. But most observers believe enterprises will be slow to adopt Windows 8 - as they would be slow to adopt any new technology until it was proven, validated and supported. Even enterprises that showed off corporate applications running on Windows 8 at launch would normally be considered rather ambitious launch partners.

Windows 8: A BYOD Remedy?

But Dell pooh-poohed all that.

"And in the customer conversations that we’ve been having, the interest in Windows 8 is quite high, even with commercial customers, who would normally wait a few releases to adopt the new versions," Dell said. "What we’re seeing here is really an immediate need, because CIOs are worried about the ramifications of a BYOD world. With Windows 8 products... we’re pleased with the incredible experience that they expect, while you get the security and versatility and reliability that your enterprise really requires."

It's hard to say how the apparent interest in Windows 8 will translate into sales, with most analysts expecting it will take until mid-2013 before sales ramp up.

But if what Dell says is true, then CIOs are truly scared to death of BYOD devices. Windows 8 certainly has a consumerish look and feel, and those CIOs apparently hope that their workers will be happy to use a tablet that looks like a consumer device, but was designed to be managed by the corporate IT department.

The Problem You Can't Touch

But Windows 8 has another problem: Mainstream Windows 8 devices apparently aren't selling all that well. Bob O'Donnell, an analyst for IDC, reports that only the 10% or so of Windows 8 devices that are touch-enabled are selling well.

"Most touch screens for notebooks (basically, anything bigger than phones) are the LCD plus a separate panel bonded on," O'Donnell said in an email to ReadWrite. "The problem is, the yield rate for these panels is low, the capacity is relatively low, so bottom line, we think only about 15% of notebooks will have touch next year. Plus, they're expensive, which just adds to the problem."

That could be good news for Dell, which emphasized touch in its Windows 8-powered offerings. But is the corporate Windows 8 enthusiam Dell sees reflective of the general market, or just its own sales force's experience?

As I've said before, until Microsoft releases its Windows 8 sales numbers in January, we won't know for certain.

If this is the dawn of the “post-PC era,” then the economy never got the memo. While the tablet segment is finally growing (thank you, Apple), the five-times-larger PC segment is actually growing faster in terms of units, and will continue to do so for the foreseeable future.

Industry analysis firm IDC predicts worldwide growth in tablet shipments from 2013 to 2016 to be about 32 million units per year. In the same period, the rate of PC shipment growth will be about 38 million units per year. 

For 2013, IDC predicts Windows 8-based tablets will constitute merely 6% of units shipped worldwide. This means, despite all this business about the new Start Screen bridging the functionality gap across platforms, Windows 8 isn’t really about tablets. It’s about injecting PCs with the desirability of tablets. 

Avoiding The Commodity Trap

While the PC market is not dying, PCs themselves must evolve more quickly into something more desirable, more functional, more adaptable to the purposes of consumers in this decade. Otherwise they will continue their slide into low-margin commodity products - largely indistinguishable from each other. PC vendors desperately need the next waves of their product lines to be significantly, tangibly different from their predecessors, in order to justify increasing their prices and profit margins.

This is why Windows 8 looks so different. While reviewers have raised a ruckus about Microsoft designing the new Start Screen to take over the entire display, making Windows 8 more difficult to use even for veterans, there is a reason why Microsoft did this: For a Windows 8 PC to justify a price point above that of the iPad, it has to look demonstrably different from a Windows 7 PC. You couldn’t photograph a Windows 7 machine, put it in a sales brochure, and have it look different from a Windows Vista computer. But you can see Windows 8 from the opposite end of the mall.

In 2006, vendors wanted Vista to be demonstrably different from Windows XP. Microsoft tried to demonstrate this difference with aesthetic nuances like translucent window frames and 3D task switching, and then tried to divide PCs into categories based on how well they supported these nuances. Consumers were rightly confused, and some even sued.

To avoid a repeat of the 2006 debacle, Microsoft had to make Windows 8 not only look entirely different, but enable new PCs to acquire some of the more desirable characteristics of tablets. That's why this next wave of PCs will promote noteworthy differences in two key areas:

1. Touchscreens

The relative success of touchscreens on PCs will be more important for Windows 8 than its comparable success on tablets.  

Up until now, most consumers looked for middle-tier laptop machines that provided good processing power and nice features, at price points around $900. The first middle-tier Win8 notebooks with touchscreens are  priced around $1,200. Acer’s new Aspire S7-191 has an 11.6-inch screen with 16:9 aspect ratio and respectable 1920 x 1080 resolution (“true HD”).  It’s based on Intel’s third-generation Core i5-3317U processor, has 128GB of solid state storage and 4GB of RAM, weighs about two-and-a-quarter pounds, and sells for $1,199.99.

Dell’s new XPS 12 also has true HD resolution, a 12.5-inch screen, and sells for $1,199.99 (one senses a theme).

The XPS 12 uses the same Core i5 processor, has the same storage capacity, and the same memory.  Dell’s value-add will be style, which has not always been its strong suit. Though the XPS 12 is still a clamshell laptop, its display is mounted along the middle horizontal axis to a hinge bracket.  So you can flip the display inside the bracket 180 degrees, close the clamshell, and use XPS 12 as a tablet.  While the conversion may be shockingly cool for some, for folks who’ve had experiences with Dell in the past, the effect may be just a bit creepy, like a 1959 Philco Predicta TV chassis.

Toshiba’s Satellite U925T has a touchscreen that folds all the way back like a yoga instructor, and then slides forward over the keyboard. It’s a unique effect, but to get a price advantage over Dell of just $50 ($1,149.99), Toshiba traded off screen resolution (1366 x 768) and graphics power, settling for Intel’s “dynamic memory” - allocating memory blocks from the system as needed, rather than using its own discrete graphics memory. 

For $1,399.99 ($200 more than the price of its model 191), Acer bumps the screen size of the Aspire S7-391 up to 13.3 inches. Instead of a full convertible, though, Acer extended the 391’s hinge so you can fold it all the way back, turning your PC into something of a “surface,” to borrow a phrase.

In a move that will likely confuse some customers, HP will mix the Envy, TouchSmart and Intel Ultrabook brands together in one device, which is a bit like naming a car “Cadillac Chevy Shelby.” The Envy TouchSmart Ultrabook 4 is based on the lower-performing Intel Core i3-3217u processor backed up with an AMD graphics processor, 4GB of RAM, and a standard 500GB hard drive, though with a 32GB solid-state accelerator.  All this crank the weight up to about 4 pounds.

The 14.4-inch display will project 1366 x 768 resolution, which is not well-suited for 1080p video, and will definitely look blocky compared to tablets. It also won’t have Dell’s cool tablet-morphing hinge. But it has a $799.99 price tag - a respectable price point for an entry-level PC compared against a $500 tablet. And it helps establish a precedent for PCs as having some greater value than tablets.

2. Power Efficiency

We’re getting closer to the time when you can complete a full day’s work on a single charge. The next dramatic improvements may not come from CPU manufacturers like Intel refining their architecture and manufacturing processes, but by Microsoft adopting a new application architecture.

Last July, in a self-published article on power optimization through software, Intel engineer Manuj Sabharwal showed that simply replacing the routines used by typical Windows programs to tick away the passing moments while they’re idle with the idle process code used in the new WinRT engine, battery life on notebook PCs could be extended by an order of magnitude. That means reclaiming 90% of lost battery power!

While Windows 8 battery life estimates remain similar to those for Windows 7 devices (averaging about 5 hours for laptops, closer to 8 hours for Ultrabooks), other efficiency factors could increase battery life down the road. In Windows 8 the Desktop is no longer rendered using the 3D accelerated engine. While not as cool, it’s also more power-efficient. And though it’s still difficult to find the exit from a Windows RT app (with the touchscreen, there’s a new “wipe-down” gesture), the fact that it consumes almost no power when idle makes quitting them less critical.

The Catch-22

While it’s tempting to toss away the remnants of the “PC era” as old and unfashionable, there’s still a sizable functionality gap between tablets and PCs. Until bandwidth and cloud storage are both cheap and ubiquitous), work devices will require sizable local storage and high processing efficiency during heavy workloads. They’ll also need gesture methods other than just touch, plus real keyboards - not something ripped off of an Atari 400.

The first round of Windows 8 PCs come a step closer to the mobile work device we’ll eventually settle down with. But the strange permutations of convertibility and hybrid hard-drive/solid-state combinations suggests this new class of PC hasn’t yet found its footing.  

While we wait for the perfect Windows 8 PC, tablet prices continue to fall,. Ironically, that may create reasons why tablets will not replace PCs. Tablets could become affordable enough that they don’t have to do double-duty as PC-substitutes just to remain desirable. Plenty of people will choose a tablet, but if you want PC functionality... you can still buy a PC.

PC photos courtesy Acer America, Dell, Hewlett-Packard and Toshiba.