I have been waking up in the middle of the night, palms sweating, heart pounding, eyes wide open. It is THAT dream again. The end is near... Armageddon for the personal computer industry.
Apple is below 5 percent market share. SGI is on the ropes. Even the 'Last Warrior', Sun, is porting to Intel's Merced. Netscape is taking on water, talking about Java as dead weight instead of a lifeboat. Cheap PCs and decent profit margins for no one, except Intel and Microsoft.
I had to make the trek once more to see Nostrajava: sage, seer, mystic and former Webmaster to the White House interns. Armed with nothing but a flask of cheap gin and a couple of Doobie Brothers 8-tracks, my journey began on a cold and rainy day. As in any journey of knowledge and enlightenment, the road is long and perilous. In my case, the road winds through the worst freeway in California. Dodging Soccer Moms in three-ton Suburbans and crazed teenagers in lowered Hondas, I worked my way up to the top of Mt. Hamilton.
At the top of the mountain, I saw the familiar beat-up Ford Van of the Keeper of the Flame, Nostrajava. Like his namesake, Nostradamus, he was in a trance, staring into a brass pot mounted on a tripod.
"Oh Great One," I called out. "Any wisdom in your brass pot; your window into the future?"
"Yo, Joey baby. What it is!" Nostrajava responded in a very un-mystic voice. "I can sense you are worried, seeing the dominance of the Intel-Microsoft machine. You fret over the future and long for the days of high margins and good gin."
"Amazing!" I responded. "How could you know?"
"Your 'Bill Gates Sucks' T-shirt for starters, but Intel and Microsoft are what everyone comes to see me about lately. Unfortunately, I can't help you, I'm out of the seer gig."
I was shocked. "But, what will you do?"
"I'm opening a microbrewery in Cupertino. Got a hell of a deal on an old building that used to house Apple Computer's Creative Services group. All kinds of cool stuff still on the wall. The place will have a 'Back to the Margin' theme"
"Look, the trend for drinking is down, and the valley is glutted with microbreweries. I thought you were a marketing wiz!" I exclaimed. "All that everyone, except me, drinks is fruit smoothies and espresso!"
"Well, Joe, you may be a trendsetter for once. Businesses already have most of the PC horsepower they need and everyone is looking to the consumer to drive the market. Next step in marketing to the consumer is a price war. Just wait until the effects of the $800 PCs hit the streets. No margins, no profit sharing, no high salaries. Trust me, people will be drinking heavily!"
Yeah, I guess he's right. The market penetration of PCs in the home is stuck at about 37 percent. The other 63 percent of the households don't need a computer or don't want to deal with the hassle of using Windows. Considering the fact that I reboot my PC two or three times a day, I understand the problem. Simply updating my browser version had my system down for a couple of days, for God's sake!
To open the market beyond the current 37 percent of households in the US, two things will have to happen. Systems will have to actually work and people will need a reason to own one. My mother will not reboot her TV, so why would she want to deal with Windows? Why do people really need a PC? Web browsing? E-mail? WebTV has it; crude but effective.
So, who is buying all these PC products right now? Current home and small business PC users. It is cheaper to buy a new system than to upgrade your old 486DX. So you buy yourself a new Pentium, and give the old system to your kids. Sales of PC products will really hit the wall as there becomes no great benefit to upgrading. A 200 Mhz Pentium is about as fast as most of us need until we get T1-speed lines into our homes. OK, OK, so there are the fringe-element Ultima players, but that's a small market.
Microsoft and Intel will do well. Microsoft is moving in on Web Commerce and corporate intranet applications, both of which continue to grow. And Windows CE will kill all other competitors in the consumer area.
Intel will move up to the high-margin server business through Sun and HP, as those companies wind down their RISC chip investment. Corporations overseas are still buying desktop systems and they buy from the big guys such as HP, Compaq and IBM. Intel gets those processors.
"So, Nostrajava, what should a humble hacker like me do in the face of such misfortune?" I asked.
"Keep that resume updated. I would hire you on as a bartender in my microbrewery, but I'm afraid you would drink up my margin." Noting the dejection on my face, he added, "One last bit of prophecy: think WebTV for the masses."
Driving back down the mountain, I saw a beautiful sunset. Overall, the Valley will do OK, the biomed, networking and specialty chip businesses are good. Pet Rocks, AIDS drugs and IP Routers will always be needed. But the ground will quake as the personal computer industry hits the wall this year.
Biomedical industry... I need to look into that. I wonder if sequencing DNA is like programming in Java?
Joe S. Valley is a scarred veteran of the Silicon Valley wars. It was either writing this column or heading back into therapy. His company can't afford mental health care coverage anymore, so writing is the only option. There are a million stories in the Valley and Joe knows lots of them. Got a good story? E-mail him at [email protected]