PC prices must rise, not fall, to solve Windows 8's lousy start, analyst argues
"If you use the netbook analogy, OEMs 'trained' customers to devalue their products," said Baker. "They told customers then that what they had been paying $800 for before was really worth only $300. That dragged down pricing across the board."
Netbooks, in fact, created the sub-$500 Windows notebook market, Baker said more than two years ago in an interview with Computerworld. That fueled sales, but at the same time depressed revenue for OEMs.
Over the holidays, said NPD, the average sales price (ASP) of a PC notebook sat at $420.
Those low, low prices now haunt computer makers: A sub-$500 laptop simply can't show off Windows 8 and touch. And because consumers have been trained to expect cheap PCs, they were unwilling in 2012 to spend enough to justify a move to the new OS.
Additional NPD data showed that was what happened. During the holiday season, sales of sub-$500 PC laptops dropped 15.5% from 2011's number. But sales of notebooks in the $500-and-up category increased by 3.5%.
"Windows 8 and touch is the right product," Baker asserted. "But Windows and touch at $349 is not. It just is not a good enough platform for Windows 8. And it's trying to compete with tablets."
"A tablet does everything that a low-end PC is expected to do, and it has touch," said Baker. "Those tablets can sell for $200 to $250, because their makers don't expect to make money from the hardware."
But while Thurrott contended that the PC industry had to solve the poor sales problem by lowering prices, Baker said just the opposite.
"That's just not a winning battle," he said. "Does touch have to average $700 to $900 [for a notebook]? No. But it has to average $500 to $700. Cheap PCs just cannot compete with tablets."
In other words, OEMs must stop racing to the bottom of the price barrel, and instead take on the much tougher task of raising prices and convincing consumers that it's smart to pay more to get more.
If that sounds familiar, it's Apple's personal computer business model in a nutshell.
"It won't be easy, but it's doable," Baker said of computer makers' need to talk customers into paying more for a credible Windows 8 laptop. "There's evidence that it can be done. Before 2009, people willingly paid $600 to $700 for computers, and that was with a crappy operating system, Vista. But you need the right product."
As an example, Baker gave a nod to Lenovo's IdeaPad Yoga 11, a $799 hybrid that runs Microsoft's Windows RT, the tablet-oriented spinoff of Windows 8.
- Microsoft plans to patch critical under-attack IE bug next week
- Microsoft reaches RTM milestone for Windows 8.1 update
- OS upgrades: Cheap is better than pricey, free is better than cheap
- No special treatment for China on XP, patches end April 8 in the PRC, too
- Microsoft ships Office 2013 SP1 the old-fashioned way
- Microsoft's 'go-low' play puts Windows revenue on the line
- Steven J. Vaughan-Nichols: Windows 7 lives!
- Users mock Microsoft for asking their help on XP-to-Windows 8.1 upgrades
- Microsoft concedes Windows 8.1 needs more for mouse, keyboard customers
- Microsoft tries to jumpstart cheap Windows devices with license price cut
- 15 Non-Certified IT Skills Growing in Demand
- How 19 Tech Titans Target Healthcare
- Twitter Suffering From Growing Pains (and Facebook Comparisons)
- Agile Comes to Data Integration
- Slideshow: 7 security mistakes people make with their mobile device
- iOS vs. Android: Which is more secure?
- 11 sure signs you've been hacked
- Apple-ization of the Enterprise The growing wave of BYOD and increasing numbers of Apple hardware in the workplace holds major implications and opportunity for today's software companies.
- HP HAVEn: See the big picture in Big Data HP HAVEn is the industry's first comprehensive, scalable, open, and secure platform for Big Data. Enterprises are drowning in a sea of data...
- What Datapipe customers need to know about the new PCI DSS 3.0 compliance standard This handy quick reference outlines what PCI DSS 3.0 is, who needs to be compliant and how Alert Logic solutions address the new...
- The 12 PCI DSS 3.0 requirements addressed by Peer 1 Hosting This handy quick reference outlines the 12 PCI DSS 3.0 requirements, who needs to be compliant and how Alert Logic solutions address the...
- Meg Whitman presents Unlocking IT with Big Data During this Web Event you will hear Meg Whitman, President and CEO, HP discuss HAVEn - the #1 Big Data platform, as well...
- The New Way to Work Knowledge Vault This Knowledge Vault focuses on how, in today's increasingly virtual world, it's more important than ever to engage deeply with employees, suppliers, partners,... All PCs White Papers | Webcasts