Dear OEMs: Put Up or Shut Up

By Steven Heller - August 23, 2012 | Tickers: AAPL, DELL, GOOG, HPQ, MSFT | 0 Comments

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Dear OEMs:

You were the muscle behind your overlord’s initiative and they should thank you for that.  But now, your overlord is questioning their loyalty to your position.  They care more about your failures than your successes.  In particular, they aren’t pleased with your performance against Apple (NASDAQ: AAPL) in recent years and will begin taking matters into their own hands.  They are gearing up for battle against you, so it’s best to stop complaining about it and start doing something about it.  No one likes a complainer full of excuses – especially shareholders. 

The time is now to rally the troops and bring more innovation.  It’s now or never because the competition has grown stronger.  Investors have lost faith in both Dell’s (NASDAQ: DELL) and Hewlett-Packard’s (NYSE: HPQ) strategic vision.  That’s why they’ve been assigned single digit PE multiples.  They have become Wall Street’s definition of value trap.  Give us a concrete reason why shares should be worth more.  I’m having trouble finding it. 

It might be time to form a collation of innovation against your overlord, Microsoft (NASDAQ: MSFT).  You played a major part into their success and they aren’t thanking you for the favor.  Instead, they are launching what appears to be a compelling tablet against the iPad.  If successful, this may be the first of many hardware initiatives from Microsoft.  I can’t blame them – it’s taken you over four years to compete with a Macbook Air.  How is that possible?  Apple didn’t need Intel’s Ivy Bridge processors to do it, so why did you?  As laptop manufacturers, I find it baffling that you couldn’t reverse engineer a laptop.  And that’s why you’ve lost credibility.  Perhaps you should consider making investments into new manufacturing equipment that will allow you to compete better. 

You’ve drifted from the vision and this is your punishment.  You’ve had it easy for many years producing mediocre devices and pocketing billions of dollars.  This perpetual laziness has left you and your superior at a disadvantage.  Microsoft is trying to undo what’s already been done to their reputation.  Because of shoddy hardware, the user experience has suffered.  Users associate Microsoft’s experience as frustrating where Apple’s is frustration-free.  The Surface aims to showcase and change perception about what hardware and software can be on a Windows machine. 

Come to think of it, Microsoft is like a parent who is teaching a lesson out of love.  They are showing how things need to be done if you want a seat at the big kids table.  Consider it a swift kick where the sun doesn’t shine and accept it as a challenge to do better.  Google (NASDAQ: GOOG) is also doing the same with their OEMs and the Nexus line.  OEMs all over the world are being put on notice because they’ve diverged too far from the vision.  Microsoft or Google for that matter shouldn’t be able to make a better tablet than an OEM – it’s not their area of true expertise.  But it goes to show you what is possible with the right vision, even from an outsider.  Imagine the possibilities of what manufacturers with decades of expertise are capable of.          

The mountain you have to climb is steep, requiring strict discipline and innovation.  I know these characteristics are uncommon in your cultures, but times-are-a-changin.  The train is about to leave the station with our without you.  It’s time to put up or shut up. 

Sincerely,

Steve Heller

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