The finding comes in a new report from Gartner containing the results of a survey of CIOs around the world. So it’s not for nothing that Gartner calls these BYOD strategies “the most radical change to the economics and culture of client computing” in a decade.

When you think about it, BYOD amounts to a pretty fundamental shift in the way companies handle the knotty questions around supplying employees the tools they need to get the job done. For years, standard operating procedure at pretty much every company was to give a computer and maybe a phone or BlackBerry to every employee who needed them, and for the company to bear the cost. (Gartner, incidentally, includes PCs in its BYOD definition.)

What started with an occasional request for the IT department to support smartphones and tablets with access to work email has blown up into a huge shift in the way that corporate IT services are supplied to employees.

Right now, Gartner said, mid-sized companies of $500 million to $5 billion in sales and 2,500 to 5,000 employees are most likely to be using a BYOD approach. BYOD-friendly companies are twice as common in the U.S. as in Europe, but employees in India, China and Brazil are most likely to be using a personal device on the job.

And if you’re looking for some figures to drive the point home, here’s one: 38 percent of companies expect to stop supplying employees with their devices entirely by 2016. But executives aren’t yet completely sold on the idea: Only 22 percent say they’ve made a good business case for adopting a BYOD move. There are, Gartner said, many benefits, not the least of which are lower costs and a happier work force.

As if you needed another indicator about how much the old Wintel world of PCs has flipped in the last couple of years, take a look at the earnings results of the British chip designer ARM, which just reported quarterly earnings this morning.

Sales rose by 29 percent year on year to north of 170 million pounds (or $260 million), which was better than expected. Earnings on a per-share basis were five pence versus the expected four pence, amounting to a beat of a penny per share. Its shares are rising by 9 percent both in the U.K. and on the Nasdaq in the U.S.

ARM, you’ll recall, is the company behind the designs that go into building the chips that land in most smartphones and tablets. Rather than make the chips, ARM licenses its blueprints to companies like Qualcomm, Broadcom and Nvidia, which then make their own chips. And since phones and tablets are growing a lot faster than traditional PCs (come to think of it, PCs actually aren’t growing at all), ARM is looking a lot healthier than traditional chip companies like Intel and Advanced Micro Devices. Here’s a pretty good indicator: Royalty payments for processors rose in the quarter by 33 percent versus a processor industry that’s up about 2 percent.

ARM is quickly turning out to be the company to watch in the chip space. Chips sporting ARM designs are everywhere these days, and there has been a lot of chatter of late about them heading into the data center.

Hewlett-Packard offers ARM processors as an option on its radical new server design, called Project Moonshot. Dell offers ARM-based servers, too, and there are even more plans for ARM chips in servers. I talked with CEO Warren East about this last year. (East is retiring this summer, by the way, and Simon Segars will be ARM’s new CEO, starting in July.)

The basic argument that ARM makes coming in is that its chips are good at managing power consumption, in part because they were designed from the beginning for mobile applications. And power consumption continues to be a huge problem, especially in data centers where thousands of servers are crowded together in one place.

Intel, the king of the chip world, has responded and created its own line of low-power chips called Atom. And as we learned from Mike Bell, head of Intel’s mobile chip business at D: Dive Into Mobile last week, it has gotten off to a slow start but is starting to get a little traction in mobile.

Another version of Atom, announced the week before last, will also defend Intel’s interests in the server space. But keep an eye on this, because there’s eventually going to be a rumble.

Yesterday’s reports from the market research firms IDC and Gartner showed conclusively what pretty much anyone paying attention had already suspected — that the bottom has finally fallen out of the PC business. During the first quarter of 2013, the combined shipments showed their worst year-on-year decline ever.

Reversing that trend is probably not an option, which means that a fundamentally new chapter in the history of the personal computer industry is unequivocally here. Shareholders in those companies will start making value judgments accordingly. That was in evidence in the premarket trading this morning.

With a few minutes to go before the opening of markets in New York, shares of market leader Hewlett-Packard were down by nearly 6 percent. Dell, still the subject of an ongoing fight over its proposed $24.4 billion plan to go private in a leveraged buyout transaction, was down only slightly.

Chipmaker Intel was down nearly 3 percent. Advanced Micro Devices, Intel’s one remaining rival, was down 2.7 percent. Microsoft, the primary supplier of operating system software to the world’s PCs, was down 3.5 percent.

Apple, the maker of the iPad, which arguably has disrupted the PC industry, but is also North America’s third-largest supplier of PCs, was down by $2, or less than half of a percentage point.

Slower-than-expected shipments in China brought on in part by the timing of the Chinese New Year holiday, plus government budget reductions, cut into sales in January and February, the firm said. The market is now expected to decline by 7.7 percent, which is 2 percentage points worse than previously expected. And it could get still worse. The firm won’t rule out a further drop into a double-digit percentage decline before a possible recovery mid-year.

The latest assessment comes only a few days after IDC released figures showing unabated growth in the market for tablets, which have been cutting into PC sales for years now.

Also, IDC’s dour outlook on PCs doesn’t mention the sales of Apple’s Macs. As it happens, another research firm, NPD, today put out its latest look at Mac sales, and they’re up by 14 percent year on year for January and February. One reason, said analyst Gene Munster of PiperJaffray in a research note to clients today, is that Apple has firmed up its supply of iMacs. Tight supplies knocked shipments down by about 700,000 units in December, Munster said. Even so, Munster expects Mac sales overall to trend down by about 5 percent in the first quarter.

After a decline in shipments by 3.7 percent in 2012, the PC market is expected to contract further in 2013, by at least 1.3 percent, the firm projects.

While it’s not as though anyone expected Microsoft’s Windows 8 to inject any real excitement into the consumer market, there were those who thought it might at least help to arrest the overall decline, especially among consumers. It wasn’t to be. Holiday season PC sales were disappointing, and the economic malaise, especially in Europe, weighed on corporate IT budgets. Shipments in the fourth quarter were down by 8.3 percent, which amounts to the worst holiday quarter on record, IDC says.

Meanwhile, emerging markets that once held the greatest potential for growth are flattening out, and some actually declined last year. They’ll start growing again this year, but only by a little through 2017. It was worse in the U.S., where shipments declined by 7.6 percent.

One thing that might give the corporate market some badly needed pep: The end of support by Microsoft of Windows XP, which kicks in this year.

The deal values Dell at $13.65 a share, amounting to a 25.5 percent premium over the closing price of $10.88, where Dell was trading on Jan. 11 before the first reports of renewed interest in a buyout transaction emerged.

The deal also brings together private equity fund Silver Lake with software giant Microsoft, and represents the latest step in a relationship that began when Microsoft bought out Skype for $8.5 billion in 2011.

The deal includes a $2 billion loan from Microsoft.

Microsoft confirmed its participation in the deal in a statement:

Microsoft has provided a $2 billion loan to the group that has proposed to take Dell private. 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. 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.”

Other financing is coming from Silver Lake; Michael Dell’s personal investment company, MSD Capital; the rollover of existing debt; and financing contributed by Bank of America/ Merrill Lynch, Barclays, Credit Suisse and RBC Capital Markets, plus Dell’s cash on hand, which stood at about $11.3 billion as of Nov. 1.

Michael Dell will remain as chairman and CEO.

The deal provides for a 45-day go-shop period, during which the company will seek to find a superior offer, but given the size of the deal, don’t expect there to be any takers. Investment bank Evercore Partners will run the go-shop process, and had advised the special committee of Dell’s board of directors that has been exploring options for the company.

Dell shares were halted as the markets opened for trading in New York this morning.

Dell has been trying to transform itself from what was once the world’s foremost PC maker into a company known more for a diverse portfolio of enterprise IT hardware, software and services. It has sought to do this mostly by way of acquisitions, about $13 billion worth since 2008.

A recent example is last year’s $2.4 billion deal for Quest Software, which it won after a complex on-again off-again bidding war with private equity fund Insight Venture Partners.

In addition to acquisitions, Dell has been beefing up its executive ranks on the enterprise side of the business. Last year, Dell hired Marius Haas, the former head of networking at Hewlett-Packard, to run its enterprise division, and John Swainson, the former CEO of IT services company CA, to run its software unit.

And while the enterprise side of the business has been growing, it hasn’t been doing so fast enough to make up for the ongoing decline in PC sales that has ravaged that industry.

Indeed, despite Dell’s best efforts to move away from PCs, the percentage of its revenue that is either derived directly from sales of PCs to consumers and corporations, and of sales of PC-related peripherals like monitors, still amounts to 70 percent.

Here’s the original announcement that just crossed the wires:

Dell Enters into Agreement to Be Acquired by Michael Dell and Silver Lake
Dell stockholders to receive $13.65 per share in cash
Transaction valued at approximately $24.4 billion
Transaction implies a 37 percent premium over the average closing share price during the previous 90 calendar days ending Jan. 11, 2013

ROUND ROCK, Texas — (BUSINESS WIRE) –

Dell Enters into Agreement to Be Acquired by Michael Dell and Silver Lake
Dell stockholders to receive $13.65 per share in cash
Transaction valued at approximately $24.4 billion
Transaction implies a 37 percent premium over the average closing share price during the previous 90 calendar days ending Jan. 11, 2013

Dell Inc. today announced it has signed a definitive merger agreement under which Michael Dell, Dell’s Founder, Chairman and Chief Executive Officer, in partnership with global technology investment firm Silver Lake, will acquire Dell.

Under the terms of the agreement, Dell stockholders will receive $13.65 in cash for each share of Dell common stock they hold, in a transaction valued at approximately $24.4 billion. The price represents a premium of 25 percent over Dell’s closing share price of $10.88 on Jan. 11, 2013, the last trading day before rumors of a possible going-private transaction were first published; a premium of approximately 35 percent over Dell’s enterprise value as of Jan. 11, 2013; and a premium of approximately 37 percent over the average closing share price during the previous 90 calendar days ending Jan. 11, 2013. The buyers will acquire for cash all of the outstanding shares of Dell not held by Mr. Dell and certain other members of management.

The Dell Board of Directors acting on the recommendation of a special committee of independent directors unanimously approved a merger agreement under which Michael Dell and Silver Lake Partners will acquire Dell and take the company private subject to a number of conditions, including a vote of the unaffiliated stockholders. Mr. Dell recused himself from all Board discussions and from the Board vote regarding the transaction.

A Special Committee was formed after Mr. Dell first approached Dell’s Board of Directors in August 2012 with an interest in taking the company private. Led by Lead Director Alex Mandl, the Special Committee retained independent financial and legal advisors J.P. Morgan and Debevoise & Plimpton LLP to advise the Special Committee with respect to its consideration of strategic alternatives, the acquisition proposal and the subsequent negotiation of the merger agreement.

The Special Committee also engaged a leading management consulting firm to conduct an independent analysis, including a review of strategic alternatives for Dell and opportunities for the company as a public entity, and thereafter engaged Evercore Partners.

The merger agreement provides for a so-called “go-shop” period, during which the Special Committee — with the assistance of Evercore Partners – will actively solicit, receive, evaluate and potentially enter into negotiations with parties that offer alternative proposals. The initial go-shop period is 45 days. Following that period, the Special Committee will be permitted to continue discussions and enter into or recommend a transaction with any person or group that submitted a qualifying proposal during the 45-day period. A successful competing bidder who makes a qualifying proposal during the initial go-shop period would bear a $180 million (less than 1 percent) termination fee. For a competing bidder who did not qualify during the initial go-shop period, the termination fee would be $450 million.

Mr. Mandl, lead director of Dell’s Board of Directors, said: “The Special Committee and its advisors conducted a disciplined and independent process intended to ensure the best outcome for shareholders. Importantly, the go-shop process provides a real opportunity to determine if there are alternatives superior to the present offer from Mr. Dell and Silver Lake.”

Mr. Dell said: “I believe this transaction will open an exciting new chapter for Dell, our customers and team members. 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 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.”

“Michael Dell is a true visionary and one of the preeminent leaders of the global technology industry,” said Egon Durban, a Silver Lake Managing Partner. “Silver Lake is looking forward to partnering with him, the talented management team at Dell and the investor group to innovate, invest in long-term growth initiatives and accelerate the company’s transformation strategy to become an integrated and diversified global IT solutions provider.”

Following completion of the transaction, Mr. Dell, who owns approximately 14 percent of Dell’s common shares, will continue to lead the company as Chairman and Chief Executive Officer and will maintain a significant equity investment in Dell by contributing his shares of Dell to the new company, as well as making a substantial additional cash investment. Dell will continue to be headquartered in Round Rock, Texas.

The transaction will be financed through a combination of cash and equity contributed by Mr. Dell, cash funded by investment funds affiliated with Silver Lake, cash invested by MSD Capital, L.P., a $2 billion loan from Microsoft, rollover of existing debt, as well as debt financing that has been committed by BofA Merrill Lynch, Barclays, Credit Suisse and RBC Capital Markets (in alphabetical order), and cash on hand. There is no financing condition.

The transaction is subject to other customary conditions, including receipt of required regulatory approvals, in addition to the Dell stockholder approvals described above. The transaction is expected to close before the end of the second quarter of Dell’s FY2014.

For further information regarding all terms and conditions contained in the definitive merger agreement, please see Dell’s Current Report on Form 8-K, which will be filed in connection with this transaction.

J.P. Morgan and Evercore Partners are acting as financial advisors and Debevoise & Plimpton LLP is acting as legal advisor to the Special Committee of Dell’s Board of Directors. Goldman, Sachs & Co. is acting as financial advisor and Hogan Lovells US LLP is acting as legal advisor to Dell. Wachtell, Lipton, Rosen & Katz is acting as legal advisor to Mr. Dell. BofA Merrill Lynch, Barclays, Credit Suisse and RBC Capital Markets (in alphabetical order) are acting as financial advisors to Silver Lake, and Simpson Thacher & Bartlett LLP is acting as legal advisor to Silver Lake.

RELATED POSTS:

• Is the Dell Buyout Really a Good Idea?
• Microsoft’s Loan to Dell Further Complicates Relationship with PC Makers
• Dell Confirms Plan to Go Private in $24.4 Billion Buyout Deal
• With Dell Buyout Poised to Be Announced Today, the Bromance Between Microsoft and Silver Lake Gets Serious
• Michael Dell’s Path: PC King to Apple Envy
• Dell Could Announce Deal to Go Private as Soon as Monday

The results compare with a consensus view of analysts, which called for a per-share profit of 40 cents on sales of $13.9 billion.

Dell’s biggest challenge is that it has been seeking to de-emphasize its older PC-centric business and pivot toward higher-margin enterprise services, hardware and software. Even so, about half its business is still tied to PCs, both in the consumer and business segments.

Dell shares are trading up more than 1 percent in after-hours trading. The way I’m reading it is that the miss, under the circumstances, could have been a lot worse.

The outlook also wasn’t so bad. Dell said it expects the “challenging global macro-economic environment” to continue, but even so it still expects to hold the line and deliver per-share earnings of at least $1.70 for the fiscal year when it reports again in January. It also said it expects sales to improve by 2 percent to 5 percent, which implies sales of between $14 billion and $14.4 billion, give or take.

Update: Okay, about that rally. Dell shares have settled down. After going up by as much as 1.5 percent after hours, they’re now trading down by more than 1 percent. The latest price I’m seeing is $9.45, down 11 cents as of 4:26 pm ET.

Here’s Dell’s original announcement.

The consensus view of analysts calls for the company to report a per-share profit of 40 cents on sales of $13.9 billion.

ROUND ROCK, Texas–(BUSINESS WIRE)–
Dell announced fiscal 2013 third-quarter results today with revenue of $13.7 billion, GAAP operating income of $589 million, and GAAP earnings of $0.27 per share. Dell’s enterprise solution strategy continued to show positive results with server and networking revenue increasing 11 percent year over year.
“We are consistently executing our end-to-end solutions strategy for the benefit of our customers,” said Michael Dell, Chairman and CEO. “In the quarter, we completed the acquisition of Quest Software which – along with other recent acquisitions like SonicWALL and Wyse – adds leading management, security, virtualization and cloud capabilities to our expanding portfolio of powerful solutions.”
“In a difficult global IT spending environment we saw solid proof points that demonstrate progress in our strategy,” said Brian Gladden, Dell CFO. “A highlight has been the strong progress of our newly introduced servers, with our server and networking business up 11 percent. We’re also encouraged by early interest in our new Windows 8 touch portfolio and the opportunities it creates for our commercial and consumer businesses.”
Mr. Gladden added that strong cash flow from operations generated over the past two years continued with $1.3 billion in the quarter and, combined with a strong cash position this fiscal year, helped enable Dell to invest in new capabilities and return almost $900 million year to date to shareholders through the company’s recently adopted dividend and share repurchases.
Results
Revenue in the quarter was $13.7 billion, an 11 percent decrease from the previous year as desktop and mobility revenue contracted.
GAAP operating income for the quarter was $589 million, or 4.3 percent of revenue. Non-GAAP operating income was $886 million, or 6.5 percent of revenue.
GAAP earnings per share in the quarter was 27 cents, down 45 percent from the previous year; non-GAAP EPS was 39 cents, down 28 percent.
Cash flow from operations in the quarter was $1.3 billion. Dell ended the quarter with $14.2 billion in cash and investments.

Strategic Highlights:
Dell Enterprise Solutions and Services revenue grew 3 percent year over year to $4.8 billion. The company year to date is 4 percent ahead of last year’s ES&S revenue at $14.2 billion, accounting for greater than 50 percent of the company’s gross margin thus far this year. The ES&S business is on an annual run-rate approaching $20 billion.
Server and networking revenue for the quarter grew 11 percent. Dell was the only top-3 server provider to have positive unit growth in the quarter. Dell’s server growth was driven by its new, 12th-Generation line, leadership in hyper-scale infrastructure solutions and an increase in customer adoption of cloud solutions for their IT requirements. Dell’s differentiated intellectual property and solutions have resulted in solid growth in this business.
Dell’s Services business continues to execute well, with gross margin percentages improving sequentially for the sixth consecutive quarter, as the company focuses on the most profitable areas of the business. Growth in support, deployment and security services highlighted the quarter.
Business Units and Regions:
Large Enterprise revenue was $4.2 billion in the quarter, an 8 percent decline. Operating income was $325 million, or 7.8 percent of revenue.
Public revenue was $3.8 billion, an 11 percent decrease. Operating income for the quarter was $352 million, or 9.2 percent of revenue.
Small and Medium Business revenue was $3.3 billion, a 1 percent decline. Operating income was $349 million, or 10.6 percent of revenue.
Consumer revenue was $2.5 billion, a 23 percent decline. Operating loss was $65 million or minus 2.7 percent of revenue.
Revenue in Americas was down 9 percent; Asia-Pacific and Japan was down 11 percent; and EMEA was down 15 percent.
Company Outlook:
Dell sees the challenging global macro-economic environment continuing in the fourth quarter, which will continue to impact the company’s results. The company expects sequential revenue growth of 2 to 5 percent. For the full year, Dell maintains its expectation for at least $1.70 in earnings per share on a non-GAAP basis. Going forward, the company is committed to its end-to-end solutions strategy and creating value over the long term.

Obviously, the conversation between Bradley and CNBC’s Maria Bartiromo was intended to coincide with the release of Apple’s iPad mini, which hit store shelves Friday. So far, HP hasn’t participated in the tablet business in any meaningful way since the shuttering of its webOS business last year under former CEO Léo Apotheker. Since then, Bradley’s job under Meg Whitman has been to move forward with a tablet strategy based on Microsoft’s Windows 8.

HP’s play, Bradley tells Bartiromo, is to build tablets that appeal to the enterprise, with backward compatibility with all the applications they’re accustomed to running, and all the security and manageability features in Windows that tend to make CIOs comfortable. And he says that the company is prepping an ElitePad pilot program with 3,000 enterprise customers in the U.S.

The problem is that there’s already an enterprise-focused tablet — it’s called the iPad, and it has found its way into the hands and hearts of many CIOs already, including the CIO of no less an enterprise-focused company than SAP. A Gartner survey this summer found that 86 percent of enterprises plan to deploy “media tablets” — basically code for the iPad — this year, before HP’s ElitePad is on the market.

HP’s advantage, Bradley argues, will come from the fact that HP knows how enterprises buy their hardware, which is true if you’re talking about PC and servers. That edge applies less in the case of the so-called BYOD trend, where employees bring their own personally owned devices to the office. While Bartiromo presses Bradley to acknowledge that Apple is going to be a tough competitor, she lets him off the hook on this point.

Meanwhile, the scoreboard is in Apple’s favor. Apple sold slightly more than 14 million iPads in its most recent quarter, slightly outpacing HP, which, according to Gartner, is still the world’s leading vendor of personal computers, selling slightly fewer than 14 million. And while Bradley’s bases his assumptions on the fact that a lot of these tablets are staying home, used for playing games and watching movies, a lot of them are going to the office, as well. Dislodging them won’t be so easy.

Justin Sullivan/Getty Images

Earnings per share were 60 cents on sales of $13.5 billion, both of which were better than what analysts had expected: 50 cents on sales of $13.2 billion. But that’s after Intel disclosed that sales were looking a lot slower than it and analysts had expected.

Expect Intel to give its clearest view yet on what it sees ahead for the markets it controls — chips for PCs and servers — and to attack the markets where its inroads as yet are minimal: Smartphones and tablets. Also expect some color on whether or not Microsoft’s Windows 8 will be much of a catalyst for PCs. As yet, the expectations are pretty low.

Update: The call is now over. Much of the discussion focused on Intel’s decision to slow down product at its many factories, or fabs, for the time being until demand for PCs and the chips inside them picks up.

It’s not a small thing. Chip fabs are expensive to build and expensive to operate, so generally speaking you want them to be running as close to full capacity as possible. But when demand is so slack that your inventory of chips begins to pile up, you have to choose when to slow down and wait for demand to pick back up again.

Also, Intel is using the slowdown as an opportunity to get under way with the transition to 14-nanometer manufacturing technology. This is one of those moments where Moore’s Law is made real, when the elements on a chip get smaller, the chips get smaller, so more of them can be made for every silicon wafer, and they consume less power. Or you can cram more transistors into the same space, and thus get more computing work done for the same cost as before.

That is sort of Intel’s ace in the hole during periods when demand drops off. Eventually it picks up if only because the PC makers need to refresh their products with the latest stuff, especially after a process shrink. It virtually guarantees that demand will pick up again eventually.

Earlier:
2:05 pm: CEO Paul Otellini is speaking. He says to expect PC sales to grow at half the rate seen historically.

Now he’s talking about Ultrabooks and says many will be $699 or less. Also 20 tablets running Clovertail, the latest version of the Atom processor.

Otellini: Talking about Haswell, the next generation of processor. He says previously it had been expected to come in at a power envelope of 15 watts. Some advances have allowed Intel to expect it to run at 10 watts. That’s good news because the lower the wattage, the better the shot Intel has at getting into handsets and tablets.

2:08 pm: Now CFO Stacy Smith is speaking.

Smith: As a result of weaker than expected demand environment, factory loadings have been cut. Factory utilization rates have been taken down. This will reduce operating costs by $500 million. Also capital spending has been cut to $11.3 billion in Q4.

Smith: Gross margin in Q4 57 percent, which is lower than typical for Intel. Ouch. A lot of that is from the cut in capex and utilization.

Smith: We are taking aggressive actions to reduce inventories.

Smith: We continue to expect a benefit from the build out of the cloud.

And now begins the Q&A:

2:13 pm: Question from RBC Capital: Stacy, you gave a number at the analyst day for FY 13 gross margin?

Smith: We’ll provide it in Janurary. Premature to provide that. We need to fight through Q4 first. There’s a few things for 2013. We’re starting up 14 nanometer so that’s worth a few points of gross margin. No excess capacity charges after Q2 in 2013. Beyond that I’ll wait until January.

2:16 pm: Question for Otellini: Assess the PC market? Is it all macroeconomy or Windows 8 pent-up demand?

Otellini: It’s both. China has turned weaker on us. However we do believer that PC consumption did grow at about half the normal seasonal rate. How much that is is TBD, we’ll know a lot more 90 days from now after the Windows 8 launch. We’ll try to quantify that for you in 90 days, but right now it’s a bit of each.

Question for Smith: Is this cut in capex going to save you what you saved in 2009?

Smith: You can see capex in 2012 is down $1.2 billion from what we thought before. We’ll talk about 2013 in January.

Question: Are you seeing any Ivy Bridge tablet designs? Any Haswell tablets?

Otellini: A handful, five to eight on Ivy Bridge. Haswell, it’s too soon to tell.

Otellini: Those tablets tend to skew toward the enterprise. That is where you will see the Ivy Bridge ones migrate. Clover Trail will be more consumer focused.

2:21 pm: Question from Chris Danely of J.P. Morgan: What will it take to pull the PC industry out of this funk? Is this a permanent state?

Otellini: Since we don’t know how much is flatness because of which condition, it’s hard not to know if we’ll return to normal growth in a good economy. That tablet is not the end state of computing. What I can’t predict is which form factor is going to win. These things that have the best of both worlds are likely to be the things that are the most high volume runners.

2:24 pm: Smith speaking about inventory: We’re too high today. That’s why we’re bringing the utilization down. (What this means is that Intel’s factories won’t be running at full tilt pace, and some production lines will be running slower or idled for the time being until demand comes back. It’s kind of a big deal for Intel to do this because letting a factory sit idle is sort of an expensive proposition.)

Wow. Smith just said that utilization rate has been taken down to below 50 percent. Part of that will make room for the new technology, 14 nanometers. But some of it will be idle. Again, ouch.

Question about utilization again: Are you mothballing one building?

Smith: We’re trying to match our capacity that is in place. We were putting in capacity for the second half that is bigger than we got. Our planning model is we’re always looking to have the ability to respond to upsides. We call that “white space.” The risk of being caught short is greater than being caught long. If you’re short it can take two years to get caught back up. If you get caught long, it’s six months.

2:29 pm: Question about inventory again. Does pricing come into play on the PC side? Is that helping? Is there anything else that Intel can be doing to spur demand? Microsoft is taking things into its own hands.

Otellini: The short answer is no on pricing. We think it was priced aggressively. In the PC group, Average Selling Prices were flat. That was us going after some incremental market share at the bottom of the market. That is more the driver.

In terms of demand stimulation: A lot of what we’re doing right now is consistent with where the market was. We’re up to 40 machines that are touch enabled. We’re working with the glass manufacturers to bring the cost of the touch enabled glass down.

Question about competitor AMD. Are you seeing lower pricing from AMD and is that affecting you?

Smith: Ask them. Last quarter and this quarter we believe we have won some share at the lower end of the market.

Question from Goldman Sachs: About profit margins. Is there anything you see to make the profit margin decline worse than you usually see during a demand downturn?

Smith: Historically, the time it took to get things realigned has taken longer than two quarters. Compare now to 2009, when we were in the mid to high 40s on gross margins, now we’re in the high 50s. It’s faster and our margins are higher than in 2009.

Question about ARM-based server players. Are you seeing any competition from ARM chips in servers?

Otellini: They need to add features to be considered like 64 bits. You can look at some of the workloads like Hadoop. They can be handled by micro-servers, and those can be served by Atom.

2:35 pm: Question about mix of demand geographically. Give us more color on demand for PCs from consumers and businesses.

Otellini: The inventory thing is straight. Our OEMs are running very lean. Any kind of demand blip could cause us to reduce even more. In terms of mix, U.S. and Western Europe are soft for consumers. The enterprise PC has gone flat, and that’s a reflection of large corporations making hard decisions.

Otellini: We’ll see how that sorts out over the next quarter. In China, the slowdown there was in consumer notebooks.

Smith: We saw PC units up 1 percent in the quarter. PC ASPs (average selling price per chip) were down 1 percent and server ASPs were down 7 percent.

Question about China: Question about demand from data center customers.

Otellini: Data center ASPs were down a bit year on year. The mix is quite good. Two-way machines versus four-way machines. One of the fastest growing segments is high performance computing (supercomputers). I see the current mix being an anomaly as the result of the soft market for corporate data centers.

2:41 pm: As you think about manufacturing capacity for 2013, what kind of PC environment are you expecting?

Smith: I’m going to hold off on a unit growth or capital forecast. Capital forecast will depend a lot on Q4.

Final question: Inventories are lean and you expect less than half of normal growth. Why are customers choosing to take inventories down further?

Smith: It’s caution. Our customers are being cautious.

And that’s it. A nice short conference call.

And while it may not come as a terrible surprise to anyone who’s been paying attention to personal technology trends during the last few years, there’s nothing like a cold, hard number to make the point crystal clear.

Word of this tipping point came quietly in the form of a press release from the market research firm IHS (the same group formerly known as iSuppli). The moment came during the second quarter of 2012. For the first time in a generation, according to the firm’s reckoning, PCs did not consume the the majority of commodity memory chips, also known as DRAM (pronounced “DEE-ram”).

During that period, PCs accounted for the consumption of 49 percent of DRAM produced around the world, down from 50.2 percent in the first quarter of the year. The share of these chips going into PCs — both desktop and notebooks — has been hovering at or near 55 percent since early 2008, IHS says.

As shifts in market share statistics go, it at first seems insignificant until you consider the wider sweep of memory chips in the history of the modern technology industry. PCs have consumed the majority of memory chips since sometime in the 1980s. IHS couldn’t say when exactly when the first personal computers started showing up in appreciable numbers in homes and businesses.

And where are all those memory chips going? Tablets and smartphones for starters. IHS says that phones consumed more than 13 percent percent of memory chips manufactured, and it expects that figure to grow to nearly 20 percent by the end of this year. Tablets — including the iPad — consumed only 2.7 percent of the world’s memory chip supply. The remaining 35 percent, which IHS classifies as “other,” includes servers, professional workstations, and presumably specialized applications like supercomputers and embedded systems.

And given their rates of growth, IHS expects phones and tablets combined to consume about 27 percent of the world’s memory by 2013, while by that time PCs will consume less than 43 percent, making the decline, in the firm’s estimation, irreversible.

For PC-making companies, notably Hewlett-Packard, Dell and Lenovo, the shift marks the beginning of an overall decline in the importance of PCs in the overall chip supply chain. Memory chip makers like Samsung, Hynix and Micron will focus increasingly on winning the business of phone and tablet makers and over time concern themselves less with the needs of PC makers. “PCs are no longer generating the kind of growth and overwhelming market size that can singlehandedly drive demand, pricing and technology trends in some of the major technology businesses,” is how IHS analyst Clifford Leimbach put it.

Depending on when you start counting it, took about two decades for the PC industry to sell its first billion units, a milepost that the research firm Gartner pegged to the summer of 2002. Judging by its annual global sales figure since then, it took about five years to sell the second billion, and about three more years to sell the third billion.

Last year, PC makers shipped about 353 million machines, an increase of about one-half of one percent, and it wouldn’t surprise anyone to see the industry finish the year with a slight decline in shipments year-over-year. No less a barometer of the PC industry than Intel lowered its sales guidance for the third quarter of this year, citing weak demand. It is currently in the midst of a campaign to both re-ignite market interest in PCs and attack the market for phones and tablets.

Compare the PC to smartphones. IHS expects people around the world to buy 655 million smart phones this year, which would amount to nearly twice the number of PCs sold last year and almost three times the number of notebook PCs that will sell this year.

And as for tablets, look no further than the iPad: For the last four quarters reported (Q4 2011 through Q3 2012), Apple has sold 55.4 million iPads, which amounts to only 5 million fewer than all the PCs that Gartner says HP sold in 2011.

So perhaps now the academic debates about where the Post-PC Era begins can come to a close. I remember the first buzz about it back in 2000 with consumer electronics makers like Sony — jealous of being left out of the PC feeding frenzy brought on by the first wave of the consumer Internet craze — tried to sell “Internet devices” that looked like PCs and served up the Web and email without costing quite as much as one. They didn’t take.

PDAs like the Palm Pilot and Microsoft’s Pocket PCs made some progress, priming us for living with handheld devices that stored data we needed close at hand. The Blackberry and the Treo became the first of what we would call “smartphones.”

But the PC always held sway as the home base of any digital person’s daily life. Now, it’s entirely possible, though not yet common, to get through modern life without one. Some people have sought to “go paperless” in their day-to-day lives by relying on tablets and smartphones for the things they used to print to paper. I wonder now if there may soon be a trend of going “PC-less.” It’s not gone yet, but it is going.

The plan is to offer U.S.-based early-stage companies an opportunity to work at a Microsoft building in Bellevue, Wash., for at least four months. In addition to an investment, the selected start-up will get access to a lot of Microsoft technology. Here’s the nut graf on that subject from Microsoft’s announcement:

As a startup in Bing Fund, you will receive subsidized usage of unique APIs from Bing’s data ecosystem and the opportunity to access certain technology assets developed by Microsoft Research. Bing Fund team members who specialize in design, engineering, marketing, and building businesses will be on hand to support every step of the way, and if you have a particular technical or business challenge, we’ll connect you with the right Subject Matter Experts (SMEs). Additionally, we’ll help with funding, by offering a convertible note and making introductions to strategic investors. Your IP and product, of course, remain yours, even if we give input and assistance.

The other big news is that Rahul Sood, the founder of VooDooPC, the small Canadian maker of super-tricked-out gaming PCs, is joining Microsoft specifically to work at the Bing Fund. Sood announced the move on his personal blog today:

Raising money is easy — the amount of time and energy we’re going to dedicate to each startup in our program is worth more than any dollar amount we could throw at them, which is why we’re choosing to incubate fewer than a dozen startups at a time. When one graduates we’ll take on another.

So now I’m working as an entrepreneur inside a company that has tremendous resources and impact. We get the best of both worlds. Our program is tapping the creative energy of startups, small and agile risk takers and we’re backing that creative energy with the vast experience Microsoft employees have in design, technology development, and business strategy. Many great things will happen.

Sood sold VooDooPC to Hewlett-Packard around the time that other small gaming PC outfits were being acquired. Another similar deal that comes to mind is Dell’s purchase of Alienware. Sood stayed on at HP as CTO of global gaming, and also served as something of an evangelist for webOS after HP’s acquisition of Palm, until he resigned suddenly late in 2010. He later explained why: He realized that HP “wasn’t the right place for me.” It will be interesting to see if Sood can be happy inside another big company.

Market research firms Gartner and IDC both put out their latest market estimates today. And while they measure the marketplace differently, both show the gap between HP and Lenovo getting a lot smaller versus this time last year.

Overall, Gartner said, consumers and businesses snapped up 87.47 million PCs last quarter, which amounts to a fractional decline from 87.6 million in the year-ago period. HP topped all other vendors, selling 13.04 million machines and taking a 14.9 percent share of the worldwide market. Lenovo, according to Gartner’s estimate, came in second by a mere whisker, selling 12.82 million units, amounting to 14.7 percent of the market, and grew by a world-beating 15 percent.

Lenovo, Gartner said, has been aggressive both in the expansion of its business via acquisitions and on the pricing front, hurting HP and Dell.

Acer and Dell battled similarly for second place: Acer sold 9.65 million, or 11 percent of market, to Dell’s 9.35 million units, only 0.3 percent behind by market share. Dell’s shipments fell by more than 11 percent year on year. Asustek rounded out the Top 5 worldwide.

In the U.S., HP, Dell and Apple rounded out the Top 3, followed by Acer and Toshiba. Apple’s share of the market rose to 12 percent.

For its part IDC, pegged the market contraction at the same size that Gartner did, saying it saw a decline in worldwide shipments by 0.1 percent. It estimated that worldwide shipments amounted to 86.73 million units.

IDC saw a wider gap between HP and Lenovo, but estimated the Chinese company’s growth rate at 25 percent. It estimated HP sold 13.42 million PCs, for a 15.5 percent share of the market, to Lenovo’s 12.89 million and 14.9 percent share. Still slim. It also put Dell in third place, ahead of Acer.

IDC also provided this marginally cool embeddable chart which I hadn’t seen before so I thought I’d share it:

(Image courtesy of icanhazcheezburger).

The consensus among Wall Street analysts calls for HP to report sales of $29.92 billion and a per-share profit of 91 cents. And, for the most part, analysts are expecting HP’s results to be in line with expectations, if maybe a little light on sales.

One possible curveball, however, is Europe. Given HP’s exposure to the faltering markets on that continent, about which Dell complained in its earnings report yesterday, HP could conceivably see its results hurt more by Europe than by Dell.

Europe accounts for 37 percent of HP’s revenue, making it the most heavily exposed there among the large IT vendors. “The increasing uncertainty and resulting macro weakness in Europe will likely act as an ongoing headwind to growth,” wrote analyst Chris Whitmore of Deutsche Bank Securities in a note to clients Tuesday.

But the big item on the agenda will be HP’s plans for restructuring, and how many jobs may be lost. As AllThingsD reported last week, HP is contemplating a restructuring that could see as many as 30,000 jobs eliminated, including 5,000 through voluntary retirements. What’s unclear is over what length of time these jobs will go — I’ve been told by sources that this is a key detail, and it is likely to be a fairly long period of time.

The reductions would be the latest in a long, painful sequence of cuts for HP that began years ago. Whitmore notes that HP chopped 50,000 jobs over the course of five years under the tenure of former CEO Mark Hurd. “We suspect HP will position this cost cutting as ‘cut to reinvest’ — an interesting strategy considering HP has been restructuring for the past decade,” Whitmore writes.

Whatever restructuring Whitman puts on the table, Whitmore expects it will help HP maintain its prior guidance — it expects to finish the year with a per-share profit north of $4.00 — but it’s still not going to be easy. Summer PC demand is expected to be soft, and the lack of a tablet strategy isn’t helping. Demand for corporate PCs will likely be a rare bright spot, but just barely.

In printers, the relatively weak results of printer concerns Canon and Lexmark don’t exactly imbue the market with confidence that the trend of sliding profits and sales in HP’s printer operation, recently combined with the Personal Systems Group in a sweeping reorganization announced last month, is anywhere close to being reversed.

One thing to watch for — and something about which Whitman has hinted in the past — is SKU reduction. An SKU is industry lingo for “stock-keeping unit,” and it refers to specific models and makes and packages of a given product. Consumer printers — and, in fact, printers in general — would be an obvious place to cut back on the number of models offered to the market, and it would be perfectly in line with Whitman’s prior messages emphasizing simplicity and streamlining HP’s approach to the market. While I don’t expect Whitman to go on at length about this subject, it’s the sort of thing she may touch on as she hones the “simplicity” message.

What not to expect: One big bomb dropped all at once, outlining the sum total of Whitman’s long-term strategy for HP — one she has already admitted will take a long time to implement. The fact is, it’s a big job, probably one of the biggest in all of the corporate world, and so it’s necessarily coming out in pieces. Today’s piece will be a big one.

Now, there are lots of X-as-a-service plays in the IT world, and one of them is the desktop-as-a-service approach, where everything you need for a workaday PC can run on a virtualized server in the cloud, and all the user sees is a keyboard, mouse and screen. It’s efficient, easier and less costly to support than desktop PCs. But? You need to fully license every instance of software you use, in much the same way you would with an old-school desktop. And then there’s always the latency that comes from delivering something via the pipes, which are never quite fast enough, no matter what you do.

But what if you could deliver a full computing experience — operating systems, applications, gaming, the whole enchilada — virtually? Two weeks ago, I saw a demonstration of just such a service that kind of blew my mind. And today the company behind it, Numecent, is coming out of stealth mode and also announcing a spinoff.

First, let’s cover the basics: Numecent is a start-up run by Osman Kent, the onetime CEO and co-founder of 3Dlabs, the company that in the 1990s more or less started the graphics processor industry, which Nvidia and Advanced Micro Devices are the leaders of today. The company has a bunch of undisclosed investors, but last month TechCrunch reported that it had raised $2 million in a series A that was part of a larger $10 million funding round. I’m told there are 107 individual shareholders in the company.

So what does Numecent’s Technology do? It calls its technology “cloud paging,” and in its corporate literature it takes pains to explain that it is nothing like “pixel streaming,” a technique in which applications, mostly games, run on a cloud server and deliver the experience of the game — literally the pixels of a gaming environment — to a PC over the Internet. This is essentially how OnLive, a gaming outfit, works.

The fundamental problem here is that while the cloud is good for streaming linear content like movies and music, where one bit follows logically after another, it’s less good at nonlinear stuff, like applications. One bit doesn’t necessarily follow in a logical order from another, because users jump around from one process or feature to another. So if you’re trying to run a software application via the cloud, you can run into trouble pretty easily if it’s a processor-heavy program.

Cloud paging, as best I understand it, uses the Internet to transmit x86 chip instructions — basically telling the Intel or AMD processor in a PC what to do remotely. What this allows is something Numecent describes as “friction-free” computing. What that means in practice is that you could run any application on your local system from the cloud, in an almost-instant, on-demand manner. And when you’re done using it you just shut it down and your local system is left more or less untouched. When you’re done using it, it’s as if the software had never been on your PC.

Numecent’s cloud-paging scheme breaks software up into small pieces, called “pages,” that can then be pushed out dynamically. The user’s machine creates what’s called a virtual memory management unit, which handles the job of requesting the pages that are delivered. Connections between the client machine and the server are also strongly encrypted.

The end result, the company says, is a reduction by as much as 60x in deployment and delivery time of applications. And there’s also nothing to maintain. When the user is done using the virtual application or machine, there’s nothing left on the client machine.

Let’s say you’re a part-time graphic designer who works for a company only two days a week. The company would normally have to pay for you to have Adobe Creative Suite installed on the machine you use. This can easily run a few thousand dollars. But if you could check it out for a few hours and run it on a cloud server, with the same features and the same native speed, as though it were installed on your local system, it would cost your employer a lot less.

Central to all this are 10 patents that Numecent has on its cloud-paging technology. I’m told that these are battle-tested patents, and that Microsoft and Citrix Systems are among its licensees.

The same experience can be applied to games. Most games worth having can be bought from download stores today, but they’re huge and take a lot of time to download and then install. What if you could just play whatever game you wanted, pay for the time you use it, and then stop paying when you’re done? That’s sort of the idea behind Approxy, a spinoff that Numecent is launching today, as well. Yavuz Ahiska, another 3Dlabs alum, is taking it out of Numecent, and plans to offer a white-labeled cloud gaming service that gaming companies can license. Approxy is described in a lot more detail in the video (below) that Numecent shared with me exclusively.

Numecent’s plan is to essentially spin out different companies that put its cloud-paging technology to work in different contexts.

Approxy from Arik Hesseldahl on Vimeo.

Just as the annual Consumer Electronics Show kicks off this week, according to a report from the NPD Group: Consumer electronics sales during this past holiday period dropped six percent from last year.

That should be some not-so-welcome news for the vendors at the Las Vegas gadget confab, which is seeking to show off new wares to excite said consumers.

Those offerings had better step it up, from a look at the NPD Weekly Tracking Service, which noted that the decline was coming off another decline from a year ago.

While 2011′s drop was not as bad as 2010′s, it’s not the right direction, although the tally did not include some of the more explosive device categories being prominently featured at CES, such as tablets.

Said NPD: “Total consumer technology sales (excluding cell phones, tablets, e-readers, and video games) fell 5.9 percent to around $9.5 billion for the 5 weeks ending December 24, a slight improvement over the 6.2 percent decline in 2010.”

Sales of personal computers and televisions fell 4 percent, with flat unit volumes.

“2010 was the first year in quite awhile where the real drags on the core CE marketplace were not TVs and PCs,” said Stephen Baker, VP of industry analysis at NPD, in a press release. “Revenue for those two segments outperformed while the rest of the market dropped by more than 7 percent. The accelerated rate of decline in older technology categories such as DVD, GPS and MP3 players put a ceiling on how well the industry could perform during the holiday.”

Consumers did snap up flat-panel TVs, with screen sizes of 50 inches and higher rising by 32 percent in unit sales.

And the rocky 3-D TV business also grew by more than 100 percent, with TVs with “3D capability accounting for more than one in every five dollars spent on TVs during the holiday.”

Also up: Home theater systems (10 percent) and stand-alone streaming devices (65 percent).

But those increases did not stem the overall negative tide.

For other sectors, here’s the damage to holiday revenue in percentage change from 2011 dollars spent:

Blu-ray players: Down 17 percent.

Camcorders: Down 42.5 percent.

Digital picture frames: Down 37.5 percent.

GPS: Down 32.6 percent.

HDD: Down 25.1 percent.

Mice and keyboards: Down 7.1 percent.

MP3 players: Down 20.5 percent.

Multifunction printers: Down 9.9 percent.

Point-and-shoot cameras: Down 20.8 percent.

MORE CES NEWS:

• Complete coverage
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• Walt Shows Off CES Gadgets for Fox Business News (Video)
• What Kind of Web Video Plans Does Sony Have? (Video)
• Fujitsu Seeking Way Into Crowded U.S. Smartphone Market
• Why Rhapsody Is (Probably) Bigger Than Spotify — In the U.S.
• Microsoft Beefing Up CeBit Presence Even as It Pulls Back on CES
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• FCC Chairman Has New Tablet, but Same Script: More Spectrum!
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• Schmidt-Storm Alert: The Google Chairman Didn’t Like Your Question
• T-Mobile Expands Bobsled Messaging Service
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• Motorola CEO: We’re Going to Release Fewer Phones This Year
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• Samsung Unveils “Super” 55-Inch OLED TV
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• Steve Ballmer Gives Ralph De La Vega a Very … Vigorous Greeting (Video)
• Interview: AT&T’s De La Vega on LTE, Tablets and Life After T-Mobile
• AT&T’s De La Vega: Shared Data Plans Still in the Works
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• LG Pushes 4G Smartphone Through Verizon: The LG Spectrum
• Live: AT&T’s Vegas Act Stars LTE and, Making Her Return to the Stage, Nokia
• CES Notebook: The Constant Search for Power and Vegas’ Worst-kept Secret
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Loosely modeled on the iTunes App store for the iPhone, iPad and iPod touch, Apple created the store last year as a reliable place to get Mac software. It follows the same 70-30 revenue split, where software makers share 30 percent of their sale with Apple, unless the app is free.

Unlike the iOS App store, the Mac App store isn’t the only place to get Mac software. You can still find good Mac software from sites like MacUpdate.com which has been a go-to for Mac fans for years; it is still buzzing along, referring users to software and generating 100,000 downloads a day.

Still, the Mac App store is now the biggest online software store in the world.

Apple’s statement is below:

CUPERTINO, Calif.–(BUSINESS WIRE)– Apple today announced that over 100 million apps have been downloaded from the Mac App Store™ in less than one year. With thousands of free and paid apps, the Mac App Store brings the App Store experience to the Mac so you can find great new apps, buy them using your iTunes account, and download and install them in just one step. Apple revolutionized the app industry with the App Store, which now has more than 500,000 apps and where customers have downloaded more than 18 billion apps and continue to download more than 1 billion apps per month.

“In just three years the App Store changed how people get mobile apps, and now the Mac App Store is changing the traditional PC software industry,” said Philip Schiller, Apple’s senior vice president of Worldwide Marketing. “With more than 100 million downloads in less than a year, the Mac App Store is the largest and fastest growing PC software store in the world.”

“With Autodesk products in both the App Store and Mac App Store, we can reach hundreds of millions of Apple users around the world,” said Amar Hanspal, senior vice president of Platform Solutions and Emerging Business at Autodesk. “With our free AutoCAD WS and the more powerful professional drafting tools of AutoCAD LT, we’re using the Mac App Store to deliver new products and reach a growing base of new Mac customers.”

“The Mac App Store has unparalleled reach and has completely transformed our distribution and development cycle,” said Saulius Dailide of the Pixelmator Team. “Offering Pixelmator 2.0 exclusively on the Mac App Store allows us to streamline updates to our image editing software and stay ahead of the competition.”

“In less than one year we’ve shifted the distribution of djay for Mac exclusively to the Mac App Store,” said Karim Morsy, CEO of algoriddim. “With just a few clicks, djay for Mac is available to customers in 123 countries worldwide. We could never have that reach through traditional channels.”

The Mac App Store offers thousands of apps in Education, Games, Graphics & Design, Lifestyle, Productivity, Utilities and other categories. Users can browse new and noteworthy apps, find out what’s hot, see staff favorites, search categories and look up top charts for paid and free apps, as well as user ratings and reviews. The Mac App Store is included with Mac OS X Lion and is available as a software update for any Mac running Mac OS X Snow Leopard. For more information visit, www.apple.com/mac/app-store.

Mac developers set the prices for their apps, keep 70 percent of the sales revenue, are not charged for free apps and do not have to pay hosting, marketing or credit card fees. To find out more about developing for the Mac App Store visit, developer.apple.com/programs/mac.

Apple designs Macs, the best personal computers in the world, along with OS X, iLife, iWork and professional software. Apple leads the digital music revolution with its iPods and iTunes online store. Apple has reinvented the mobile phone with its revolutionary iPhone and App Store, and has recently introduced iPad 2 which is defining the future of mobile media and computing devices.

First, Apple investors will freak out.

Second, Apple will do what Apple has planned to do for all these years.

For years, since Jobs’s first bout with pancreatic cancer was disclosed, Apple has taken a lot of criticism from analysts, shareholders, activists and tech and business columnists on the subject of succession planning. The main complaint has always revolved around the fact that Apple seemed not to have a plan for the day that Jobs would cede the helm either by choice or happenstance.

The fact is that Apple does have a plan, and chose, I think wisely, to keep most of the details related to it confidential. On the very last page of Apple’s Corporate Governance Guidelines (PDF here) you find that the company designates its compensation committee, a subset of its board of directors, as the body responsible for succession planning.

Here’s what the text says (emphasis mine):

XIX. Management Review and Succession Planning
The Compensation Committee should conduct, and review with the Board, an annual evaluation of the performance of all executive officers, including the CEO. The Compensation Committee is expected to use this review in the course of its deliberations when considering the compensation of the CEO and senior management. The Board also reviews the CEO performance evaluation to ensure that the CEO is providing effective leadership of the Corporation. As part of the annual evaluation, the Board and the CEO should conduct an annual review of management development and succession planning for senior management, including the CEO.

And for the record, the members of the compensation committee are as follows: Millard Drexler, the chairman and CEO of retailer J. Crew; Al Gore, the former vice president of the United States; and Andrea Jung, the CEO of Avon, is the committee’s chair.

All of them, Gore especially, know a little something on the subject of succession planning. Yet the market has over the years generally assumed that Apple has had no plan for a post-Jobs Apple.

Expect that assumption to be the order of the day when the markets open tomorrow. Apple shares have already taken a 5 percent hit, dropping $19.08 in after-hours trading tonight, and you can bet that’s just a precursor for what’s coming tomorrow. Over the coming days, the so-called “Jobs premium” will be erased.

So what happens next? First off, tomorrow will be Tim Cook’s first day as CEO — not acting CEO, but as the actual CEO of Apple. Long credited as the man who brilliantly runs Apple day to day, he’s now in charge.

And that’s an encouraging thought. Formally designated Apple’s number two in 2005, he has overseen it during its most exciting and world-changing years. On his first business day as COO, Apple shares closed at $54. Today before the news broke, it closed at nearly seven times that price.

During those years Apple has largely remade much of the world around it: Music, media, communications are all indelibly and fundamentally different because of the work that has come out of Apple during this six-year period. To assume that this stops because Steve Jobs doesn’t show up at the office tomorrow or next week is failing to understand the Apple way.

If you follow Apple long enough, you know that Apple has a long-term vision. I think enough time has passed that I can share the following anecdote. In 2007, right after the introduction of the first iPhone, I attended a meeting with Jobs and the editors of the magazine I was working for at the time.

The meeting included a Jobs-led, hands-on demo with prototype iPhones, during which I asked Jobs a question: “Will you do a version of this without the phone?” The answer — which surprised me that he even gave it — was yes. In that moment I got a very tiny glimpse of the long path that lay ahead. I could see way off in the distance the logical progression leading first to the iPod touch and from there to the iPad. It was a revelation.

And we all know exactly what the iPad is doing to the established order of the PC industry: It is tearing it down. Hewlett-Packard’s decision to get out of the PC business is just one very big and recent example of the degree of that change.

That in mind, I find it hard to accept the argument that there isn’t a similar long-term vision that Apple is executing on at this very moment. My suspicion has long been that a pipeline of products — some of them incremental improvements on existing ones, others radically new and disruptive — are in various stages of the design process. I think it is a safe bet that Apple’s strategic plans for the next five years are more or less mapped out. Beyond that, it’s harder to see, and circumstances can certainly change a great deal in that amount of time.

But consider where Apple was five years ago and what has happened since. Yes, the Apple story was interesting in 2005 and 2006, but who could have predicted that Apple would become the biggest company by market capitalization in the entire world, eclipsing ExxonMobil, if only for a few days.

Markets will do what markets must do. And so must Apple. The next phase of what has turned out to be the most interesting business story in living memory has begun.

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The results come as PC makers benefit from a wave of companies upgrading their computer hardware. Lenovo has also benefited from business in China and other emerging markets, where demand is outperforming a weak consumer segment in the U.S. and other developed markets.

Read the rest of this post on the original site »

At Dell, while weak PC sales to consumers will put some pressure on overall sales, Whitmore writes, revenues should be more or less in sync with the consensus number of $15.4 billion. Gross margins should, however, be better than the 17.6 percent reported in the year-ago quarter–as high as 20 percent–because of better sales of more profitable products to corporations, a pricing environment for commodity components that is “relatively benign,” and higher contribution from Dell’s corporate storage products to overall results. “Looking forward, we expect Dell to highlight increasing activity around corporate upgrades and a growing pipeline of corporate infrastructure upgrade activity, which should support earnings in subsequent quarters,” he writes. He expects Dell to report per-share earnings of 45 cents, slightly better than the consensus expectation of 43 cents.

He also expects corporate PC sales to be strong overall for Dell, driven by upgrades to Microsoft’s Windows 7. He reckons about 80 percent of Dell’s small business and corporate customers are still running Windows XP. Soft sales to consumers are more or less baked into the expectations and shouldn’t come as a surprise to anyone. Even though Dell has improved profitability of its consumer PC segment recently, it is having a hard time competing with Apple’s iPad, which sold 4.7 million units in the March quarter. “Expectations for the Consumer segment are very low,” he writes.

At HP, the picture is kinda the same, but also kinda different. It’s seeing the same relative strength in corporate IT spending relative to consumer spending that Dell is, translating strong sales of servers and software combined with services. Its weakness will be, Whitmore writes, around the growth of sales of its products generally, or what he calls “organic revenue growth.” He expects revenues to grow companywide by 2.2 percent to $31.5 billion, gross margins of 24.5 percent, one point better than a year ago, and $1.20 in per-share earnings–a penny below the street consensus of $1.21.

HP will be running downhill a bit, thanks to the state of the currency markets. The weakness in the U.S. dollar translates to attractive prices to buyers outside the U.S. This help from the currency markets could continue for the next few quarters, he writes. Even so, judging by the belt tightening seen in internal memos, HP may need every advantage it can get.

Sales of laser printers should be strong given a replenishment of inventories, and some gains in market share from more attractive prices. The inkjet business is another matter entirely. “Fundamentals in the inkjet printer market remain challenging and continue to be characterized by competitive pricing and soft unit volume.”

On PCs, HP is getting hammered on the consumer front thanks to the iPad, just as Dell is. “Although well anticipated, soft results in this segment could undermine confidence in HP’s organic growth prospects and highlight the absence of a tablet offering,” he writes, though the Touchpad is expected in the summer.

On the enterprise side, sales of servers should prove solid as demand for building out data centers remains strong overall, though storage sales may be weak on share losses to EMC and NetApp. Also, sales of servers based on Intel’s Itanium chip may prove weak because of uncertainty around the product’s future.

In the first of two memos below, Joshua Brenkel, head of PSG for the Asia/Pacific and Japan region, orders a freeze on new hires during the second and third quarters.

In the second, Guillaume Gerardin, finance director for PSG Europe-Middle East and Africa, institutes a freeze on operating expenditures (OPEX) “until further notice.” It includes a freeze on travel unless the trips are specifically approved by him or by Eric Cador, the group’s senior vice president. It also orders a hold on new marketing programs.

To place these memos in their context of recent events at HP, they were both circulated to relevant employees mere days after the March 14 HP summit at which HP CEO Léo Apotheker set out his big cloud-centric strategy for the company.

The dates on the memos are also mere days before the close of the first calendar quarter, one in which PC sales were said to be getting hammered, according to market surveys by both IDC and Gartner, thanks once again to the iPad.

I’m told from the source who sent me these memos that others like them went out around the same time in other divisions within HP. That said, I haven’t seen any others like it. HP, by the way, reports quarterly earnings a week from today. Analysts expect it to report per-share earnings of $1.21 on sales of $31.5 billion. Clearly someone is worried about something.

HP declined to comment, citing its quiet period before reporting earnings.

From: Joshua Brenkel
Date: 18 March 2011
Subject: Action: PSG APJ Hiring

Hi All,

Over the course of the past five quarters we have significantly invested in building our teams through sales coverage plan and have added over 370 net new team members to PSG APJ. Due to business conditions, our current revenue forecast, sales productivity versus other regions and OPEX plans, we need to implement the following immediately:

Hiring Freeze (Q2/Q3)
all new positions
all replacement positions
all ETW/contractor positions including extensions
all the above is inclusive of all current open/sourcing requisitions

Process
We will put all roles on hold effective tomorrow all current requisitions
All pending starts (offers extended and accepted) will continue
Finance in process of deploying 2H OPEX
Productivity analysis underway including ETWs/Contractors
Communicate live with your teams so they understand clearly the business context

We recognize there will be a select number of mission critical positions that we will need to go forth with. Thus, we will put in place the following exception process:

Exception Process
Country/Region HR Lead should submit the following attachment which has been approved by the L3 to Damien Hsu by March 24th and ongoing to Damien Hsu by the 20th of each month.
Jos/HR/Finance will review monthly

Overall, this is a very good opportunity for us to step back and ensure our organizations are aligned and efficient as well as all our talent is achieving the revenue/results we are capable of and expect.

Questions, please don’t hesitate to let us know. Appreciate your leadership in advance.

Here’s the second memo:

From: Guillaume Gerardin
Sent: 22 March 2011
Subject: Freeze on Opex – effective immediately

Dear all,

Further to Eric’s message on March 18, this is to confirm that, in order to offset our revenue and resulting gross margin challenges, we are on Opex freeze in PSG EMEA until further notice. Effective immediately, the following measures must be strictly adhered to:

– Travel Freeze:
-No travel for internal meetings, unless otherwise approved by Eric or Guillaume.
-Travel for customer meetings/visits can continue but should be reviewed for maximized return.
– All requisitions are on hold — see attached message from Elizabeth with more details
– Marketing programs — under review for Q2. No marketing program should be engaged and committed for next quarters without formal approval from Eric.

Please distribute accordingly within your teams and ensure strict adherence.

Thanks,

Guillaume

As details about the daring raid on Abbottabad continue to emerge, we’re learning more not only about how Navy Seals found and killed their target, but about the potential for further clues that may help catch yet more terrorists still on the loose.

Historically, obtaining a computer used by a terrorist is almost as important as catching or killing the terrorist himself. When Khalid Sheikh Mohammed was nabbed in Rawalpindi, Pakistan, in 2003, agents with the CIA and Pakistani intelligence seized a computer whose hard drive was said to contain, among other things, three letters from Osama bin Laden, a list of safe houses that bin Laden had used, a pilot’s license belonging to 9/11 hijacker Mohamed Atta and information about the four planes hijacked that horrible day.

In Iraq in 2005, a seized computer found after a close call played a role in ultimately running to ground the terrorist Abu Musab al-Zarqawi. After being pulled over in a pickup truck by U.S. forces, he managed to get away, but was in such a hurry that he left his laptop behind. (I wrote about it at the time.) The computer yielded financial information and recent pictures of Zarqawi. It took another year, but he was eventually killed in 2006.

Clearly the walled compound wasn’t some Luddite hut where modern conveniences were banned. In some of the images of the compound you can clearly see a satellite dish, probably for TV. The Journal’s Tom Wright was among the reporters who got to tour the site. Initially described as a “mansion,” it seems from his description to have been nothing of the kind.

Among the items seized at Abbottabad, according to numerous reports, are hard drives, DVDs and other “electronic equipment.” CNN has a more detailed inventory here. The amount of information found is being described as “impressive” by CIA Director Leon Pannetta, and analysts are digging through it now to see who they can smoke out next.

Often it turns out that terrorists are just as sloppy as the rest of us when it comes to using computers. They make up easy-to-guess passwords, don’t go to the effort to encrypt their sensitive files and leave unencrypted documents in directories where they’re easy to find. With any luck, there is among the collected digital detritus something that will lead to several repeat performances by Seal Team Six.

It’s all part of the wider implications stemming from the dramatic close of the biggest manhunt in American history. I discussed them with Simon Constable and Spencer Ante of The Wall Street Journal during an extended all-bin-Laden edition of The News Hub yesterday. We talked about my story from yesterday on how it appears that bin Laden’s efforts to forgo the use of telephones and the Internet may have been a key clue that helped bring his hiding place to the attention of intelligence analysts. By trying to make himself digitally scarce, bin Laden may have ironically raised a red flag.

In a repeat of a trend seen last quarter, both firms report that the market shrank in the first quarter of the year. This would constitute the first market contraction in six quarters, and the first since the onset of the recession. They differ, however, on the size of that contraction: IDC pegs it at 3.2 percent since the first quarter of 2010; Gartner at 1.1 percent.

To be fair, let’s remember that the first quarter of the year is always seasonably slow for PC purchases because two things tend to happen in the fourth quarter: Consumers splurge on gifts for family and frankly for themselves too, and take advantage of crazy deals offered by retailers desperate to clear out their inventory. On the business side, some CIOs take the opportunity to use up unspent funds in their budgets, and get employees starting off the new year with a fresh new machine at their desks. However, this tendency is just as often offset by the start of a new budget year. Whichever way you slice it, the first quarter is always weak on consumer sales though a bit stronger on the enterprise side.

So what happened? The iPad 2, for one thing. “With the launch of the iPad 2 in February, more consumers either switched to buying an alternative device, or simply held back from buying PCs,” is how Mikako Kitagawa, principal analyst at Gartner, put it. “We’re investigating whether this trend is likely to have a long-term effect on the PC market.” Ya think?

Bob O’Donnell, IDC’s vice president for Clients and Displays, wasn’t quite as willing to blame the iPad: “Slower than expected commercial growth in the first quarter failed to offset the ongoing challenges in the consumer market,” he said in a statement. “While it’s tempting to blame the decline completely on the growth of media tablets, we believe other factors, including extended PC lifetimes and the lack of compelling new PC experiences, played equally significant roles.”

Jay Chou, another IDC analyst put it much more succinctly: “‘Good-enough computing’ has become a firm reality.”

The picture gets no better when you look at regional results. IDC says shipments declined in the U.S. by 10 percent. Gartner pegged it at 6 percent. It was, Gartner noted, the third consecutive quarter for year-on-year declines in U.S. notebook sales. Shipments in Europe contracted too, and Japan, which was already expected to be a weak market this quarter, has other things on its mind since the devastating earthquake and tsunami. Asia was the only bright spot, where shipments increased by 5.6 percent in IDC’s forecast and 4.1 percent in Gartner’s. China, IDC noted, failed to reach double-digit growth, and consumers in India, Gartner says, were distracted by the Cricket World Cup. Okay, then.

So how do the numbers look? Since IDC’s forecast is the most dire, I’ll start there:

The worldwide demand for PCs was 80.6 million units. Hewlett-Packard sold 15.2 million; Dell, which just made it back to second place, shipped 10.3 million; Acer 9 million; Lenovo 8.2 million; Toshiba 4.8 million; while “others” clocked 33 million. All vendors except for Lenovo saw declines. The worst decline was Acer’s, whose shipments fell nearly 16 percent. (Now we know why its CEO Gianfranco Lanci lost his job.) Lenovo, on the other hand, saw its shipments improve by more than 16 percent.

Demand in the U.S. was 16.1 million. HP led with 4.3 million, Dell 3.7 million, Toshiba 1.6 million, Apple 1.4 million and Acer 1.3 million. Unnamed others sold 3.7 million. Acer saw its shipments fall by an alarming 42 percent. Apple and Toshiba posted gains of 9.6 and 10.4 percent respectively. HP and Dell both saw declines.

Now let’s look at Gartner’s numbers (remember that each firm tracks the market a little differently):

Gartner pegged the worldwide market at 84.2 million units. It says HP sold 14.8 million, Acer 10.9 million, Dell 10 million, Lenovo 8.2 million, Toshiba 4.8 million. (Clearly there’s a difference in how they see Acer and Lenovo’s performances.)

In the U.S., Gartner estimated the market at 16.1 million units. By its reckoning, HP sold 4.2 million, Dell 3.6 million, Acer 1.8 million, Toshiba 1.7 million, Apple 1.5 million, others 3.3 million.

As you can see from the specs, it’s really just a modern PC built into a body that has the same look and feel as the original C64, which was fully contained inside the body of a keyboard. The appeal is that you can launch a C64-mode to play all the old games and run the old software via an emulator available on the desktop. Though as the vendor’s Web site informs you: “Commodore OS 1.0, along with emulation functionality and the classic game package, will be mailed to purchasers when available. In the meantime, units come with the Ubuntu 10.04 LTS operating system on CD ready to install.” You could probably also install Windows on it provided you get one with a sufficiently large hard drive.

I got my first C64 in 1983 and had to wait a few months before my folks could spring for the floppy disk drive. I had to get by loading programs with a cassette-tape drive at first. When I tell younger people about these tape drives, some of them think I’m pulling their legs. Remember downloading pictures or music or pretty much anything on a dial-up modem? Yeah, it was kind of like that, but worse.

Commodore USA–which bears no relationship to the company that brought the original C64, and later the Amiga computer, to market, then went bankrupt and was liquidated in 1994–is selling the machine for a starting price of $250, though the price increases to $595 (the price of the original in 1982) and $695 depending on options.

If you’re not willing to spend that kind of cash, there are several C64 emulators for modern machines, and plenty of sites where you can download ROM files for old games. Mac users will like Power64, which is what I use. I’m not as familiar with emulators that run on Windows, though here’s a list of several. And everything you’ve ever wanted to know about C64 software, including all those fabulous 8-bit games, can be found at C64.com.

Belows is probably not the first and certainly not the only Commodore TV ad you’ll see around this week. (Many more to be found here.) This one is a 1984-vintage ad for the C64, advertising the machine for $250. It had come down from its original price, but its specifications didn’t change in that time.

The C64′s time on the market gave it the staying power required to make it the best-selling single model of a computer of all time. Estimates as to exactly how many were sold vary: Commodore founder Jack Tramiel said he thought the number was between 22 million and 30 million. A 1993 Commodore annual report (yes, it was publicly held, and you can read more than you ever wanted to know about it in this book) claimed lifetime sales of about 17 million units, though further research suggests the real number was closer to 12 or 13 million. Whatever the number, millions clearly adored, and still do adore, the 64.

The executive–Todd Bradley, who heads HP’s personal-computer business–decided earlier this month to remain with the company, the people said.

But the negotiations underscore Intel’s willingness to consider unusual measures to strengthen its management ranks as the company faces the difficult task of identifying an eventual successor to Chief Executive Paul Otellini. An executive vice president regarded as the most likely candidate among Intel’s top managers, Sean Maloney, is recovering from a stroke he suffered a year ago. Another potential candidate, Patrick Gelsinger, left Intel in 2009 to join EMC Corp.

Read the rest of this post on the original site »

For one thing, January’s restructuring of the board of directors has left a bad taste in the mouth of a pair of shareholder advisory firms, who have publicly called upon HP investors to vote against the re-election of as many as three sitting directors and against some say-on-pay proposals.

Sources familiar with the situation confirmed to me that after today’s event, HP’s investor relations team plans to mount what’s being described as a “road show” to counter the recommendations to vote against management made by Institutional Shareholders Services and Glass Lewis among retail investors. Exactly who is involved and whom they plan to visit couldn’t be determined. HP had no comment about it.

At least part of the road show’s mission will be to drive home the highlights of the strategy that Apotheker lays out in his keynote today. But there is some nagging concern that a sufficient number of shareholders, put off by repeated instances of board room drama over the last decade — Carly Fiorina’s ouster in 2002, the pre-texting scandal in 2006, and last year’s departure former CEO Mark Hurd — may vote against the three directors standing for another term: Lawrence Babbio, Sari Baldauf, and Ken Thompson.

That enough investors would vote against management to make a difference may seem unlikely at first until you consider the number of shareholder lawsuits stemming from the Hurd affair that are currently pending both in federal courts and in the Delaware Chancery Court. The fear of an embarrassing defeat for HP and its new board at the annual meeting on March 23 isn’t an unreasonable one.

Then there are the larger questions. As Bernstein analyst Toni Sacconaghi pointed out in a recent note to clients, HP’s stock has underperformed the S&P 500 since Hurd’s departure, and the lag has been driven mostly by uncertainty among investors about its strategy and about Apotheker himself. Its disappointing results in the first quarter didn’t help matters.

There are numerous questions around HP’s hardware strategy, particularly around the PC business. While it has promised to put the WebOS platform it acquired last year when it absorbed Palm into tablets and into every PC it ships, HP is still seen as far behind Apple on the tablet front. We all know why that is.

But the questions go deeper than that. Apotheker, a former CEO of the business software giant SAP, last week sent a strong signal in an interview with Bloomberg News that he plans to acquire some software companies.

What kind of acquisitions? He’s ruled out SAP, for one thing. And in a meeting with Bernstein’s Sacconaghi last month, he said any acquisitions would not be so large as to “keep investors awake at night,” meaning, Sacconaghi suggests, that they would probably not exceed $5 billion. Aside from buying software companies, he’s also signaled that the days of cuts–the hallmark of Mark Hurd’s tenure–are over. Cutting costs is out, investing is in.

But then there’s the larger issue about whether or not Apotheker can steer Hewlett-Packard, the storied Silicon Valley icon, on a course that restores its former glory. The question marks around him on this score are considerable because the task is just so huge. HP is a sprawling $126 billion juggernaut meaning change comes slowly, often in barely perceptible steps that leave impatient investors wondering what’s taking so long.

At the outset, the Apotheker’s strategy appears to be summed up pretty simply: Bring the market-leading position in hardware to bear and combine its offerings with a newly ascendant software business, which together will feed into an IT services business that aims to compete with IBM. It’s not going to be easy and the most important important thing that Apotheker has to do is inspire both analysts and shareholders alike that he’s the man to get the job done. As yet both are understandably skeptical mainly because Apotheker is an unknown quantity.

When Apotheker’s predecessor Mark Hurd took over at HP in 2005, there was very little doubt about what kind of CEO he would be: A relentless, unsentimental cost-cutter, and this much was clear before he was even officially on the job.

And while Apotheker has pointed tentatively in the direction he’d like to take HP, there are still more questions about him than there is certainty. His most important job will be to convince all concerned that he’s the man who can steer HP back on a course to greatness.

PREVIOUSLY:

• Another Advisory Firm Singles Out HP Director Babbio
• Shareholder Group Contends HP’s New Board Is Too Chummy
• “Peripatetic Polyglot” Léo Apotheker Wants to Save HP’s Soul by Buying Software Companies
• HP Earnings Today: Will Léo Apotheker Speak?
• Michael Dell Thinks HP Paid “Way Too Much” for 3Par
• Judge: HP Can Re-Investigate Hurd Departure
• Is This the HP Board That Will Allow Us to Stop Thinking About HP’s Board?
• Meg Whitman, Patricia Russo Among Five Joining HP Board
• HP Plans Another Probe Into Hurd Departure
• Léo Makes It Official: SAP’s Bill Wohl Joins Hewlett-Packard
• Want Enterprise Growth, HP? Think Services
• Mark Hurd Really Wants to Keep the Jodie Fisher Letter Private
• Mark Hurd Doesn’t Want You to Read the Letter That Cost Him His Job
• HP Networking Head: “People Are Tired of Paying for Cisco”
• HP Names Ex-SAP Chief Apotheker as CEO