In my lectures at Reykjavík University I talk about how free market companies that dominate over their competitors any given field, only hold temporary position and will eventually loose their dominant position. This is due to technology changes as well as organizational structure of companies.
Last week, we saw yet another evidence of this. Software giant Microsoft reported on Thursday (January 22, 2009) that client revenues are down 8% as result of a PC market weakness and a continued shift to lower priced netbooks. The company is eliminating 5.000 jobs, which is unusual, but not surprising in the economic environment of today. Of course Microsoft still has strong revenue streams (maybe not from Zune) and is still dominant in the field of software.
It is the shift to netbooks that I find interesting. While Microsoft still dominates as an operating system for these low-end computers, the revenues are lower for a cut-down 10-inch netbook than a full-blown Vista machine. It turns out that many people would like a $500 option for a small compact computer, something less feature rich than a laptop, and more powerful than a small-screen smartphone. It turns out that there is a market for this that was not being fulfilled by any technology. This is a classic case of disruptive technology where companies enter a market with low-end product since the current products are “too good”.
This is signaling another trend. As we move beyond personal computers on every desk (long time Microsoft vision) we see people find owning multiple computers necessary. Thus we might have our office computer, home computer, travel computer, game computer, entertainment computer and so on. One size doesn’t fit all needs.