Dell eyes wearable computing move as PC business keeps slumping

Struggling computer maker Dell is

considering a move into the

"wearable computing" space, as it

grapples with the effects of a

shrinking PC market. Sam Burd, Dell's global vice-

president of personal computing,

told the Guardian that "we're

exploring ideas in that space". The idea of computers that can be

worn on the body has become one

of the hottest spaces in the

technology business. Google has

thousands of people testing its

head-mounted Glass system, while the Californian company Pebble has

sold more than 85,000 of its

Bluetooth-connected "smart

watches". Persistent rumours

suggest that Apple will introduce an

"iWatch", while companies including Samsung, iPhone maker Foxconn,

Sony, LG and Philips have

announced – but in only a few

cases unveiled – wearable devices. "There are challenges in cost, and

how to make it a really good

experience," Burd told the Guardian.

"But the piece that's interesting is

that computers are getting smaller.

Having a watch on your wrist – that's pretty interesting, pretty

appealing."

With Dell preparing to take the

company private in a $24bn

leveraged buyout as the PC market

– the field which its founder and

chief executive Michael Dell first

exploited – begins to shrink in importance, the company is seeking

new sources of income. "Looking ahead five years, we

expect devices and form factors to

continue to change. There will still

be a need for 'static' computing on

desktops, but there will be a real

need for mobile devices. There's a lot of discussion about how that fits

into wearable devices like we've

seen with Google Glass and

watches. We're looking at a world

of lots of connected devices. "I don't see any magic new form

factor like the iPad – I don't think

anybody saw how that was going to

change devices. But the number of

[computing] devices per person is

exploding." On wearables, he said "we haven't announced anything,

but we are looking at the technology

in that space." Dell needs to add new revenue

streams as some larger customers

have slowed spending amid

economic belt-tightening. Though

the company has large enterprise

and services businesses, they have revolved around its PC business as

a means of winning services

contracts. But that is under threat. Dell's PC

revenues shrank by 9% to $8.9bn in

the three months ending in May

compared with the year before, and

income slumped 65% to $224m – a

2.5% margin. It has also been pushed into third place in the global

PC market by China's Lenovo, which

is now just behind the largest PC

maker, HP. And worse is to come, suggests the

research company IDC: it forecasts that global sales of PC desktops and

laptops will fall by nearly 8% this

year, the second year of decline in

a row – and expects they will keep

falling in 2014. Instead, tablets and "hybrid" devices

such as Microsoft's Surface are

expected to become increasingly

important; tablets like the iPad are

expected to outsell laptops this

year, and PCs (counted as laptops and desktops) by the end of 2015.

But Burd admitted that Dell has so

far only sold "hundreds of

thousands" of its XPS-10 and

Latitude 10 tablets, which

respectively run Microsoft's

Windows RT and Windows 8 software. However he added "I

think that's pretty exciting when we

look at the ramp [in purchasing]

that we expect from corporate

customers." He said Windows 8 on tablets had

not done well so far with the large

companies that make up a

substantial proportion of Dell's

customers. "Businesses are slow to

adopt a new operating system," he said. "But tablets really need

Windows 8 to sell well. Still, it is

encouraging to see some

businesses deploying Windows 8

and tablets. It's going to take some

time, and the jury is still out. IDC's numbers says that Windows 8 on

tablets is still far smaller than the

iPad, but there are successes.

Maybe in a few years when we get

to Windows 8 tablets being a third

or 40% of tablet volume we can feel it's happening. Tablets are

definitely an important piece of the

computing business." More broadly though the decline in

traditional PC sales is putting severe

pressure on Dell's revenues and

profits, driving the company to seek

to go private in a $24bn private

equity buyout and end its 25-year stock market listing. Burd insisted

that "the PC business

is important to us. It's how we

started as a company, and where

we have strong share globally. Lots

has been written about the demise

of the PC business, we we think it's an interesting area going

forward." The rapid growth of the tablet

market since the introduction of the

iPad in 2010 has seen Dell struggle

to keep up. Going private could help, thinks

Burd: "Michael Dell believes we are

on the right page for

transformation," he said. "The view

is that we can get ourselves out of

the quarterly reporting process where you can't make hard

decisions to speed up that

transformation." The company has struggled to make

an impact in the fast-growing

smartphone and tablet market. It

killed off its range of Android

phones after having effectively

invented the "phablet" range in 2010 with its Dell Streak 5in

smartphone. Flaws in the software

led to low sales, and the category

of a phone with a mini-tablet sized

screen was grabbed by South

Korea's Samsung, which has turned

it into a sector where it dominates through its Galaxy Note products.