I think 2007 is going to be a rough year for computer manufacturers. Hardware architectures are changing too quickly for consumers to keep up, Vista is not a compelling reason to upgrade, and virtualization is pointing out that there is a lot overcapacity out there already. I think Apple will be the only company with strong PC sales this year.

PC confusion

As far as architecture churn goes, personal computers have never been more confusing.

Most households already have a computer and the computer they have already has enough umph to do whatever light computer work they do. (Most people use a word processor, view web pages, and check email - easy stuff.) The same is true for many businesses. There just isnt a functional reason for most people to buy new hardware, especially since it now entails a Vista upgrade.

The big hardware users (and thus buyers) tend to be gamers and the gamer picture is pretty cloudy.

Having upgraded just 6 months ago, I find that the new hardware requires totally new architectures with more to come this year. That means new motherboards, new memory - new everything. Instead of a new CPU, I find that I have to completely replace my current PC for an upgrade which is annoying enough but it isnt even clear what to buy.

The picture is even more murky because of Vista. Vista introduces DirectX 10 - which requires new video hardware. Such a hardware incompatibility is always confusing to consumer but this is even worse because there is very little hardware available yet and there are no games that use DX10. So why upgrade?

I am doubtful that Vista is going to be a boon to hardware companies. Why upgrade to DX10 hardware if there arent any games yet? Why upgrade your existing system with better hardware if you know DX10 will obsolete it next year? Or will it? Maybe DX10/Vista will flop?

server overcapacity

Most home users either have an ancient PC or a super fast PC that they barely use. In other words, there is a lot of PC overcapacity in homes. More worrisome to hardware vendors is that there also appears to be a lot of overcapacity in businesses and business users know enough about computers to figure this out - and do something about it.

That something is called virtualization. Instead of having 10 servers that do very little, you can have a single server that does the same work as the old servers. That is the essence of this article and it is a trend that will continue, especially given the high cost of hardware, support and electricity. Virtualization is one of those good ideas that also has an immediate return on the bottom line so it will get used.

'Virtualization' Is Pumping Up Servers

Software That Enables Use of Fewer Machines May Cut Hardware Sales

By CHRISTOPHER LAWTON and DON CLARK

March 6, 2007

Wall Street Journal

So the company took a new tack. Instead of buying more servers, Mobius used technology from a start-up called Virtual Iron Software Inc., of Lowell, Mass., that lets each server run multiple programs at once and exploit more of its computing capacity.

In roughly eight months, Mobius managed to get rid of 134 servers. The bulk of them were so-called x86 servers, which take their name from the chip technology used by Intel Corp. and Advanced Micro Devices Inc. It also canceled plans to purchase an additional three dozen x86 servers this year, says Mr. Clark.

Other computer users are making similar moves, cutting the cost of buying and maintaining servers and reducing energy bills needed to keep them running. But the trend -- exploiting software that uses a technique called "virtualization" -- could be starting to take a toll on computer makers.

There was a surprising slowdown in unit sales of x86 servers in the fourth quarter, according to two prominent research firms, Gartner Inc. and IDC. For example, IDC found that sales grew just 1.1% to 1.85 million units, compared with 8.8% growth in the third quarter. That is the worst performance for the market segment since the dot-com bust, and IDC analyst Matt Eastwood lays the blame largely on virtualization.

....

Virtualization is an idea that originated on mainframe systems in the 1960s. But it has been rejuvenated by the rapid spread of x86 servers, which usually run one primary application program and an operating system. As a result, many machines operate at just 10% to 25% of their capacity.

...

David Siles, chief technology officer for Kane County in Illinois, in the fall of 2004 was managing roughly 300 servers scattered across 45 departments -- too many for his three-person staff to handle. Things got so bad, he says, that people were running servers in broom closets and under desks.

When it came time to retire those machines, Mr. Siles used VMware's technology to consolidate the county's computing operations on just 35 new physical servers. He estimates the move will save $30,000 to $40,000 a year in electricity bills. The new machines are running at roughly 65% of their capacity, versus no more than 10% before the shift.