PCs' Mid-Market Blues

The computer industry, or the Windows portion of it, seems to have come down with a case of the Mondays. Across much of the business, profits are flat or dropping and stock valuations are crumbling, and the rest of this year seems only to promise more of the same.

Industry icon Dell's latest quarterly profit dropped by half compared with a year ago, and then it had to issue the largest product recall in the history of consumer electronics after a handful of laptop batteries burst into flame. Gateway lost money outright, and then the founder of the eMachines half of the company (which he sold to Gateway for $290 million in 2004) asked Gateway to sell its retail division back to him for $450 million so he could run it better.

It's tempting to blame Microsoft for this mess -- its new Windows Vista operating system will ship months later than planned. That delay yanked away the industry's best chance for a big holiday season -- people upgrading their copy of Windows the old-fashioned way, by buying a new computer.

But even if Vista were to land on store shelves two months from now, and in perfect quality, the PC industry would still have serious issues to address. They all revolve around the basic theme of any business built on mass-produced electronic devices: the inevitable shift of a product from luxury to commodity.

Computer manufacturers all know how to sell a luxury item, whether it's a $2,000 Sony Vaio laptop or a $3,000 Dell XPS gaming rig: Throw in every possible feature, and spend some extra time designing a shiny case that sticks out in a crowd.

Most of these companies also know how to sell a $300 bargain-basement desktop: Build the thing out of the cheapest available parts and make sure it's easy for customers to find in the store.

But what about the computers in between -- the models that will allow a computer manufacturer to build a thriving business, instead of selling only to pricey niches or grinding out a living at the low end of the market?

Many of these middle-of-the-road models combine the least appealing parts of these approaches: one or two high-end components mixed in with average hardware, all packaged with a total absence of style. There's little that is interesting about these machines unless, perhaps, you're a corporate information technology department.

Put it this way: If it weren't for the occasional battery bursting into flames, what would make a Dell laptop uniquely Dell?

Confused buyers have no clear, simple way to choose among these apparently identical products. Traditionally -- thanks to a decade or so of advertising, much of it orchestrated by Intel -- they could just look at which computer's processor was faster based on a number called "clock speed." If one was rated at 2.4 GHz while the others were stuck at 1.8 or 2 GHz, consumers could march off to the store secure in their knowledge of which machine had more juice.

But the latest round of processors from Intel and Advanced Micro Devices -- all of which have clock speeds slower than older models yet work considerably faster in practice -- have put an end to that. You can still compare a pair of PCs with Intel Core Duo processors, but what if one machine has an AMD chip? What if one has a Pentium D? You can't tell who wins that race unless you geek out with benchmarking software.

The industry no longer has a shared language in which to communicate which machine is fastest -- or how much faster a new computer could perform compared with a three-year-old model.

That may be a positive development overall: The focus on speed doesn't necessarily help computer buyers when most of them don't use their computers in any way that would tax a processor of three years ago.

With that kind of muddied message, it can't surprise anybody that the new-car smell is gone from the computer business. Just what is a buyer supposed to be excited about now?

It's not that customers don't have clear needs. Most have a pretty good idea of what they'd like out of their next computer -- but manufacturers typically are either unwilling or unable to deliver those things.

They keep bundling the same operating system, so they can do little to fix two of the problems people complain about most often, security and maintenance. They don't seem to want to learn from which programs people add to their computers afterward, so as to provide a better choice of bundled software.

Other aspects of computers seem to defy the efforts of everybody in the industry: Batteries on a laptop struggle to last more than four hours, and there's no cheap and widely available form of wireless broadband Internet access.

There is one area, however, that computer vendors control completely, and that could set them apart from competitors: tech support. In most other businesses, interacting with the customer after the purchase is not only considered a normal part of the job, it's one of the primary ways to build repeat business. And it can be done in the PC business, too: Just ask Apple, which has people lining up to talk to the tech-support "geniuses" at its retail stores.

Living with technology, or trying to? E-mail Rob Pegoraro atrobp@washpost.com.