While Apple grabs a bigger part of the laptop market, Amazon continues to build on its cloud track record.
It was a bad week for Dell and Hewlett-Packard as both companies reported results that disappointed Wall Street.
Dell reported that profit fell 33% as sales were hurt in part by what one analyst termed the Apple effect as consumers and businesses embracing the bring-your-own-device model are picking Apple products. Dell is in the midst of transitioning out of consumer and low-margin products into servers and services for the enterprise, but the popularity of Apple is hurting Dell's bottom line, at least in the short term.
The Apple effect is also dinging the other personal tech giant: Hewlett-Packard. HP is in the process of cutting 28,000 employees as Meg Whitman (the latest in a revolving door of CEOs) tries to sort out the consumer, enterprise, and commercial businesses. The Apple effect is in full bloom in the consumer sector and may even be reaching into the once high-profit margin printer business. I'm positing the widespread use of tablets means fewer documents are getting printed, but I can't back that up yet.
In addition to Apple, there is another "A" on the Dell and HP horizons. While the Apple effect is chewing into the traditional laptop segments, I'm thinking the Amazon effect is working its way into the high end and much sought after cloud computing space. Right now, Amazon Web Services is on track to do more than $1 billion in revenue this year. (Morgan Stanley estimated an AWS run rate of $1.19 billion in 2011. Technology Business Research, a marketing and research firm, estimated that AWS revenue for the first quarter of 2012 reached $283 million, up 37% year to year. Amazon refuses to disclose AWS revenues.)
Amazon's infrastructure-as-a-service is considerably "stickier" than software-as-a-service offerings from Google or Salesforce.com. It is much easier to switch in and out of software applications than it is to start shuttling around your IT infrastructure.
While HP is bolstering and betting on cloud services as is Dell, Amazon has lots of experience in developing and deploying its infrastructure cloud offerings, and it has lots of customers. While $2 billion in revenues is not a big number for the likes of Dell and HP, those revenues are coming from customers that Dell, HP, and lots of other tech vendors would like to secure.
The Amazon Web Services model is not for every company. There are still security and compliance concerns that stop some companies from moving to the cloud. For other companies, cloud services are seen as good adjuncts to disaster recovery and scaling capabilities but are not ready to replace a company's data center. However, Web services seem to be part of every company's infrastructure future and Amazon offers a track record that few other vendors can now match.
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