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January 3rd, 2008, 04:05 PM

That Computer Is So You

PC makers used to focus on capability and price. That's changing—and fast—now that consumers want hardware that makes a fashion statement

by Steve Hamm and Jay Greene

With nearly 3,000 technology companies touting their wares at the annual International Consumer Electronics Show in Las Vegas from Jan. 7 to 10, it's a challenge to stand out from the crowd—even for an industry giant like Microsoft (MSFT). So the software *behemoth is staging a "fashion show" in which three top style mavens, including Nigel Barker from the TV show America's Next Top Model, will pick their favorites from among a dozen computers.

When it comes to design, rival Apple (AAPL) gets most of the ink, but Microsoft wants to demonstrate that PCs running Windows can turn heads, too. "There's a new bar being set," says Dave Fester, general manager of PC product marketing at Microsoft. "The market is pushing computer makers to do this."
Computers for the Fashion-Forward

PC makers are focusing as never before on turning utilitarian machines into fashion statements, and not just for the young and the hip. Lenovo Group (LNVGY), the world's No. 3 PC maker, is using the Vegas show to promote its expansion from commercial into consumer markets. The company is introducing three splashy notebooks—super-svelte and colorful, with textured covers that make them easy to grip. The lightest, at 2.3 pounds, is aimed at sophisticated, globe-trotting professionals.

Hewlett-Packard (HPQ), the leading consumer PC brand, will hawk such new models as its Blackbird 002, a black-clad desktop gaming PC whose insides, with a copper-piped liquid cooling system, are as pleasing to the eye as the exterior via an easy-to-open side cover. And Netherlands-based Tulip Computers is showing off ultra-high-end notebooks that look like expensive purses and are pitched at wealthy, middle-age women.

Until recently, PCs were viewed by many in the industry as low-margin commodities. What changed? Apple proved with its flashy iPods, iPhones, and MacBook laptops that design really matters to consumers. The company's aura of cool, cultivated masterfully by Chief Executive Steve Jobs, helped increase its PC market share worldwide from 1.8% three years ago to 3.2% now, according to market researcher IDC (IDC). Thanks in part to its high-sheen brand, Apple's operating profit margins top 18%, compared with 6% for Dell (DELL). But other companies are riding the bandwagon successfully as well. HP's accent on design has helped it regain the title of the world's No. 1 PC maker from Dell, which concentrated on run-of-the-mill office machines.
So Long, White Box

Now even Dell has become style-*conscious. Last year it brought out new consumer PCs that came in a choice of eight colors, including bubble-gum pink, yellow, green, and red. And it just introduced its XPS One—an elegant one-piece desktop. "We're in the fashion business. The products we sell increasingly make a statement about who you are," says CEO Michael S. Dell.

That perspective reflects a fundamental shift in who is buying computers today. Corporations and small businesses used to provide the lion's share of the demand. Now the consumer market is exerting a stronger pull on PC makers. Since 2002 the segment has been growing at a blistering pace. Last year consumer PC sales grew 19%, while commercial PC sales grew 11.7%, according to IDC. For much of the PC era, consumer machines made up about one-third of overall sales; today, consumer sales constitute 41% of the total PC market. "If you're not a player in consumer these days, you're not a player," says Roger L. Kay, president of market researcher Endpoint Technologies Associates.

Just as the auto industry strives to create a car for every type of driver, PC models are being designed to appeal to specific kinds of people. Notable niches include young men with gaming machines, soccer moms with touch-screen models that sit shoulder-to-shoulder with kitchen appliances, and teenage girls with cute, pink, leather-clad laptops. "We're entering the age of style because we have multiple PCs in our households. So you no longer have one white box that serves every function for every person in the household," says J.P. Gownder, a Forrester Research (FORR) analyst.
Designs That Target a Limited Audience

ASUSTeK Computer has taken the automobile analogy to its logical conclusion, producing a laptop specifically for racing fans. Its Lamborghini VX2 notebooks, with their shiny black or yellow covers and Lamborghini logos, even make vroom-vroom engine sounds when they boot up. The price: up to $3,300.

Tulip's notebooks may be the ultimate fashion accessory. Some of its Ego Lifestyle Limited Edition line "handbag" models are encrusted with jewels. "This is for people who drive the Bentley and buy the Gucci bag," says Dmitry Prut, owner of Avant Gallery, a shop in Miami's South Beach that began offering the Egos two weeks ago and has already written up three orders. The limited-edition models range in price from $7,500 to $50,000. For $50,000, you get real diamonds.

A few of the new machines hitting the market are clearly intended to capture some of Apple's design magic. But while most of Apple's designs seem aimed at that young, artsy slacker it features in its clever TV commercials, Apple's approach isn't about targeting hipsters, says Donald A. Norman, a professor at Northwestern University and author of The Design of Future Things. Rather, the company's design genius lies in its dedication to making simple, elegant devices for specific activities, not demographic types, he says. Its early markets were learning and publishing; now they're creativity and entertainment. "The proper way to design is not to target an individual type of customer. You want 100 million customers," says Norman.
Betting on Consumers' Willingness to Pay a Premium

A $50,000 price tag shrinks the potential customer base for a PC considerably. But people appear willing to pay a premium for a machine that tickles their fancy. In a 2007 survey by Forrester, consumers signaled they'd pay an average of $204 more for a high-end laptop that's well designed and $253 more for a high-end desktop.

Lenovo is so sure good design will help it fetch a premium price that it's skipping right over the bottom half of the PC market with its new consumer laptops. It will charge up to $2,000 for some versions of its IdeaPad U110, an 11-inch-wide, 2.3-pound notebook with a bright red top and a high-sheen display screen that runs right to the edge of the lid. The U110 also features a vine-like texture on the surface of its metal cover.

Gownder, of Forrester, says that kind of embellishment seems better suited to Chinese tastes than to the U.S. consumer. But Yao Yingjia, executive director of the Lenovo Innovation Design Center in Beijing, whose team designed the new PCs, says: "You have to take some risks."
Retailers Resistant to New Approaches

Now that PC makers have designed a wide range of flashy machines, the battle is spreading to the shelves of stores. Sony (SNE) has convinced a few retailers that specialize in TVs and audio equipment to stock its Vaio LT, a computer tucked behind a flat-panel, high-def, wall-mountable screen. HP would love to see its TouchSmart PC, a touch-screen model for the kitchen, displayed alongside microwaves and refrigerators.

But by and large, retailers haven't been that adventurous. They're confining PCs to the computer aisles. "We still have a long way to go," says Satjiv S. Chahil, senior vice-president for global marketing for HP's Personal Systems Group. "When you go to retail, they are still displayed in the old-fashioned ways." That's the next frontier for these new-fashioned PCs.

January 3rd, 2008, 05:12 PM
I for one welcome our fashionable PC overlords.

Really, I spent so many years with the plug-ugly beige boxes... I'm overjoyed that we're finally starting to see some aesthetics at work. Not that I would pay that sort of price for computer hardware...