X

2HRS2GO: Leaving PCs is the right decision for Micron Electronics

3 min read

COMMENTARY--Friday ramblings:

 Now we know why Micron Electronics delayed reporting its latest quarterly results. Wall Street ought to be pleased with the company's decision to exit the PC business.

In some ways, Micron's decision is the opposite of what was expected when the company originally entered the Web site and application hosting business. A year ago, analysts said Micron Electronics might be entering that field to create a business that could be spun off.

At the time, I questioned whether the ASP field could save Micron. I had the divestiture idea right; I was just wrong about which business would be sold off. "After Micron Electronics spins off those e-services (if it does), it's back to being a box maker," I wrote back then.

Oops.

Shares of Micron Electronics (Nasdaq: MUEI) are down following today's announcement, but let's face it, PCs are an albatross. The company hopelessly lags Dell (Nasdaq: DELL), Gateway (NYSE: GTW), Compaq (NYSE: CPQ) and other leaders in a market whose best days are behind it anyway. Micron Electronics, at best, might have been able to trundle along as a marginally profitable business.

The cash from selling PC and DRAM operations can help Micron Electronics build the HostPro business. Once the merger with Interland is complete, Micron should have a formidable Web hosting operation.

Of course, that field might not be so hot either. Web site hosting and ASP services could easily turn into a market of low-margin, commodity services. Some critics would argue it's already reaching that stage.

But it sure beats PCs, which passed the commodity point a long time ago.

 On the other hand, Wall Street has no reason to be happy with Motorola (NYSE: MOT), which just announced 4,000 job cuts.

Layoffs are never reasons for joy, of course, but investors normally can take some encouragement from the fact that a company is moving to trim costs. Unfortunately, this isn't the first or even the second time Motorola has announced massive job cuts this year.

The continuing series of announcements has to make you wonder why Motorola management couldn't make the tough decisions in the first place. Motorola underestimated the duration of the economic slowdown, or executives lacked the courage and/or foresight for a thorough house-cleaning.

Either scenario doesn't make the company's leadership look good. And Wall Street's confidence in Motorola's management team wasn't very high to begin with.

 A Palm (Nasdaq: PALM) executive this week tried to back off from an industry forecast provided by one of his colleagues. Must we play these disclosure games?

"Our company is in a quiet period," Palm's Vice-President of worldwide sales, Greg Rhine, told Reuters. "We are not commenting on our own outlook."

No, but another Palm executive earlier took care to note that industry analysts predict the handheld computer market's growth could slow to 40 percent this year, far below the triple-digit gains of another year. If Palm, which is still the runaway leader in handhelds, didn't want to provide insight into its own outlook, the company wouldn't have provided that analyst forecast in the first place. Bottom line: Palm's growth will slow dramatically this year.

That's not a reflection on Palm, necessarily. Everyone is feeling the U.S. economy's problems.

But it would be refreshing for the company to acknowledge the reality as well.

 "Veterans" of failed dot-coms are heading back to business school, but what can school teach them by now? If you've been through the dot-com wars and still need school, it speaks poorly of your ability to learn from your experiences. And why should an employer hire someone like that? 22GO>